All Departure Scenarios

Step 1 — Identify the annual shortfall. "Lost Pension /yr" is your full-career pension minus the deferred annuity you'd receive if you leave early. "Lost FEHB /yr" is the employer health subsidy you would forfeit in retirement (your today's-dollar FEHB value inflated to retirement year). Together these are the two streams of federal benefit income you give up.

Step 2 — Value each stream at retirement. Both streams grow with COLA during retirement. The calculator discounts each year's payment back to the first day of retirement using your private return rate. This produces a single "required pot at retirement" — the lump sum you must have on hand on retirement day that, earning your private return and being drawn down annually, covers every year's shortfall and reaches exactly zero at your life expectancy.

Why the required pot is larger than you might expect. You might think: "I need $X total over retirement, so I just need a pot that grows to $X." That understates the problem. That logic lets the pot sit untouched and compound the entire time. In reality, you start drawing from the pot immediately at retirement — it is shrinking with withdrawals at the same time it is growing with investment returns. Because you never let it fully compound, the required starting balance is significantly larger. The "PV of Lost Benefits" column is the present value of that required pot, discounted back to your departure date.

Step 3 — Back-solve for annual savings. Given the required pot at retirement, the calculator solves for the flat annual dollar amount you must save each year from departure through retirement (invested at your private return rate) to accumulate exactly that pot. This is a level annuity: the same nominal dollar amount every year — it does not grow with your salary. Gross Premium /yr then grosses that figure up by your working-years tax rate, representing the pre-tax salary increase a private job would need to provide for you to net the required savings amount.

Shrinking time, shrinking savings window. Each year you stay, your deferred pension grows — so the total value of benefits you'd lose does shrink. But the number of years you have to save for that loss shrinks too, and the time effect wins by a mile. A $300,000 gap spread over 20 years of saving is a manageable annual payment; but a $200,000 gap crammed into 2 years is crushing. The total goes down, but the time horizon collapses faster — that's why the chart slopes up and to the right.

FEHB is all-or-nothing. Whether you leave with 5 years of service or 25, you lose the entire retiree health subsidy — the government doesn't pay a prorated share. That's a fixed dollar amount that must be saved in whatever time remains. With 20 years to save, the annual burden is light; with 2 years, it's crushing.

Compounding works against you. When you have many years to save, investment returns do a lot of the heavy lifting — your money grows while you contribute. With only a few years left, contributions barely have time to compound, so more of the total must come straight out of your paycheck. The math is unforgiving: halving the time horizon more than doubles the annual premium.

Putting it together. Leaving early means a bigger total benefit loss (smaller deferred pension) but many years to spread the cost — so the annual premium is modest. Leaving late means a smaller pension gap but almost no time to fund it, plus the full FEHB subsidy still needs to be replaced. The shrinking time window dominates, and the required annual premium shoots upward.