Reg Jones Expert's View

FERS employees have to retire by the last day of a month in order to begin receiving an annuity in the following month. CSRS employees may retire up to the third day of a month and still receive an annuity for that month. However, that first month’s annuity will be reduced by 1/30 for each day they aren’t on the annuity roll.

So, how do you pick a departure date that increases the dollar value of your annuity? Whether you are covered by CSRS or FERS, your annuity computation will be based on a fixed formula and two variable elements: your years and months of service and your high-3 years of average basic pay.

Your high-3
Your high-3 is defined as your highest three consecutive years of basic pay. As a rule, it keeps getting higher the longer you work. Therefore, most of you who are eligible to retire will do so when you have come as close as possible to spending a full year at your highest pay level. That’s usually the end of the year following an annual pay adjustment.

Your years and full months of service
This is the second element used to compute your annuity. It includes all the time you were employed by the federal government in positions from which retirement deductions were taken. If deductions weren’t taken – or if you left and received a refund of your retirement deductions and didn’t repay that debt – in most cases that time won’t be counted.

Your unused sick leave
When you retire, any unused sick leave will be added to your service time and – if there’s enough of it – result in an increase in your annuity. Since there’s no limit to the amount of sick leave that can be included in your annuity computation, you could see a real boost in the amount you receive. A real bonus for staying well!

Your annual leave balance
When you retire, you’ll be given a lump sum payment for any unused annual leave. What you may not know is that unused annual leave is projected forward, just as if you were still on the employment roll. And it’s paid at the hourly pay rate in effect at that time. Even if you retire before a new annual pay adjustment goes into effect, any unused annual leave that crosses over into the new pay year will be paid at that higher hourly rate.

However, picking a retirement date to get full value out of this extra benefit is crucial. If you are carrying more than the annual leave limit – 240 hours for most employees – you’ll have to retire before the current leave year ends or you’ll lose those extra hours. This year it ends on January 5, 2019.

A closing thought
While it’s a good idea to see how you can maximize your annuity, it would be a better idea to not be blinded by dollar signs. There’s more to a happy and productive retirement than a few extra bucks.

Retire when you’re ready: to take on a new job, to finally go on the vacation you’ve always wanted, to visit old friends or long-lost family members, or to kick back and just have a good time at home. Don’t be like those sad cases I’ve known who died while trying to maximize their high-3.

See also, Calculating a Federal Annuity – FERS and CSRS at ask.FEDweek.com