If there is one retirement option that very few federal employees can participate in, it’s a “phased retirement.” The federal government realized that many senior federal employees, especially those in specialized or leadership roles, were sometimes leaving their jobs to successors who lacked the experience or knowledge to handle the position seamlessly.
What is Phased Retirement and Is It Right for You?
To ease the transition from a retiring federal employee to their replacement, the Office of Personnel Management (OPM) created the “phased retirement” option. This allows an active federal employee to “retire” from part of their job responsibilities while continuing part-time. Typically, this involves mentoring and knowledge-transfer to employees moving into senior positions. Most phased retirees are training their successors for specialized or leadership roles.
Understanding the Process
A phased retirement is voluntary and must be offered by your agency. It is not something you can sign up for independently; it requires a mutual agreement between the employee and the agency. Phased retirement usually lasts a few months, depending on how long it takes to train and mentor your replacement. As such, it’s not an option most employees can take advantage of, and it often doesn't last long.
What Happens After You Accept a Phased Retirement?
As a phased retiree, you will receive half of your earned pension and a part-time salary during the phased period. It’s important to note that you are not eligible for Special Retirement Supplement (SRS) payments during this period if you would have otherwise been entitled to them. However, you will start receiving your SRS after you leave the phased period and fully retire, provided you are eligible.
Impact on Your Benefits
Most of your benefits remain the same as if you were an active employee. Your Federal Employees Health Benefits Program (FEHB) and Federal Employees Group Life Insurance (FEGLI) continue as usual, with premiums still paid pre-tax. You can also contribute to the Thrift Savings Plan (TSP) and receive matching contributions if your agency permits it. Flexible Spending Accounts (FSA), FEDVIP, and the Federal Long Term Care Insurance Program are unaffected by phased retirement.
What’s in It for You?
When you fully retire from phased status, OPM will recalculate your pension payments, including the time worked as a phased retiree as “full time.” This can increase your High-3 calculation and result in a higher pension than if you hadn't participated in phased retirement.
Is Phased Retirement Worth It?
Although phased retirement allows you to work reduced hours and earn a part-time salary along with half of your pension, it might not be financially advantageous. Consider the potential loss of your SRS and the reduced household income during this period. However, it may help increase your service years and High-3 calculation, thereby boosting your eventual pension payments. This decision requires careful consideration and balancing of various factors.
Next Steps
If phased retirement seems like a good fit for your situation, discuss the specifics with your agency. They can provide details on available opportunities and specific terms. If everything aligns, phased retirement could be a beneficial way to transition into full retirement.
For more comprehensive guidance, I highly encourage you to attend one of our Federal Employees Retirement System Training workshops, such as the FERS Annuity Training Workshops in Jacksonville. Our Federal Employee Retirement Seminars cover all federal benefits topics and essential decisions, offering clear action items and one-on-one sessions for deeper insights. Additionally, specialized sessions like FERS Special Provision Employee Training are available to address specific needs. Ensure you have all the facts to make an informed decision about your retirement.
