If you are eligible to retire, have decided to do so soon but haven’t made up your mind on an exact date, you need to know the important dates and rules. If you aren’t eligible to retire—or you are eligible and have made the decision that it’s not time yet to go—thinking about it now will give you a base for your decision in the farther off future.
While there is no absolute best date to retire, a large number of workers favor retiring around the turn of the year. Let’s look at why.
If you are a FERS employee, you have to retire no later than the last day of a month if you want to be on the annuity roll in the following month. In other words, you’d have to retire no later than December 31, 2019 to be on the annuity roll on January 1, 2020. If you missed that target by a single day, you wouldn’t be on the annuity roll until the following month.
If you are a CSRS employee, the law allows you to retire up to the third day in any month and be on the annuity roll in that same month. Therefore, you could retire no later than January 3, 2020 and still be on the annuity roll in January. However, for every one of those days that you weren’t on the annuity roll, your first month’s annuity would be reduced by 1/30th.
Are there any other factors than retirement dates to consider?
Yes, there are. For one, the last pay period in calendar year 2019 for most agencies ends on December 21. If you work past that date to December 31 (FERS) or January 1, 2 or 3 (CSRS), you’ll earn some additional salary; however, because you have to complete a pay period to get any credit for any annual or sick leave, you won’t get credit for those extra days you worked.
And here’s another factor. Because the 2019 leave year doesn’t end until January 4, 2020, you’ll get a lump-sum payment for all your unused annual leave, including any leave that exceeds the annual carryover limit. And those hours of annual leave will be projected forward as if you were still on the payroll. So, if there’s a pay increase in 2020, any hours of annual leave that fall after the pay raise—and it’s a good bet there will be one, either 2.6 percent or 3.1 percent with some variation by locality—goes into effect on January 5, 2020, will be paid at the higher hourly rate.
Taxes: If you retire at the end of the year, your taxes will be less at the end of the following year. That’s because of two things. First, your income will be lower. Second, some of your annuity will be tax free. That’s because part of it represents contributions you made to the retirement fund while you were working. And you’ve already paid taxes on that money.
Processing time: Also, because of the turn of the year spike in retirements, you need to be aware that the time needed to process your case may be longer than if you’d retired during the dog days of August. That in turn means that you likely will be on “interim” retirement payments for a longer time. We’ll look more deeply at that in a future column, too.
See also, Retirement Eligibility & FERS Minimum Retirement Age at ask.FEDweek.com