In the last two weeks we’ve looked at how you can increase the two main elements of your retirement benefit calculation — high-3 and years of service — by continuing to work beyond your retirement eligibility point, if you are not financially prepared to retire at that time.
Having covered that, let’s look at how timing your retirement can add just a little more value. The eligibility rules governing CSRS and FERS are different and so are the rules regarding when an annuity begins. But there’s even more to it than that. Let me explain.
If you are a CSRS employee, you can retire at age 62 with 5 years of service, 60 with 20, or 55 with 30. You can retire up to the third day of the month and still be on the annuity roll in that month. Each day you wait before retiring reduces the amount of your first month’s annuity by one day.
For example, if you leave on October 3, your October annuity would be based on 27 days—as a fraction, 27/30 of your full monthly amount. Wait, you say, October is a 31-day month, wouldn’t it be 28/31? No. That’s because annuities are based on 30-day months. That’s so your annuity payments don’t fluctuate from month to month.
If you are a FERS employee, you can retire at age 62 with 5 years of service or at age 60 with 20. You can also retire at your minimum retirement age (MRA) with 30. (MRAs range between 55 and 57, depending on your year of birth.) Unlike CSRS you can also retire at your MRA with as few as 10 years of service. However, there’s a catch. If you retire under the MRA+10 provision, your annuity will be reduced by 5 percent for every year (5/12ths of 1 percent per month) you are under age 60.
There’s another difference between CSRS and FERS. If you want to be on the annuity roll in the following month, you’ll have to retire no later than the last day of a month For example, if you want to be on the annuity roll in November, you’d have to leave no later than October 31. If you missed that end-of-month cutoff date, your annuity wouldn’t start until December.
Now you know the ground rules governing when you are eligible to retire and when your annuity begins. Let me close by pointing out that you can retire on any day of the week you want to, even on a holiday. And you can even do that at any time during a pay period. However, before you pick a date by throwing a dart at your calendar, I need to remind you of two things.
First, retiring at any other time later than the third day of a month (CSRS) or the last day of a month (FERS) means that you won’t move seamlessly from being an employee to being a retiree. Second, if you retire before the end of a pay period, you won’t receive any credit for the annual and sick leave you would have otherwise accrued during that pay period.