A day seldom goes by without some federal employee asking me if there is an ideal date on which to retire. As the years have gone by, my answer has gotten shorter and snappier. Today it reads like this: The ideal time to retire is when you have the right combination of age and service and are in the right financial position and frame of mind to do so. In doing so, I have been guilty of providing a one-size-fits-all answer to what is, in reality, an incomplete question. Let me explain.
The question most of my inquirers mean to ask is this: What is the ideal date to retire if I have more unused annual leave than I can carry into the next leave year? Now, there’s a question worth answering. And the basic answer is simple. Retire before the new leave year begins. However, that leaves a few things left unsaid. So, I’ll say them now.
First, the date on which you should retire to maximize the value of your unused annual leave lump-sum payment depends on whether you are covered by CSRS or FERS. If you’re covered by CSRS, you may retire up to the third day in a month and still receive an annuity for that month. If you’re covered by FERS, you have to retire no later than the last day of a month to receive an annuity in the following month.
Second, you need to know the date on which the new leave year begins. For most agencies, it is either the first or second Sunday of January. This year that meant the 4th or 11th. In 2005, it will likely be the 2nd and 9th. Clearly, the closer you come to the day on which the current leave year ends when you retire, the better off you will be financially. That’s because unused annual leave is projected forward and is paid at the rate in effect at that time. And the new leave year and the annual pay raise go into effect on the same day. Note: If there is a retroactive pay adjustment next year as the last two years, your agency is required to make up the difference in a supplemental lump-sum payment.
Real question answered. Problem solved. (I hope!)