If you separate from federal service before you’re eligible to retire, you may be able to receive a refund on your retirement contributions until you are able to receive a deferred annuity. Although, there could be repercussions to doing so.
To be eligible, you must:
- Be separated from the federal government for at least 31 consecutive days or have transferred to a position not subject to retirement deductions for at least 31 consecutive days
- Not be reemployed in a position subject to retirement deductions at the time you file your application for a refund
- Be ineligible to receive an immediate annuity within 31 days of separation
- Not be prohibited from receiving a refund due to a court order
- Notify your current and/or former spouse(s) of the refund request, if applicable
Therefore, a refund might be the right decision for you if:
- You have less than 5 years of civilian service and don’t intend to return to federal employment. A refund might be smart here because you must have at least 5 years of creditable service to receive an annuity, OR
- You have 5 or more years of civilian service and you don’t intend to return to federal employment and you believe you can invest the funds so that the final value of those investments exceeds the value of the deferred annuity.
Note: If you don’t take the refund, you can apply for a deferred annuity at age 62. You may then provide a survivor annuity for your spouse.
On the other hand, a refund might not make sense if:
- You could be reemployed with the federal government and wish to receive credit for the refunded service. To receive credit for those earlier years of service, you must make a redeposit, plus interest.
- You have 5+ years of civilian service and your potential deferred annuity exceeds the value of the lumpsum.
A refund of all deductions voids any retirement options including survivor benefits unless the refund is redeposited. Ineligibility for a survivor benefit also usually means ineligibility for your survivor after your death.