Reg Jones Expert's View

It’s that time of year again. The time when retirement-eligible employees begin to wonder if they should retire, and if so exactly when. If you are one of those, you need to know the rules.

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, 2015 to be on the annuity roll on January 1, 2016. If you missed that target by even a single day, you wouldn’t be on the annuity roll until the following month.

If you are a CSRS employee, a quirk in 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, 2016 and still be on the annuity roll in January. However, for each of those days that you weren’t on the annuity roll, your first month’s annuity would be reduced by 1/30th.

Before you make your decision, there are a few other factors to consider. Here’s one. For most agencies, the last pay period in 2015 ends on December 26. If you work past that date to December 31 (FERS) or January 1,2 or 3 (CSRS), you’ll earn some additional salary, but you won’t get credit for any annual or sick leave you would have earned during those extra days. That’s because you have to complete a pay period to get any credit. It’s all or nothing.

And here’s another. Because the 2015 leave year doesn’t end until January 9, 2016, 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 2016, and there likely will be one averaging 1.3 percent, any hours of annual leave that fall after the pay raise goes into effect on January 10, 2016, will be paid at the higher hourly rate. Not bad, eh?

Finally, if you retire at the end of the year, your taxes will be less at the end of the following year because your income will not only be lower, but a portion of your annuity will be tax free. That’s because it represents a portion of the contributions you made to the retirement fund while you were working. And you’ve already paid taxes on that money. Sweet!

While there is no absolute best date to retire, the end of the year is one that’s favored by a large number of workers. Maybe you’ll be one of them.