Deferred vs Postponed Retirement FERS: The Critical Difference That Could Cost You $300,000

Two federal employees leave government service in their early 50s with similar years of service. One can reinstate federal health insurance in retirement. The other loses it forever.

The difference? One reached their Minimum Retirement Age before leaving. The other didn't.

This is the distinction between deferred and postponed retirement under FERS, and confusing them is one of the most expensive mistakes a federal employee can make.

Key Takeaways

• Deferred retirement is for employees who leave BEFORE their MRA with 5+ years of service. You permanently lose FEHB.
• Postponed retirement is for employees who leave AT or AFTER their MRA with 10+ years (MRA+10). You can reinstate FEHB when your annuity begins.
• Neither option qualifies you for the FERS Supplement.
• The difference in lifetime healthcare costs can exceed $300,000.
• If you're close to your MRA, waiting a few months to separate could save you a fortune.

The Core Difference: When You Leave

The terms "deferred" and "postponed" sound similar. They're not.

Factor	Deferred Retirement	Postponed Retirement
When you separate	BEFORE reaching MRA	AT or AFTER reaching MRA
Minimum service	5 years	10 years
FEHB in retirement	NO, lost permanently	YES, reinstated when annuity begins
FEGLI in retirement	NO, lost permanently	YES, reinstated when annuity begins
FERS Supplement	NOT eligible	NOT eligible
Sick leave credit	NOT credited	NOT credited

The single biggest difference is health insurance. Deferred retirees can never get FEHB back. Postponed retirees can.

Why FEHB Matters So Much

Federal health insurance is one of the most valuable benefits you have. In retirement, the government continues to pay roughly 70-75% of the premium.

Compare the costs:

Scenario	Monthly Cost	20-Year Total
FEHB in retirement (BCBS Standard)	~$350	~$84,000
Private insurance (age 62-65)	~$1,200	~$57,600 (3 years)
ACA Marketplace (no subsidy)	~$800-1,200	Varies by income
Medicare + supplement (age 65+)	~$500-700	~$120,000 (17 years)

Total lifetime difference: A deferred retiree paying full price for healthcare from age 55 to death could spend $200,000 to $400,000 more than a postponed retiree who keeps FEHB.

And that's assuming you qualify for coverage. If you have pre-existing conditions and gaps in coverage, private insurance may not even be available (depending on the plan type).

Your Minimum Retirement Age (MRA)

Your MRA depends on your birth year:

Year of Birth	MRA
Before 1948	55
1948	55 + 2 months
1949	55 + 4 months
1950	55 + 6 months
1951	55 + 8 months
1952	55 + 10 months
1953-1964	56
1965	56 + 2 months
1966	56 + 4 months
1967	56 + 6 months
1968	56 + 8 months
1969	56 + 10 months
1970 and later	57

If you were born in 1970 or later, your MRA is 57. This is the magic age that determines whether you get deferred or postponed retirement.

The MRA+10 Option Explained

MRA+10 refers to retiring at your Minimum Retirement Age with at least 10 years of service. It's technically an "immediate" retirement, but with a catch: your annuity is reduced 5% for each year you're under age 62.

Here's where "postponed" comes in. You can separate from service at MRA+10, but delay actually receiving your pension. By postponing the start of your annuity, you reduce or eliminate the age penalty.

Example: Sarah's Decision

Sarah is 57 (her MRA) with 12 years of service. She wants to leave federal service.

Option 1: Start annuity immediately at 57

• Age penalty: 5% × 5 years (under 62) = 25% reduction
• If her full annuity would be $2,000/month, she gets $1,500/month
• BUT she can reinstate FEHB immediately

Option 2: Postpone annuity until age 62

• Age penalty: 0% (waited until 62)
• She gets the full $2,000/month
• FEHB reinstates when annuity begins at 62
• Gap: 5 years without FEHB (must use other coverage)

Option 3: Postpone until age 60

• If Sarah reaches 20 years of service, no penalty at 60
• Shorter gap to bridge

The Healthcare Gap Problem

Both deferred and postponed retirees face a gap in coverage. The difference is what happens when your annuity starts.

Deferred Retiree Gap

• Separates at age 52 (before MRA of 57)
• Gets 31 days free FEHB extension
• Can elect TCC for 18 months (full premium + 2% fee)
• After TCC: Must find private insurance
• At age 62 when annuity starts: Still no FEHB, ever

Postponed Retiree Gap

• Separates at age 57 (at MRA)
• Gets 31 days free FEHB extension
• Can elect TCC for 18 months
• After TCC: Must find private insurance until 62
• At age 62 when annuity starts: FEHB reinstates automatically

The postponed retiree only needs to bridge 5 years. The deferred retiree loses FEHB for life.

Healthcare Bridge Strategies

If you're facing a coverage gap, here are your options:

1. Temporary Continuation of Coverage (TCC)

Federal employees' version of COBRA.

• Duration: Up to 18 months
• Cost: Full premium (employee + government share) + 2% admin fee
• For BCBS Standard in 2026: Approximately $1,500/month
• Enrollment deadline: 60 days from separation
• Note: First 31 days are free automatic extension

2. Spouse's Employer Coverage

Often the best option if available.

• Check if spouse's plan accepts special enrollment
• Compare premiums to TCC costs
• May provide longer coverage than TCC

3. ACA Marketplace Plans

Available at healthcare.gov.

• Cannot be denied for pre-existing conditions
• Subsidies available based on income
• Open enrollment: November 1 to January 15
• Special enrollment triggered by loss of coverage

4. Short-Term Health Insurance

For temporary gaps only.

