Category: Beyond Benefits

Last verified: October 17, 2026, against the sources linked below. Written by Casey Steward.

Welcome to Beyond Benefits, our section for general personal finance seen through a federal-employee lens. First up: FIRE, short for “financial independence, retire early.” Most FIRE math assumes no pension. Feds have one, plus a TSP with its own withdrawal rules and retiree health insurance that depends on how you leave. Our angle: build the FIRE plan as if the pension doesn’t exist. Then the deferred annuity you keep is a bonus that starts at 57, 60, or 62. Below: what you keep and give up by leaving at 40, 45, or 50, and what the bonus is worth, with every number shown.

The short version

• Plan as if the pension doesn’t exist; collect it as a bonus. A GS-13 step 5 who leaves at 45 with 20 years keeps $24,126 a year from 60, about $16,658 in today’s dollars at 2.5% inflation. That cuts a $60,000 portfolio draw by 28% and puts a floor under spending before Social Security. The math.
• Yes, but “retire” is the wrong word. Before your minimum retirement age (MRA), regular FERS employees don’t retire; they leave. With 5+ years and no refund you keep a deferred annuity, payable at 62, or from your MRA (reduced) with 10+ years (OPM).
• What leaving costs: retiree FEHB, the FERS supplement, sick leave credit, and the 1.1% multiplier.
• The TSP is the bridge, with a toll. Separate in or after the year you turn 55 (50 for federal public safety employees) and traditional TSP withdrawals skip the 10% early-withdrawal tax. Otherwise: 59½ or a 72(t) series.
• The catch: the deferred annuity is frozen in nominal dollars until it starts, COLAs begin only at 62, and it comes without FEHB. Take a refund and the bonus is gone.
• Built-in early retirement exists: firefighters and law enforcement officers under special provisions can retire at 50 with 20 years, or at any age with 25.

The examples and the assumptions

Pay comes from OPM’s 2026 General Schedule table for the Rest of U.S. locality (OPM 2026-RUS): GS-13 step 5, $120,629 and GS-12 step 5, $101,443. To keep the math readable, we treat the 2026 salary as the high-3 and ignore future raises.

Our hypothetical: regular FERS, hired at 25, born after 1969 (MRA 57), no refund taken. Leaving at 40, 45, or 50 means 15, 20, or 25 years. Annuities are before survivor reduction and taxes.

Leaving vs. retiring: the distinction that runs everything

An immediate annuity starts within 30 days of separation. A deferred annuity is what you get if you leave before you qualify for an immediate one (OPM; 5 U.S.C. 8413).

How you go	Age and service	Reduction	FEHB in retirement	FERS supplement
Immediate: MRA+30	MRA with 30 years	None	Yes (5-year rule)	Yes, to 62
Immediate: 60/20	60 with 20 years	None	Yes (5-year rule)	Yes, to 62
Immediate: MRA+10	MRA with 10 to 29 years	5% per year under 62, unless postponed	Yes (5-year rule), including if postponed	No
Deferred	Left before MRA: 5+ years (start at 62) or 10+ years (start at MRA)	5% per year under 62; none at 60 with 20 years or MRA with 30	No	No

The 5-year rule means you must be enrolled in FEHB for the 5 years of service immediately before retirement, or for all your service since your first chance to enroll if that’s shorter (5 U.S.C. 8905(b)). Mechanics: our guide to quitting at 45.

