Making the best decisions for your future always depends on understanding your rights and options. This is especially important when it comes to the arena of retirement, which is one of the crowning benefits for federal employees. While most federal employees understand what regular retirement is, they probably do not know about disability retirement.
Read on to learn about disability retirement vs. regular retirement. We’ll explore each system’s basic characteristics, eligibility requirements, and benefits. Don’t be afraid to reach out to our federal disability retirement lawyers if you have further questions. Just give us a call at (800) 801-0598 or send us a message online to set up an initial conversation.
Disability Retirement vs. Regular Retirement: A Detailed Comparison
As a preliminary matter, disability retirement and regular retirement fall under the Federal Employee Retirement System. Technically, there is another federal retirement system called the Civil Service Retirement System (CSRS). We’ll focus on the terms of FERS retirement because only the most senior federal employees receive CSRS retirement, which was phased out in 1987. That said, let’s turn to how the two kinds of retirement compare.
Eligibility
Eligibility for disability retirement requires you to have at least 18 months of federal service. You also need to have a medical condition that significantly impacts your ability to perform the essential functions of your job. This condition must last at least one year.
In contrast, regular retirement eligibility hinges on your age and total years of service. Full benefits are typically available at a minimum retirement age ranging from 55 to 57, coupled with 30 years of service. If you are 60, then you only need 20 years of service to obtain full retirement benefits. If you are 62, five years of federal service is sufficient to receive complete retirement benefits.
Benefit Amount
When it comes to benefit calculation, disability retirement benefits under OPM are initially equal to 60% of your high-3 average salary for the first year. Your “high-3” salary represents the highest average salary you had over any continuous three-year period in your career. So let’s imagine you plan to retire in 2024, and you received your highest salary in the previous three years.
If you made $80,000 in 2021, $100,000 in 2022, and $120,000 in 2023, your high-3 salary would be $100,000. After the first year of disability retirement, your disability benefits shrink to 40% of your high-3 salary. OPM will also adjust your retirement benefits amount if you receive Social Security disability benefits.
In regular retirement, you receive benefits from three different sources. The first one is your FERS pension. Your benefits under the pension equal a percentage of the high-3 average pay multiplied by years of service. For every year of service, you receive an extra 1% on this calculation.
If you retire when you are over 61 and you have more than 20 years of service, then each year of service adds 1.1% to the calculation. So, if you have 30 years of service, retire at age 63, and have a high-3 salary of $100,000, you would calculate your retirement benefit by multiplying $100,000 by 33. Unlike disability retirement, you can reduce your retirement benefits if you retire early or make a survivor benefits election.
Aside from the pension, the two prongs of regular retirement is social security and the Thrift Savings Plan (TSP). The TSP is a defined contribution plan that essentially functions like a 401k. During your career, you can make contributions to your TSP. Your employer will match your contributions up to 3%-5% of your salary. After you retire, you can draw upon your TSP funds.
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Documentation Requirements
A significant aspect of disability retirement is the requirement for substantial medical documentation to establish the disabling condition. Fulfilling this requirement requires significant paperwork from your doctor and certification by your agency.
By contrast, regular retirement under FERS has no medical requirements. Additionally, employees typically opt for disability retirement when they cannot continue their federal employment due to their condition. On the other hand, regular retirement offers the flexibility to continue working and potentially increase future benefits.
Impact on Other Sources of Income
Disability retirement can impact other benefits, such as Social Security disability. Thus, you need to make sure you can coordinate the benefits from each system. Disability retirement also has an income threshold.
However, regular retirement does not directly affect Social Security benefits. Employees become eligible for Social Security and Medicare according to age and other standard criteria.
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Permanency
Regular retirement is generally a permanent change of status. This kind of retirement intends to continue for the remainder of the individual’s life. Once you retire under regular retirement, you typically do not face ongoing evaluations or conditions that could lead to the discontinuation of your benefits. Nor do you face any kind of income threshold.
On the other hand, Congress designed disability retirement as a potentially temporary solution. Indeed, receiving disability retirement benefits over the long term is contingent on the continuance of a disabling condition. When you receive disability retirement, the implicit understanding is that your retirement is due to a medical condition that prevents you from performing your job functions.
Therefore, the permanency of this benefit is linked to the persistence of your disability. OPM will periodically require you to undergo medical evaluations to confirm that your disabling condition still affects your ability to work. If you recover or your condition improves to a point where you can return to work, OPM will discontinue your disability retirement benefits. You can also lose disability retirement benefits if you begin making more than 80% of your salary in your prior government position.
Want to Learn More About Medical Retirement vs. Regular Retirement? Let Us Be Your Guide
Disability retirement and regular retirement have significant differences in multiple aspects. Now that you understand the essential characteristics of each, you should have a sense of how they play into your plans. That said, each path has intricacies and pitfalls that make expert guidance invaluable. This is where Pines Federal can step in to light your path ahead.
At Pines Federal, our focus is on federal employment law. Therefore, we can offer clients a deep well of knowledge and experience in both medical and regular retirement. Our dedicated team understands that the journey to retirement is often fraught with complexity, especially when it involves intricate federal laws and regulations. We are committed to providing clear, comprehensive, and personalized guidance to help you navigate these paths with confidence and ease.
If you or a loved one are curious about which retirement path is best for you, you should contact us right away. Doing so can provide you with a stable financial future and peace of mind.
Get started by reaching out online or calling us today at (800) 801-0598. Let us guide you towards a golden retirement today.