VERA and VSIP Decision Guide: Should Federal Employees Take Early Out?
Your agency is offering VERA (Voluntary Early Retirement Authority) and VSIP (Voluntary Separation Incentive Payment). This guide helps you decide if it's right for you.
Key Takeaways
- 1VERA allows retirement before MRA+30/60, but your pension is reduced without the supplement.
- 2VSIP payments are up to $25,000 (taxable income) - a sweetener, not a full retirement package.
- 3You can keep FEHB into retirement if you've had it for 5 years - major benefit.
- 4Your TSP doesn't change - you can still access it (with different rules before 59½).
- 5The decision depends heavily on your years of service, age, and FERS supplement eligibility.
What Are VERA and VSIP?
These are two separate authorities that agencies can use during downsizing:
- **They're often offered together** but are legally separate
- **VERA is about eligibility** - letting you retire when you otherwise couldn't
- **VSIP is about incentive** - cash to encourage you to leave
- **You might get VSIP even if already retirement-eligible** - it's just extra
| Authority | What It Does | Who Qualifies |
|---|---|---|
| VERA | Lets you retire early (before MRA+30/60 or age 62) | Any age with 25 years, or age 50 with 20 years |
| VSIP | Cash incentive to leave (up to $25,000) | Set by agency - may include those eligible for regular retirement too |
VERA and VSIP basics
How VERA Affects Your FERS Pension
VERA retirement has some unique impacts compared to regular retirement:
- **No FERS Supplement** - You won't receive the supplement that bridges to Social Security
- **Possible reduction** - If under MRA, pension may be reduced 5% per year under 62
- **Years of service still count** - Your pension calculation uses actual service
- **COLA may be delayed** - Cost-of-living adjustments start at age 62
| Scenario | Pension Impact |
|---|---|
| VERA at 50 with 25 years (under MRA) | May have reduction, no supplement |
| VERA at MRA with 20 years | No reduction, but no supplement |
| VERA at 55 with 30 years | May have reduction depending on MRA |
VERA pension impacts by scenario
The Supplement Loss
The FERS Supplement (~$1,000-1,500/month until 62) is NOT paid to VERA retirees. This can be a $60,000-90,000 loss over 5-6 years. Factor this into your decision.
FEHB: The Big Federal Advantage
Your Federal Employee Health Benefits can continue into retirement - this is huge.
- **Must have had FEHB for 5 years** immediately before retirement
- **Government continues paying ~72%** of the premium
- **This alone is worth $10,000-20,000/year** compared to buying insurance privately
- **Continues for life** - even after Medicare, FEHB can be secondary coverage
- **Covers spouse and dependents** per normal rules
The FEHB Calculation
If your FEHB costs you $300/month and the government pays $700/month, that's $8,400/year in subsidy. Over 30 years of retirement, that's $252,000+ (and it would be more buying private insurance). FEHB continuation is often more valuable than VSIP.
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TSP in Early Retirement
Your Thrift Savings Plan is yours regardless of VERA:
- **It stays in TSP** - You don't have to do anything immediately
- **Separated at 55+** - Can withdraw without 10% penalty (similar to Rule of 55)
- **Under 55 at separation** - 10% penalty on withdrawals until 59½
- **Can roll to IRA** - More investment options, but lose 55 rule
- **Required distributions** - Start at 73 (or 75 under SECURE 2.0)
Age at Separation Matters
If you're 54 and retire under VERA, you face 10% penalty on TSP withdrawals until 59½ (or use 72(t) substantially equal payments). If you're 55+, no penalty. This 1-year difference can cost tens of thousands.
Making Your VERA/VSIP Decision
Work through these considerations:
- 1**Calculate your FERS pension** with and without the VERA offer
- 2**Factor in the lost FERS Supplement** if you're under 62
- 3**Add VSIP incentive** ($25,000 max, taxable)
- 4**Value FEHB continuation** - This is often worth more than VSIP
- 5**Consider your TSP access** - Penalty-free at 55+, or plan around it
- 6**Evaluate job security** - If position is targeted, VERA may be better than RIF
- 7**Talk to HR** - Get your specific numbers, not estimates
Example Decision
You're 56 with 25 years. VERA pension: $2,500/month (no supplement). Regular at 62: $3,200/month + supplement. VSIP: $25,000. Six more years of work = ~$600k salary. Is $25k worth giving that up? Probably not, unless your position is at risk.
Get Your Specific Numbers
OPM and HR can give you exact pension calculations for VERA vs. regular retirement. Don't make this decision based on estimates. Your specific years of service, high-3, and age make a huge difference.
Protect Your TSP in Transition
If you take the VERA/VSIP, your TSP becomes your primary retirement fund. Consider protecting a portion from market volatility.
- Roll part of TSP to a Gold IRA after separation
- Physical gold provides stability your G Fund can't
- Diversify beyond the limited TSP options
- Gold hedge protects against both inflation and crashes
- Tax-free rollover from TSP to Gold IRA
Frequently Asked Questions
1If I take VERA, can I still get the FERS Supplement?
No. The FERS Supplement (which bridges to Social Security at 62) is NOT available to VERA retirees. This is one of the biggest downsides of VERA.
2Is the VSIP taxable?
Yes, VSIP is ordinary income taxable in the year received. For a $25,000 VSIP, expect to net around $17,000-19,000 after federal and state taxes.
3What if I'm eligible for regular retirement - should I still take VSIP?
If you're already eligible for regular retirement (MRA+30, 60+20, or 62+5), VSIP is just bonus money to leave. Whether to take it depends on whether you want to retire anyway. It's free money if you were planning to go.
4Can I decline VERA/VSIP and still keep my job?
Usually yes - these are voluntary. However, agencies offer VERA/VSIP because they need to reduce workforce. If they don't get enough volunteers, a RIF (Reduction in Force) may follow. Understand your agency's situation.
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