Leave at 40, 45, or 50: the pension you keep

The deferred annuity is 1% × high-3 at separation × years of service. When it starts before 62, it’s cut by 5/12 of 1% per month (5% per year); starting at 57 means 60 months early, or 25% (OPM; 5 U.S.C. 8415). GS-13 step 5, $120,629:

Leave at	Service	Base annuity	Start at 57 (−25%)	Unreduced start
40	15 years	$120,629 × 15 × 1% = $18,094	$13,571	$18,094 at 62
45	20 years	$120,629 × 20 × 1% = $24,126	$18,094	$24,126 at 60
50	25 years	$120,629 × 25 × 1% = $30,157	$22,618	$30,157 at 60
Stay to 57	32 years	$120,629 × 32 × 1% = $38,601	Immediate, unreduced (MRA+30), starting at 57

With 20+ years, a deferred annuity started at 60 has no age reduction; with fewer, the reduction runs to 62 (OPM). Staying to 57 pays 60% more than leaving at 45 ($38,601 ÷ $24,126 = 1.60), three years sooner, with FEHB and the supplement. For dollar values, see how much your FERS pension is worth if you leave early.

The twist: the pension is the bonus, not the plan

Size the FIRE plan as if the FERS pension doesn’t exist, so the portfolio alone covers spending from the day you leave. Then the deferred annuity isn’t a load-bearing wall. It’s a bonus that shows up at 57, 60, or 62, and everything it pays is margin. It needs 5+ years of service and no refund.

The example is our GS-13 step 5 who leaves at 45 with 20 years: $24,126 a year, unreduced, from 60. We use two illustrative assumptions, not recommendations or typical figures: $60,000 a year of spending and a $1,000,000 portfolio at age 60, both in today’s dollars. Inflation is assumed at 2.5% a year.

The honest catch first: it’s frozen until it starts

The deferred annuity is fixed in nominal dollars the day you leave and gets no cost-of-living increases before 62 (OPM; 5 U.S.C. 8462). Over 15 years of 2.5% inflation (45 to 60), that means dividing by 1.025¹⁵ = 1.448:

• $24,126 ÷ 1.448 = $16,658 a year in today’s dollars, a 31% haircut before the first check.
• Sensitivity: $17,926 at 2% inflation; $15,485 at 3%.
• Starting at 57 instead: $18,094 (25% reduced) ÷ 1.025¹² ≈ $13,454 in today’s dollars.
• Once COLAs begin at 62, the “diet COLA” pays the full increase only when inflation is 2% or less; 2% when it’s between 2% and 3%; inflation minus 1 point above 3% (5 U.S.C. 8462(b)).

Figures are before the survivor reduction, which is 10% for a full survivor annuity (OPM). Hence bonus, not foundation.

(a) The portfolio withdraws less from 60 on

At age 60, today’s dollars	Portfolio only	Portfolio + pension
Spending	$60,000	$60,000
Paid by the pension	$0	$16,658
Withdrawn from the portfolio	$60,000	$60,000 − $16,658 = $43,342
Withdrawal rate on $1,000,000	6.0%	4.3%
Rate if a bad market cuts it 25%, to $750,000	$60,000 ÷ $750,000 = 8.0%	$43,342 ÷ $750,000 = 5.8%

The bonus cuts the draw by 28% ($16,658 ÷ $60,000), so a bad market stretch does less damage: after the same 25% drop, the withdrawal rate is 5.8%, not 8.0%.

Portfolio equivalent (illustration only). FIRE planners often size portfolios with a 4% withdrawal rule of thumb. On that yardstick, the pension does the job of $16,658 ÷ 0.04 = $416,450 of portfolio in today’s dollars, not the $24,126 ÷ 0.04 = $603,145 its nominal amount suggests. Put another way: $60,000 of spending at 4% takes $1,500,000 alone, or $43,342 ÷ 0.04 = $1,083,550 with the pension. Ignoring the pension isn’t wrong; it’s $416,450 of uncounted cushion.

(b) A guaranteed floor before Social Security

The annuity is paid for life and arrives at 60, two years before the earliest Social Security claim at 62 and seven before full retirement age at 67 for anyone born in 1960 or later (SSA). In our example it covers 28% of spending from 60 no matter what markets do (inflation still nibbles until COLAs start at 62). Claiming Social Security at 62 instead of 67 means a permanent 30% cut, so a floor that doesn’t depend on the portfolio makes waiting easier to fund.

