Retirement and the Federal Employee: What a Difference a Day Can Make!

When is the best day to retire? It depends. Here are a couple of examples and how it may impact your finances.

Joe was a 57-year-old Federal employee. On the 31st of the month, he was going to celebrate his 30th anniversary of Federal service, meaning he could retire. One of his friends told him he should wait one day and collect some extra money. Another said he should definitely retire on the 31st, and avoid losing money.

Which friend was right? And why?

The first fellow noted that the 31st was a Thursday, with Friday being the last day of the pay period. If Joe delayed his retirement until Friday, he would finish the pay period, thus earning eight hours of annual leave and four more hours of sick leave. He would be compensated for the annual leave at his regular hourly rate of pay (the sick leave would not give him an additional month of service, so it could be ignored).

As a GS-12, Joe made $40.21 per hour. Multiply by eight and this meant delaying his retirement by one day would result in an additional $320.96 payment for his eight hours of accrued annual leave (in addition to one day’s pay for working). Good deal, right? Why not do it?

Joe’s other friend pointed out that with Friday being the first of the new month, if he retired on Friday he would get -0- annuity for the entire month -– his annuity would not begin until the following month! His annuity being $2,097 monthly, working on Friday to get the additional $320.96 would be costly. Better to retire on Thursday, the 31st, and get a full monthly annuity starting the next day.

So, Joe thanked his two friends, and retired on Thursday, the 31st. He “gave up” the extra annual and sick leave, but his annuity started immediately.

CSRS Is Different

The situation described above is how it worked for Joe. It was different for his cousin, Mary.

Mary had the same numbers as Joe, with the only difference being she was CSRS. The starting date for a CSRS annuity is figured more liberally. If the employee retires no later than the 3rd of the month, he gets his annuity starting with the month he retires. It is pro-rated to reflect the “missing” day, or days, but it is still a lot more than the -0- that FERS employees get.

For Mary, her first check was 96.6% of the full monthly amount.

Mary retired on Friday. Her first annuity check was for the same month, rather than having to wait until the next month. She did receive the annual and sick leave for her last pay period.

Anniversary date

Once you become eligible for an annuity, each month on this date you accumulate another 1/12th of 1.0% toward the annuity. So, be mindful of this, and try not to retire just a short time before you would have earned another increment. (Example: a $74,000 salary would generate $5.13 more in your annuity for each additional month of service. Over a 20-30 year retirement span, this is significant.)

What other pitfalls are there to watch out for? Well, those retiring in late December might want to hold off until early January, in order to be paid for their annual leave at the higher rate for the new year. Of course, this only works if there IS a general salary increase the next year!

The continuity of your FEHB health insurance will probably be okay regardless of when you retire, but you should confirm this with your HR office.

Sick leave is added to your service time, when you retire. It is not worth much, but it will double its value beginning in 2014. To find out more, and to do an actual calculation, go to my website – – and click on no. 7.

About the Author

Robert Benson served 35 years in various Federal agencies, as both a management analyst and IT specialist. He is a graduate of Northwestern University.