Expert's View

Many federal employees who retire time that action to occur around the turn of the year. If you are one of them, you wouldn’t be human if you weren’t trying to game the system and find the single best day to retire. There isn’t one best day. In part that’s because the rules differ according to the retirement system you are in. But it’s also true that the best day depends on which financial outcome is most important to you. Let me explain.

If you are covered by CSRS (including CSRS Offset), you can retire up to the third day of the month and be on the annuity roll for that month. For each day within that time frame that you are not on the annuity roll, the annuity for that month will be reduced by 1/30th. So, if you retired on December 3, 2007, your January annuity payment would only be for 27/30ths of the month.

If you are covered by FERS (including those with a CSRS component in their annuity), you have to retire no later than the last day of the month to be on the annuity roll in the following month. So, if you retired anytime in December, 2007, you’d be on the annuity roll in January 2008.

Which date works best for you depends on a number of things. For example, if you were on the annuity roll in December 2007, you would be eligible for a full cost-of-living adjustment in January 2009. On the other hand, if you were on the annuity roll in January, your January 2009 COLA would only be 11/12ths of the total amount.

Another factor governing the best date to retire is the amount of the lump-sum payment you’ll get for any unused annual leave. To determine the amount you’ll receive, an agency must project that leave forward as if you were still employed during an equivalent number of days. Therefore, the value of each hour will be calculated on your base pay at the point where those hours fall on the calendar. Hours that fall before the 2008 pay raise will be paid at the 2007 rate and those on or after the raise will be paid at the higher rate. Thus, the closer your retirement date is to the pay adjustment, the more of those hours will be paid at the higher rate. For most agencies, the new pay rates will go into effect on January 6.

And, yes, there’s at least one more factor to consider: when the pay periods end in your agency. If you retire before the end of a pay period, you won’t get credit for any leave would have otherwise earned. It’s a small point, but one you may want to consider.