Keeping the bonus intact

• Don’t take the refund. After 31 days out you can request your FERS contributions back, but “receiving a refund of retirement deductions voids all annuity rights under FERS” (OPM FERS Refund Fact Sheet). That swaps $24,126 a year for life for your own contributions back. Bonus cancelled.
• The bonus doesn’t include health insurance. A deferred annuity can’t carry FEHB, so the FIRE plan has to buy coverage until Medicare at 65 either way. If a plan can stretch to your MRA, an MRA+10 retirement (postponed if you like) keeps FEHB, but only if you were enrolled for the 5 years right before you separate (5 U.S.C. 8905(b); OPM). Dropping FEHB in your last 5 years (say, for a spouse’s non-federal plan) can break that.
• The bridge is still yours to fund. From 45 to 60 the portfolio carries everything. The Should I Leave Federal Service? calculator compares exit dates with your own numbers.

What else you give up

• Retiree FEHB. Temporary Continuation of Coverage (TCC) keeps FEHB for up to 18 months at the full premium plus 2% (OPM: TCC). Then you’re on your own.
• The FERS supplement. Paid on immediate, unreduced retirements before 62 (and some involuntary or early-out retirements, from the MRA). Deferred, disability, and MRA+10 annuities don’t get it (OPM; 5 U.S.C. 8421).
• Sick leave credit. Unused sick leave doesn’t count toward a deferred annuity (OPM).
• The 1.1% multiplier. It applies only if you retire on an immediate annuity and are 62 or older with at least 20 years at separation (5 U.S.C. 8415(i)). A deferred annuity that starts at 62 still uses 1%. For a GS-12 step 5 with 20 years at 62: $101,443 × 20 × 1.1% = $22,317 a year, versus $20,289 at 1%. Same career, 10% more.

MRA+10: the early exit that keeps FEHB

Wait until your MRA to leave and MRA+10 turns a “leave” into a “retire” (10 to 29 years, at your MRA on separation day) (OPM). Start it right away and it’s reduced 5% per year under 62, or postpone it to shrink or erase the reduction (with 20 years, starting at 60 removes it).

Example: GS-12 step 5, leaves at 57 with 15 years. Base annuity $101,443 × 15 × 1% = $15,216. Start at 57: 25% off, $11,412 a year. Postpone to 62: $15,216. Unlike a deferred annuity, it keeps FEHB under the 5-year rule, re-enrolling when a postponed annuity begins (OPM). No supplement either way.

Getting at the TSP before 59½

The TSP is yours whenever you leave; the question is the IRS’s 10% additional tax on early withdrawals (IRS; TSP: Tax Rules about TSP Payments):

• Age-55 separation rule. No 10% tax on payments after you separate during or after the year you reach 55. Note “the year”: separate in January of the year you turn 55 and you qualify at 54.
• Public safety employees (federal LEOs, firefighters, CBP officers, air traffic controllers): age 50 instead of 55, or any age with 25 years of service under the TSP (TSP Bulletin 23-3; 26 U.S.C. 72(t)(10)).
• The IRA trap. The separation exception covers employer plans like the TSP, not IRAs (IRS table). Roll the money to an IRA and it stays behind. See roll over your TSP or keep it.
• Leaving at 40, 45, or 50 (regular FERS): none of the above applies. That leaves 59½, or a 72(t) series.

The 72(t) option

Section 72(t)(2)(A)(iv) waives the 10% tax for “substantially equal periodic payments” over your life expectancy, taken after you separate. Once started, you can’t change the payments, add money, or take extra withdrawals until the later of 5 years or age 59½; break the series and the 10% tax comes back for every prior year, plus interest (IRS SEPP FAQ). The TSP’s version is life-expectancy installments, with the same 5-year-or-59½ lock (TSP).