• Typically 3-12 months coverage
• Limited benefits
• May not cover pre-existing conditions
• Much cheaper than comprehensive plans

6 Critical Gotchas

These mistakes can cost you tens of thousands of dollars or your entire pension:

Gotcha 1: Taking a Refund Kills Your Pension

If you withdraw your FERS contributions when you leave, you forfeit all rights to a deferred or postponed pension. Once the money is out, you cannot buy back into the system.

The temptation: A refund might be $30,000-$100,000 depending on your salary and years of service.

The loss: A pension worth $500,000+ over your lifetime.

Gotcha 2: Sick Leave Is Not Credited

In immediate retirements, your unused sick leave is added to your service time, increasing your pension. With deferred retirement, you get zero credit.

Example: 2,000 hours of sick leave = 1 extra year of service credit. At a 1% multiplier on a $100,000 high-3, that's $1,000/year, or $20,000+ over retirement.

With deferred retirement, you lose this entirely.

Gotcha 3: The 5-Year FEHB Enrollment Rule

To reinstate FEHB in postponed retirement, you must have been enrolled in FEHB for 5 consecutive years immediately before separation.

If you dropped FEHB coverage at any point in your last 5 years (to join spouse's plan, for example), you may not be able to reinstate it.

Gotcha 4: Military Service Deposits

If you have post-1956 military service, you must make a deposit BEFORE separation to get credit for that time. You cannot make military service deposits after you leave federal service.

Gotcha 5: Survivor Benefits Disappear

Deferred retirees generally cannot elect survivor benefits. If you die before your annuity starts, your spouse gets nothing from FERS (though they can get a refund of your contributions with interest).

Postponed retirees may be able to elect survivor benefits when their annuity begins, depending on circumstances.

Gotcha 6: COLAs Don't Start Until 62

Regardless of when your annuity begins, FERS cost-of-living adjustments (COLAs) don't kick in until you're 62.

If you start your postponed annuity at age 60, you get two years of payments with no COLA increases while inflation erodes your purchasing power.

Decision Framework: Deferred vs Postponed

Ask yourself these questions:

Question 1: Have you reached your MRA?

• No: Your only option is deferred retirement (or stay in federal service)
• Yes: You can choose postponed retirement (MRA+10) or continue working for a better deal

Question 2: Do you have 10+ years of service?

• No: You can only take deferred retirement (requires minimum 5 years)
• Yes: Postponed retirement is available if you've reached MRA

Question 3: How important is FEHB to you?

• Very important: If you're close to MRA, consider waiting. Postponed retirement lets you reinstate FEHB.
• Not critical: If you have secure healthcare through spouse or other means, deferred retirement may be acceptable.

Question 4: Can you bridge the healthcare gap?

• Yes, easily: Deferred retirement is more feasible
• Barely: The shorter gap of postponed retirement is safer
• No: You may need to stay until you qualify for immediate retirement

Calculate Your FERS Pension

The difference between deferred and postponed retirement affects your bottom line. Use our FERS Retirement Calculator to see:

• Your estimated pension at different retirement ages
• How the 5% penalty affects your annuity
• Whether postponing your annuity start date makes sense

Calculate Your FERS Pension →

Frequently Asked Questions

What is the difference between deferred and postponed retirement under FERS?

Deferred retirement is for employees who leave federal service BEFORE reaching their Minimum Retirement Age (MRA), while postponed retirement is for those who leave AT or AFTER their MRA but delay receiving their pension. The biggest difference is health insurance: deferred retirees permanently lose FEHB, but postponed retirees can reinstate FEHB when their annuity begins.

Can I keep my federal health insurance (FEHB) with deferred retirement?

No. If you take a deferred retirement, you permanently lose eligibility for FEHB. This is one of the major drawbacks of deferred retirement compared to postponed retirement. Even when your deferred annuity begins at age 62, you cannot re-enroll in FEHB.

How do I avoid the 5% per year age penalty under MRA+10?

You can reduce or eliminate the age penalty by postponing the start date of your annuity. If you wait until age 62 to begin receiving payments, the penalty is completely eliminated. If you have 20+ years of service, waiting until age 60 also eliminates the penalty.

Am I eligible for the FERS Supplement with deferred or postponed retirement?

No. The FERS Supplement (Special Retirement Supplement) is only available to employees who retire with an immediate, unreduced annuity. Neither deferred nor postponed retirees qualify for this benefit that bridges the gap until Social Security eligibility at age 62.

What happens to my unused sick leave with deferred retirement?

If you take a deferred retirement, you do NOT receive credit for unused sick leave in your annuity calculation. Sick leave credit only applies to immediate retirements. This can mean losing the equivalent of months or even a year of service credit, reducing your pension.

How long can I continue FEHB coverage after leaving federal service?

You automatically get a 31-day free extension of FEHB coverage after separation. You can then elect Temporary Continuation of Coverage (TCC) for up to 18 months, but you must pay the full premium (employee + government share) plus a 2% administrative fee. For a typical FEHB plan, this is approximately $1,500/month.

When should I choose postponed over deferred retirement?

If you can wait until reaching your MRA (age 55-57 depending on birth year), postponed retirement is almost always better. The ability to reinstate federal health insurance into retirement can be worth hundreds of thousands of dollars over your lifetime. The only reason to accept deferred retirement is if you must leave before MRA and cannot wait.

Related Resources

• FERS Retirement Calculator: Estimate your pension under different scenarios
• Complete FERS Retirement Guide: Everything about FERS eligibility, formulas, and benefits
• VERA/VSIP Guide 2026: Early retirement options if offered a buyout
• Best Dates to Retire 2026: Optimize your retirement date for maximum benefits
• FERS Supplement Earnings Limit 2026: Working after early retirement

Sources

• OPM: Types of Retirement
• OPM: FERS Eligibility
• OPM: Temporary Continuation of Coverage
• OPM: Cost of Living Adjustments
• FedWeek: Deferring and Postponing Have Very Different Meanings