Reg Jones Expert's View

I usually hold off writing an article about the best date to retire till the end of the year. However, I’ve already been peppered with so many questions that I’ve reached the conclusion that more employees are getting the urge to leave than ever before. And maybe because of the dicey economic climate, a lot more preplanning is going into the decision than usual.

As faithful readers will recall, my mantra has always been, "There is no best day to retire, only better ones." I plan to stick by that this time around, but with one proviso. There may be a best day for CSRS employees to retire this year. That’s because the leave year ends on January 3 for most agencies. And the 3rd is the last day of any month on which CSRS employees can retire and be on the annuity roll in that month. The last day for FERS employees is the 31st, which as you’ll see below is still a pretty good one on which to retire.

Effective date of annuity

If you are a FERS employee who retires on December 31, you’ll be on the annuity roll for the entire month of January. If you are a CSRS employee who retires on January 3, you also will be on the annuity roll in January; however, your annuity for that month will be reduced for each of those three days.

Lump-sum payments for unused annual leave

The last pay period of 2008 for most agencies ends on January 3. The new leave year begins on January 4, and it coincides with the annual pay raise adjustment. Therefore, if you are a CSRS employee who retires on January 3, not only will you get credit for any annual leave you earned during that pay period but your lump-sum payment for every single hour of unused annual leave will be paid at the new hourly rate. That includes any use-or-lose leave that would be lost if you retired after January 3.

If you are a FERS employee who retires on December 31, you’ll lose any annual leave you would have earned during that last pay period, and your lump-sum payment will include three days (24 hours) paid at the old 2008 rate. If you decide to retire at the end of the preceding pay period, it would mean that an additional two weeks (80 hours) would be paid at the lower rate.

Cost-of-living adjustments

COLAs are payable on January 1 of the year following your retirement. If you are a CSRS employee, you’d have to retire no later than December 3 to get a full 2010—not 2009–COLA. If you retire no later than January 3, 2009, you’d be eligible for 11/12ths of the COLA on January 1, 2010. As a rule, if you are a FERS retiree, you won’t be eligible for your first COLA until you reach age 62, regardless of when you retire. However, FERS-covered law enforcement officers, firefighters, air traffic controllers, and disability retirees don’t have to wait until they are age 62. They are treated the same as CSRS retirees.