The IRS’s own example: a 50-year-old with $400,000 gets $11,050 a year under the required minimum distribution method ($400,000 ÷ a 36.2-year life expectancy), $21,102 under fixed amortization, or $22,030 under fixed annuitization, both at a 4% interest rate (IRS). A faucet, not a fire hose. Model your balance with the TSP growth calculator.

The income gap before Social Security

The timeline for our GS-13 who leaves at 45 with 20 years:

Age	What becomes available
45	Last paycheck. Unused annual leave paid as a lump sum (5 U.S.C. 5551). TCC for up to 18 months.
57	Deferred annuity, reduced 25%: $18,094
59½	TSP without the 10% additional tax
60	Deferred annuity, unreduced: $24,126
62	Earliest Social Security, reduced 30% for anyone born in 1960 or later (SSA). First FERS COLA.
65	Medicare eligibility (SSA)
67	Full Social Security retirement age, same group (SSA)

The FERS supplement fills the stretch to 62 only for immediate retirees. Social Security also shrinks: benefits are based on up to 35 years of indexed earnings, so stopping work at 45 with about 20 years of earnings (plus any pre-federal jobs) can put zeros in the average (SSA). Your SSA statement projects this; we don’t estimate it.

Built-in early retirement: special provisions

Firefighters, law enforcement officers, air traffic controllers, and a few other special-provision groups get early retirement by design: an immediate annuity at 50 with 20 years of covered service, or at any age with 25 (5 U.S.C. 8412(d); OPM). The first 20 years are credited at 1.7% (5 U.S.C. 8415). A GS-12 step 5 retiring at 50 with 20 years: $101,443 × 20 × 1.7% = $34,491 a year, with FEHB (5-year rule), the supplement, and penalty-free TSP access. More in retire at your MRA and work. Regular employees get those terms only under an OPM-approved early-out (VERA), which is the agency’s call (OPM).

FAQ

Can a federal employee retire at 45?

Regular FERS employees can leave at 45 but can’t start an annuity then. With 10+ years, a deferred annuity can start at the MRA (reduced 5% per year under 62), at 60 unreduced with 20+ years, or at 62. Special-provision employees with 25 years can retire immediately at any age.

Do I keep FEHB if I leave federal service early?

Not with a deferred annuity. Retiree FEHB requires an immediate or postponed annuity and 5 years of coverage before separation (or all service since you were first eligible, if shorter). TCC can bridge 18 months at full cost plus 2%.

What is the TSP rule of 55?

Separate during or after the year you turn 55 and traditional TSP withdrawals avoid the 10% early-withdrawal tax (income tax still applies). Public safety employees qualify at 50, or with 25 years. Otherwise it’s 59½, or an exception such as a 72(t) series.

Does a deferred FERS pension count toward a FIRE number?

It can, but it’s frozen in nominal dollars until it starts and lacks FEHB. Plans built without it treat it as a bonus: in our example, $24,126 a year from 60, about $16,658 in today’s dollars, or $416,450 of portfolio at an illustrative 4%.

Run your numbers: Should I Leave Federal Service? calculator · TSP growth calculator

Related: How Much Is Your FERS Pension Worth If You Leave Early? · Quitting at 45 With 20 Years · Retire at Your MRA and Take a New Job?

Sources

• OPM, Types of Retirement (voluntary, MRA+10, postponed, deferred, FERS annuity supplement, MRA table, VERA)
• OPM, 2026 General Schedule salary table, Rest of U.S.
• OPM, Temporary Continuation of Coverage; OPM, FERS Refund Fact Sheet
• 5 U.S.C. 8412, 8413, 8415, 8421, 8462, 8905, 5551; 26 U.S.C. 72(t)
• TSP, Tax Rules about TSP Payments; TSP Bulletin 23-3, public safety employees and the early withdrawal penalty
• IRS, Exceptions to Tax on Early Distributions; IRS, Substantially Equal Periodic Payments FAQ
• SSA, Starting Your Retirement Benefits Early; SSA, Social Security Benefit Amounts
• Examples: The High Three’s own calculations from the assumptions above.