I What it is
Half-time work, half your annuity, without ever fully leaving. The authority is 5 U.S.C. 8336a and 8412a, with regulations at 5 CFR part 848 and 5 CFR 831 subpart Q.
A phased retiree is an active employee working part-time and drawing a partial annuity — still an employee for all purposes unless law or regulation says otherwise.
You may elect phased employment and phased retirement status only once. If it ends for any reason — including transitioning into full retirement, which is the normal ending — you may not elect it again.
Try it for six months, decide it does not suit you, return to full-time: you have used your election. There is no second attempt later.
A change in your working percentage also terminates the status, as does separation from phased employment for more than three days.
II Three gates
| Gate | Detail |
|---|---|
| Retirement eligible | You must already qualify for immediate retirement |
| 3 years full-time | Immediately preceding — OPM cannot waive this |
| Agency consent | Mutual. Not an entitlement |
The middle one catches people. OPM has said plainly it has no authority to waive or adjust the full-time requirement, because it is an express statutory condition. Anyone who dropped to part-time in the last three years has disqualified themselves — often without knowing the rule existed.
The third one is the practical barrier. Agencies vary enormously in willingness to approve phased retirement, and some have never built a process for it. Ask whether yours does this before building a plan around it.
III Who cannot
| Excluded |
|---|
| Disability retirement candidates |
| FERS employees retiring under MRA + 10 |
| Reemployed annuitants |
| Anyone who already served phased retirement and opted out |
| Most positions with mandatory retirement — LEO, firefighter, ATC, nuclear couriers, Capitol and Supreme Court police, some CBP |
| Firefighters under 5 U.S.C. 5545b; nurses under 38 U.S.C. 7456 or 7456A |
The MRA + 10 exclusion is worth noting: the people most likely to want a gradual exit are frequently the ones retiring early, and that route is closed to them.
IV Income Model
What Would I Actually Take Home?
V The supplement gap
No FERS annuity supplement is payable during phased retirement.
Where applicable it may be paid after phased retirement ends, you begin full retirement, and you start receiving the composite annuity. But not while you are phased.
The supplement exists to bridge the gap to Social Security, and for many people it is a substantial part of early-retirement income. Phased retirement removes it. Someone comparing half salary plus half annuity against full annuity plus supplement may find the gap much narrower than the headline figures suggest — which is exactly what the model above shows.
VI What you get at the end
When you enter full retirement, OPM recalculates your annuity as though you had been working full time throughout the phased period. The result is a composite retirement annuity.
In general that final amount is more than if you had fully retired at the start and not continued working part time — and it becomes the basis for other benefits, including survivor entitlements.
Two other things hold their value while you are phased. For FEHB and FEGLI you are treated as a full-time employee and premiums are withheld at the full-time rate. TSP continues, with government contributions based on the basic pay you actually receive — and phased retirees are not subject to required minimum distributions or the TSP withdrawal deadline while in that status.
You enter full retirement by application, and separation from phased employment for more than three days puts you there automatically. You may also elect to end phased status and return to regular employment with agency permission — but remember that spends your one election.
VII Playbook
| Situation | What to do |
|---|---|
| Considering it | Ask whether your agency approves phased retirement at all, first. |
| Thinking of going part-time | Don’t, if phased retirement is in your plans. It disqualifies you. |
| Under 62 | Model it without the supplement. That is the real comparison. |
| Retiring under MRA + 10 | You are excluded. Different route needed. |
| Already a reemployed annuitant | Excluded as well. |
| Want to try it and see | There is no trying. One election, spent either way. |
| Worried about insurance | You are treated as full-time for FEHB and FEGLI. |
| Planning the mentoring | 20% of your hours. Agree what that means with your supervisor. |
Before you elect
- Confirm your agency has a phased retirement process and who approves it.
- Check you were full-time for each of the preceding three years.
- Confirm you are not in an excluded category.
- Model your income without the FERS supplement.
- Compare all three options, not just phased against working.
- Agree what the 20 percent mentoring commitment looks like in practice.
- Understand that ending it early still spends your one election.
- Ask how the composite annuity would be computed in your case.
Questions
Once. An individual may elect phased employment and phased retirement status only once in their lifetime, and if that status ends for any reason — including transitioning into full retirement, which is the normal ending — the individual may not elect it again. Someone who enters phased retirement, decides after six months that it does not suit them and returns to regular full-time employment, has used their one election and cannot revisit it later.
Yes. Participation is entirely voluntary and requires the mutual consent of both the employee and the employing agency. It is not an entitlement, and eligible employees must apply and receive approval. Agencies vary considerably in how willing they are to approve it, and some have never implemented a process at all. That makes the first question a local one: does my agency actually do this, and who approves it.
You must be eligible for immediate retirement and must have been employed on a full-time basis for the previous three years. OPM has stated it has no authority to waive or adjust the full-time requirement, because it is an express statutory condition. So someone who moved to part-time in the last three years has disqualified themselves without necessarily realising it, and someone contemplating phased retirement should avoid reducing their schedule in the run-up to it.
Disability retirement candidates, FERS employees retiring under MRA plus 10 provisions, reemployed annuitants, and anyone who has already served a period of phased retirement and returned to full-time duty. Employees subject to mandatory retirement provisions may also be excluded, including law enforcement officers, firefighters, air traffic controllers, nuclear materials couriers, Capitol and Supreme Court police and some Customs and Border Protection officers. Certain special work schedules are excluded too, including firefighters under 5 U.S.C. 5545b and nurses under 38 U.S.C. 7456 or 7456A.
Not during phased retirement. No FERS annuity supplement is payable while you are in phased retirement status. Where applicable it may be paid after phased retirement ends, you begin full retirement and you start receiving the composite annuity. For anyone under 62 who was counting on the supplement as part of their bridge income, that is a significant gap and it is the detail most likely to change whether the arrangement works financially.
Employees in phased retirement, other than those at the Postal Service, must spend at least twenty percent of their work hours engaged in mentoring activities. That is the stated purpose of the programme — to keep experienced people available to train the staff who will fill their positions. On a half-time schedule it means roughly one day a fortnight is committed to mentoring rather than to your substantive work, which is worth factoring into what you promise your office.
For health benefits and life insurance purposes a phased retiree is considered a full-time employee, and FEHB and FEGLI premiums are withheld at the same amount as for someone working full-time. TSP participation continues, with government contributions based on the basic pay you actually receive each pay period rather than on the phased retirement annuity. Phased retirees are not subject to required minimum distributions or the TSP withdrawal deadline while in that status.
OPM recalculates your annuity as though you had been working full time throughout, producing what is called a composite retirement annuity. In general that final amount will be more than if you had fully retired at the outset and not continued working part time, and it becomes the basis for other benefits including survivor entitlements. You enter full retirement status by application, and separation from phased employment for more than three days puts you there automatically.