Thinking of Early Retirement as a Federal Employee? Read This Before You Hit Send on That Letter

Missy E
November 14, 2025

Key Takeaways:

Early retirement may sound tempting, but it can seriously affect your pension, health benefits, and Social Security—so think carefully before pulling the plug.
Your pension could be reduced by up to 30% if you retire too early, and you might lose valuable benefits that you can’t get back.

So, You’re Thinking About Early Retirement? Let’s Get Real

Early retirement sounds like a dream. No more emails, no more meetings, and finally, the freedom to travel or spend your days however you choose. But hold up—before you hit send on that resignation

letter, you need to know the facts about what this decision will do to your financial future. I get it, the thought of leaving the grind behind is appealing, but trust me, as a federal employee, you have a lot to consider before walking away.

How Early is “Early” Retirement?

First things first, let’s define what “early” retirement means in the world of federal employees. For those of us under the Federal Employees Retirement System (FERS), early retirement usually means leaving before you reach your Minimum Retirement Age (MRA). Your MRA depends on the year you were born but generally falls between 55 and 57.

If you’re thinking about retiring at 50 or 55 instead of sticking it out until you’re 62, you’re in early retirement territory. And while that may sound like a fantastic idea, you’ll be trading in some serious financial benefits for those extra years of freedom.

Beware of the Reduced Pension

Here’s the deal: If you retire early under FERS, your pension will take a hit. The closer you get to age 62 without actually hitting that milestone, the more your pension shrinks. Under the MRA+10 rule, which allows you to retire as soon as you hit your MRA with at least 10 years of service, your pension is reduced by 5% for every year you’re under 62.

So, if you leave at 57, that’s a 25% reduction in your pension. And if you’re even younger—say 55—that number jumps to 35%. That’s not chump change! Imagine cutting your paycheck by a third and trying to live on that for the next 30 years or more.

The FERS Supplement: Kiss It Goodbye

Now let’s talk about the FERS Supplement. This is basically a bridge between your early retirement and Social Security. It’s designed to supplement your income until you’re eligible for Social Security at age 62. But here’s the catch: If you retire before your MRA or use the MRA+10 option, you’re likely forfeiting that supplement. That means you’re living solely on your reduced pension until Social Security kicks in, which could feel like walking a financial tightrope.

What About Your Health Benefits?

Think about your health insurance before you make any hasty decisions. As a federal employee, you’re eligible to carry your Federal Employees Health Benefits (FEHB) into retirement, but only if you meet certain criteria. You need to be enrolled in FEHB for at least five consecutive years before you retire. If you haven’t hit that mark, early retirement could leave you scrambling for health insurance options, and trust me, private plans can get pricey.

Even if you do meet the five-year rule, retiring early could mean you’re footing the bill for your health insurance for several years before Medicare becomes available at 65. That’s a long time to pay premiums without the cushy backing of a federal paycheck.

The Cost of Delaying Social Security

Speaking of Social Security, early retirement means you’ll also need to think about when you’ll start claiming it. While you’re technically allowed to start pulling Social Security at 62, doing so means a permanent reduction in your benefits—up to 30%. The earlier you start, the smaller that check will be for the rest of your life.

If you want the full Social Security benefit you’ve earned, you’ll need to wait until your full retirement age (FRA), which is usually between 66 and 67. And if you can push it until 70, you’ll get an even bigger monthly check. But again, retiring early means you may be dipping into your savings to bridge that gap, and that can eat into your financial cushion faster than you might expect.

Your TSP: Is It Enough?

The Thrift Savings Plan (TSP) is another critical part of your retirement package, but it’s not as simple as just cashing out and calling it a day. If you start pulling from your TSP too soon, you may face penalties. Sure, you can start withdrawing penalty-free at age 59½, but if you’re retiring earlier than that, things get trickier.

Also, consider the fact that your TSP is meant to last you through your entire retirement. If you start dipping into it in your 50s, you’ll need to make sure that it will last another 30 or 40 years. Are you confident your TSP will stretch that far without you making further contributions?

Is Early Retirement Really Worth It?

Look, I’m not here to say early retirement is always a bad idea. For some, it’s the right move. But you’ve got to go into it with eyes wide open. The excitement of getting out of the daily grind fades quickly if you’re constantly worried about making ends meet.

Do you have enough saved to cover decades of expenses without a full pension, without the FERS Supplement, and with reduced Social Security benefits? What’s your plan for health insurance between now and when Medicare kicks in? Will your TSP last as long as you need it to? These are the tough questions you need to answer before you walk out that door.

Ready to Hit Send? Take a Step Back

Before you write that letter, take a step back and really weigh the pros and cons. Maybe early retirement is worth it to you despite the financial sacrifices. Or maybe, after crunching the numbers, you’ll decide to stick it out a few more years to maximize your benefits.

Either way, it’s important to have a plan. Sit down with your TSP statements, pension estimates, and Social Security projections. Look at how much you’ll need for healthcare, and don’t forget about inflation and potential market volatility. The last thing you want is to retire early only to realize you didn’t plan far enough ahead.

Avoiding the Financial Pitfalls of Early Retirement

It’s easy to get caught up in the allure of early retirement, especially when the daily grind feels like too much. But making sure your financial foundation is solid is critical. Take the time to review your pension, TSP, health benefits, and Social Security options before you make any life-altering decisions.