What is the Best Date to Retire?

By on December 10, 2014 in Q&A, Retirement with 4 Comments

Q: I am planing to retire this FY. I am trying to determine if hanging until Jan. 10, 2015 for full lump sum (448 hours) is a better option than going 12/31/14 which would obviously get my annuity started 1 month earlier. Likewise, I am trying to determine whether or not the 1% expected bump on Jan. 1st would have any significant positive benefits to my annuity or is it simply increasing my lump sum annual leave by 1%?

A: It’s really just a math problem and one that no one can accurately solve for you without a lot more personal details. Generally speaking, however, it always pays to work longer.  Only you can decide whether if pays ENOUGH to make it worth staying the extra 10 days.

You could sit down and do the math to determine the additional benefits of staying into 2015.  Be sure you’re considering the following:

Retiring effective 12/31/2014 means:

  • Annuity commences 1/1/2015, with 1st annuity payment payable on 2/2/2015 (but it probably won’t actually be received until at least 2/15/2015)
  • You’ll get 11/12 of any annuity COLA in 2016
  • Annual leave lump sum payment will reflect balance as of 12/27/2014 (440 hrs?)
  • Annual leave lump sum payment will eventually* reflect payment for 80 hrs at your 2014 hourly salary rate and 360 hrs at the new 2015 hourly salary rate

Retiring effective 1/10/2015 means:

  • Full pay for an additional 56 hrs (assuming a standard 40 hr work week)
  • Additional TSP savings of $ ?? **
  • Annuity commences 2/1/2015, with 1st annuity payment payable on 3/2/2015 (but it probably won’t actually be received until at least 3/15/2015)
  • You’ll get 10/12 of any annuity COLA in 2016
  • Annual leave lump sum payment will reflect balance as of 1/10/2015 (448 hrs)
  • Annual leave lump sum payment will eventually* reflect payment for 448 hrs at the new 2015 hourly salary rate

​*  I say “eventually” because (in most cases) your agency will initially pay you the entire balance for either date ​at the 2014 hourly rate, then issue a subsequent payment for the difference between the 2014 and 2015 hourly rates for any hours that would have been used on/after 1/11/2015 (when the COLA is likely to be effective).

**  Pay period 24 (ending 12/13/2014) is probably the last pay period in the 2014 tax year (i.e., the last pay you will actually receive in calendar year 2014).  If so, that means you could significantly INCREASE your TSP contributions for pay periods 25 and/or 26 (tax year 2015) in order to put as much money in the TSP as possible before you retire.

The 1% increase that may occur on 1/11/2015 will not impact your annuity at all​, but (as shown above) will increase your lump sum annual leave payment for any leave that might have been used after that date.

© 2016 Ehren Clovis. All rights reserved. This article may not be reproduced without express written consent from Ehren Clovis.

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About the Author

Ehren Clovis retired from federal service after a career as a Benefits Specialist. She dealt with the employees of several different federal agencies, and acquired broad knowledge and experience with federal benefits, including the special retirement provisions for federal Law Enforcement Officers (LEOs). She now presents retirement and benefits training for federal employees through private companies. Ms. Clovis also counsels individual clients about federal retirement and benefits via phone and email.

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