Leaving Federal Job After 10 Years Retirement

Ten Years Changes Everything

The 10-year service mark is a threshold in FERS retirement planning. With 5–9 years of creditable civilian service, you can leave your contributions in the fund for a deferred annuity at 62 or request a lump-sum refund; with fewer than 5 years, you are not vested for a deferred annuity. At 10 years, a third path opens: the MRA+10 immediate (or postponed) retirement, if at least 5 years are creditable civilian service. And with it comes the possibility of preserving FEHB health insurance — the benefit most early leavers regret losing.

Your Options by Years of Service

5–9 years: You're vested for a deferred annuity at age 62, calculated at 1.0% × High-3 × years. You permanently lose FEHB and FEGLI eligibility. FERS Supplement is not available. The alternative is an SF 3106 refund that removes the service from your annuity calculation unless you later qualify for and complete a redeposit.

10–19 years: If you separated before your MRA, your deferred annuity can start at MRA with a 5% reduction per year under 62, or at 62 without the age reduction. If you separated at or after MRA with at least 5 years of creditable civilian service, you can take an immediate MRA+10 annuity with a 5% reduction per year under 62, or postpone it to begin as late as two days before age 62 to reduce the age penalty and re-enroll in FEHB when payments start.

20+ years: A deferred annuity at age 60 (unreduced) becomes available; with 30+ years, it can begin at MRA without an age reduction. If you left at or after MRA with 20–29 years, postponing to age 60 eliminates the MRA+10 penalty while preserving FEHB — you don't have to wait until 62.

The MRA+10 Penalty in Real Numbers

The age reduction penalty is 5% for every full year you are under 62 when the annuity begins (5/12ths of 1% per month for partial years). It's permanent — it never adjusts upward later.

An employee separating at MRA (say, 57) with 15 years of service and a High-3 of $95,000:

• Immediate annuity at 57: $95,000 × 1.0% × 15 = $14,250/year, minus 25% penalty (5 years under 62) = $10,688/year permanently
• Postponed to just before 62: $14,250/year before any age reduction based on the annuity start date, plus FEHB re-enrollment if the 5-year enrollment rule was met
• Postponed to 60: not available with only 15 years (need 20+ for the age-60 unreduced threshold)

That 25% penalty costs $3,562 per year for life. Postponing five years saves that — but you need to bridge income and health insurance during the gap.

The 20-Year Milestone

With 20+ years of service, you unlock the unreduced annuity at age 60 instead of 62. You also reduce the postponement period by two years, which means two fewer years of self-funded health insurance.

If you're at 17 or 18 years and can hold on to reach 20, the payoff is significant: two extra years of service credit in the annuity formula plus a lower unreduced commencement age. Run the math on whether staying those additional years is worth it.

What About 7 Years?

At 7 years, you're vested but below the MRA+10 threshold. Your deferred annuity at 62: 1.0% × High-3 × 7 years. For a High-3 of $80,000, that's $5,600 per year — about $467 per month. Not life-changing, but it's a guaranteed lifetime benefit with cost-of-living adjustments once payments begin.

The refund for an original FERS employee after 7 years is roughly $4,480 in contributions plus interest. The $5,600 annual annuity equals the $4,480 principal in about 10 months; accrued interest adds to the amount to compare. Unless you're certain you'll never return to federal service and you have a high-conviction private investment thesis, the deferred annuity wins the break-even analysis.

The Health Insurance Decision

At exactly 10 years of service, health insurance becomes the pivotal factor. Below 10 years, FEHB is gone permanently no matter what you do (short of returning to federal service). At 10 or more years, with at least 5 years of creditable civilian service, the postponed retirement path preserves re-enrollment rights — but only if you met the 5-year continuous enrollment rule at separation.

The gap between TCC expiration (18 months after separation) and annuity commencement (potentially years later) needs a plan: ACA marketplace coverage, spouse's employer plan, or new employer benefits.

The Leaving Federal Service Early guide builds out the full timeline for each service-year scenario, including the coverage bridge worksheet and the penalty break-even analysis.

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