The end of the year is just around the corner and employees are peppering me with one question. When is the best date to retire? In almost all years that can be a complex question, involving considerations of the payout for accumulated annual leave and a difference of policies between CSRS and FERS.
Well, this year the answer is simple: No later than December 31. That’s the end of the last pay period in 2022. So, what does that mean for FERS and CSRS employees who are thinking about retiring?
If you are a FERS employee, you will have to retire no later than the last day of a month to be on the annuity roll in the following month. Therefore, you could retire at the end of business on December 31 and be on the annuity roll on January 1. Talk about a Happy New Year!
If you are a CSRS employee, you could retire up to the third day of a given month and be on the annuity roll in that same month. However, this year that wouldn’t make any sense. That’s because this year you can retire at the end of business on December 31 and be on the annuity roll the following day. Yipee!
Whether you are covered by FERS or CSRS, you’ll get credit for any annual leave you earned during that last pay period. And, when it’s added to all the other unused annual leave you have, you’ll receive a lump sum payment calculated at the hourly rate you were earning when you retired.
As for sick leave, those four extra hours you earned during that last pay period might not seem like much, but when added to your other unused sick leave hours, it might just be enough to give you an additional month of service credit that will be used in the computation of your annuity.
Cost-of-Living (COLA) Adjustments
CSRS retirees are entitled to an annual COLA in the calendar year following their retirement. For example, if your annuity began in July 2022, you’d be entitled to one-half of the 2023 COLA payable on January 1, 2023. If you go on the annuity roll in January 2023, your first COLA would be included in your January 2024 annuity payment.
Most FERS retirees aren’t entitled to a COLA until they reach age 62. (There’s an exception to the rule for special category employees, such as law enforcement officers and firefighters.)
The only bad news for both CSRS and special category FERS retirees is that by retiring on December 31, you’ll miss the 8.7 percent cost-of-living (COLA) increase that will be enjoyed by other retirees. Of course, you could get a thin wedge of that increase if you were on the annuity roll on November1 or an even smaller one if you were on the annuity roll by December 1.
Whether this is a good time for you to retire is a decision only you can make. Make it wisely because you could end up spending as many years in retirement as you did while working for the government.
Calculator: See your time to retire under FERS ticking away