Are There Pitfalls to Retiring Really Early?

Jun 16, 2017


We all love the idea of retiring early, or at least as soon as possible. Maybe at age 55 or 60. But what about the idea of retiring as early as 45? Is that even possible, or a good idea? Before going all-in on this idea of retiring at 45, carefully consider some of the issues below.

Minimum Retirement Age

Once you reach your Minimum Retirement Age (55-57 depending on when you were born), you are eligible for a FERS deferred retirement benefit if you have at least 10 years of federal service when you leave. However, retiring early, say 45, would leave you to completely rely on your savings to get you to your MRA for your basic retirement benefit. Then you would have to wait another few years until age 62 to be eligible for Social Security retirement benefits.

Also, if you are without entitlement to a FERS basic annuity benefit, you would forfeit lifetime continuation of health insurance under FEHB. To continue your health and life insurance benefits, you must be eligible for an immediate retirement and be covered for the last 5 years of your career.

If you resign from federal service before your MRA, you aren’t eligible for an immediate retirement even if you have more than 30 years of service. The only exceptions to this are:

  • You were offered an early retirement under Voluntary Early Retirement Authority.
  • If you qualify for a disability annuity under FERS or OWCP.
  • You’re covered under special provisions of federal retirement law, such as law enforcement officers, firefighters, or air traffic controllers.

FERS Supplement

Along with Social Security not being payable until at least age 62, the FERS annuity supplement (meant to bridge the gap between retirement and qualifying for Social Security) would not be payable. The supplement is only available when a FERS employee retires younger than 62 with an immediate, unreduced retirement—unless you’re disabled or retiring under special provisions.


Those who separate before being eligible for an immediate FERS retirement also may incur a 10 percent tax penalty for early withdrawals from a TSP before 59 ½. There are exceptions to this like choosing a monthly life expectancy payment schedule, separating in the year you turn 55, or under the special provisions for public safety officers.

Most retirement income is also subject to state and federal taxes. You may also need to allow for other deductions if you’re eligible and choose to continue insurance coverage.

Retiring super early may sound ideal, and of course, there are people who can probably afford to do it. However, it can also cause an undue financial hardship if you don’t account for all these scenarios and how they can interact with each other.

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