Phased retirement is the federal government’s mechanism for letting experienced employees draw a partial FERS annuity while continuing to work part-time. It sounds like the best of both worlds. For the narrow group of employees who are actually eligible, it often is. For most federal employees reading about it, the eligibility rules will eliminate them before they ever have to decide whether it’s a good idea.

Here is how it actually works.

What phased retirement does.

Under 5 U.S.C. § 8336a and OPM’s implementing regulations, phased retirement allows an eligible federal employee to:

  • Work a part-time schedule (typically 40–60% of full-time, depending on the agency’s plan).
  • Receive a partial FERS annuity calculated as if they had retired, then reduced by the percentage of full-time they continue to work.
  • Continue to earn a partial salary for the part-time work.
  • Continue to contribute to the TSP and receive the agency matching contributions on the part-time salary.
  • Continue to accrue FEHB and FEGLI coverage as an active employee.

The math in plain terms: a GS-13 step 10 employee with 30 years of service earning a $130,000 high-3 who goes to phased retirement at 50% time would receive an annual annuity of about $19,500 (calculated as if retired: 1.0% × 30 × $130,000, then halved for the 50% work schedule). They would also receive a half-time salary of about $65,000. Their TSP contributions and matching continue on the half-time salary. Total compensation lands at roughly $85,000 for the part-time schedule, with continued benefits and continued service accrual.

The eligibility requirements.

Phased retirement eligibility has two parts: the employee must qualify, and the agency must offer it.

Employee eligibility requires:

  • At least 30 years of creditable FERS service, or
  • At least 20 years of creditable FERS service and being at or past your MRA.

Agency participationis the bigger constraint. Phased retirement is not a universal benefit; it requires the agency to have an OPM-approved phased retirement authority covering the employee’s position. As of 2026, a meaningful number of agencies have approved plans, but many have not, and the list of covered positions within participating agencies is often narrow.

The continuation requirement.

A phased retiree must continue to work in the part-time schedule for at least one year before being eligible to convert to full retirement. If the employee leaves the part-time arrangement before the year is up, the partial annuity stops and the employee is treated as if they had not retired at all.

After at least one year in phased retirement, the employee can convert to full retirement. At conversion, the partial annuity is recalculated using the actual years of service at that point (including the part-time service, which counts at the part-time rate) and the high-3 at the time of conversion. The multiplier remains 1.0% or 1.1%, depending on age and service at conversion.

The trade-offs.

Phased retirement is not free. Three trade-offs to understand:

  • Final annuity calculation. The high-3 at the time of conversion may be lower than it would have been at a later full retirement date, because the part-time salary drags the average down. For some employees, this is a meaningful drag on the final annuity.
  • TSP contribution limit. TSP contributions during phased retirement are based on the part-time salary. The dollar amount of the match and the elective deferral are correspondingly smaller.
  • Continued work commitment. Phased retirement is not a path to stepping away from work. The employee is still on the agency’s books, still subject to performance management, and still required to perform the part-time duties.

For employees in the narrow band who can use phased retirement — typically senior subject-matter experts in participating agencies — the trade-offs are usually worth it. For everyone else, phased retirement is more useful as a thing to know about than as a thing to plan around.