Leaving federal service before 62 doesn't have to mean a permanently smaller pension. FERS has three main routes out early: a Voluntary Early Retirement (VERA), a Voluntary Separation Incentive Payment (VSIP), and the MRA+10 retirement. They differ in who qualifies, when your annuity starts, whether there's an age penalty, and whether you keep your health insurance. Here is how each one works and when it makes sense.

VERA: early retirement with no age penalty

A VERA is an early-out window your agency opens during a reorganization, downsizing or transfer of function. You can't request one on your own; the agency has to offer it to your position.

Who qualifies: age 50 with at least 20 years of creditable service, or any age with at least 25 years. You generally need to have been on the rolls for at least 31 days before the window was announced.

What you get: an immediate annuity calculated the normal way (1% of your high-3 for each year of service) with no reduction for age. That is the big advantage over MRA+10.

The FERS Supplement: VERA retirees do get the supplement, but it doesn't start until you reach your minimum retirement age (MRA). If you retire under a VERA at 52 and your MRA is 57, there's a five-year gap with only the base annuity. The supplement then runs until 62 and is subject to the annual earnings test if you keep working.

Insurance: you keep FEHB and FEGLI into retirement as long as you've had five years of continuous coverage right before you retire.

VSIP: a cash incentive to leave

A VSIP, often called a buyout, is a lump-sum payment for leaving voluntarily. Like VERA, your agency must offer it. Agencies often pair VSIP with VERA, so an eligible employee can take both: the cash plus an immediate unreduced annuity.

The amount: the lesser of your severance pay formula or the statutory cap, which is $25,000 under the standard rule. Some agencies have had specific authority for higher amounts, so check your offer.

Taxes: the payment is taxable income and usually withheld as supplemental wages. Plan for federal, state and Social Security/Medicare tax coming out of it.

The repayment rule: if you return to federal employment, including as a contractor through a personal services contract, within five years, you must repay the entire VSIP before your first day back.

If you take a VSIP without being retirement-eligible, you leave with a deferred annuity. It starts:

  • at your MRA, unreduced, if you have 30 or more years,
  • at 60, unreduced, if you have 20 or more years,
  • at 62 if you have at least 5 years,
  • or at your MRA with a 5%-per-year reduction if you have at least 10 years and want it sooner.

Deferred annuitants don't receive the FERS Supplement. FEHB and FEGLI end at separation and generally can't be picked back up when a deferred annuity starts. For many families, that's the biggest hidden cost of a VSIP-only exit.

MRA+10: retire at your MRA with 10 years

You don't need an agency offer for MRA+10. Once you reach your MRA (between 55 and 57 depending on your birth year) with at least 10 years of service, you can retire and start an annuity right away.

The penalty: the annuity is reduced 5% for each year you're under 62 (5/12 of 1% per month). Retire at 57 and you lose 25% of your annuity for life. The reduction doesn't apply if you have 30 years at your MRA, or 20 years at 60, because those are already unreduced retirements.

No supplement: reduced MRA+10 retirees don't receive the FERS Supplement.

Postponing pays off: you can separate under MRA+10 and postpone the start of your annuity. Each year you wait shrinks the reduction. If you have 20 or more years, starting at 60 removes it entirely; otherwise starting at 62 does. A postponed MRA+10 annuitant can also re-enroll in FEHB when the annuity starts, as long as they met the five-year coverage rule at separation. That's a key difference from a deferred annuity.

Choosing between them

  • If your agency offers VERA and you qualify, it's usually the strongest option. You get a full-formula annuity now, the supplement at MRA, and your insurance continues. Add a VSIP if it's offered alongside.
  • A VSIP without retirement eligibility gives you cash today but delays your pension and usually ends your health coverage. Compare the lump sum after tax against the years of pension and FEHB you're giving up.
  • MRA+10 gives you control over timing, but the reduction is permanent. If you can bridge the gap with savings or TSP withdrawals, postponing to 60 or 62 often produces a much larger lifetime pension.

Use the Early-out options panel in the What-If Simulator to compare all of these for your own age, service and birth date. You can then save the one you choose so your Income Plan and countdown follow it. Confirm eligibility, dates and amounts with your agency HR office before you sign anything.