When a Federal Employee May Want to Retire Just a Little Later

When are you planning to retire? There are situations where your timing in selecting a retirement date can make a difference in your retirement income.

Last March, I wrote a short article about when to retire. There are situations in which
one day can make a significant monetary difference to you as a retiring federal employee. (See Retirement and the Federal Employee: What a Difference a Day Can Make!) In summary, I discussed:

  • Finish the pay period, in order to get your usual increment of sick and annual leave,
  • Better to retire the last part of the month instead of early the next month, because you will not —unless you are in the old CSRS system—be paid your annuity for the month in which you retire, and
  • January is better than late December, so you are paid for your accumulated annual leave at the higher rate of the new calendar year. (Of course, this only works when no pay freeze is in effect!)

There is another situation I did not mention but that may impact your decision. Let me explain.

In calculating the FERS annuity supplement, a retiree receives earnings credit only through the end of the previous year. For example, if you retire as a FERS employee on May 24, your earnings history will run through December 31 of the year before. You will not receive credit for the year of your retirement. You see what’s coming, don’t you?

If Joe is eligible to retire on December 29, the last day of the pay period, he might be wise to postpone his retirement until on or after January 1 of the next year (the next calendar year, not the next fiscal year). This way, when his supplement is calculated
he will get full credit for his earnings in the year just ended. If his retirement date is effective on December 29, he will receive -0- credit.

How much difference will it make for Joe?

For each year of FERS service, the average employee who retires is paid an annuity supplement of approximately $42 per month. Joe is 58.5 years old when
his retirement starts. So, from retirement to the day his supplement ends (age 62) is 3.5 years, or 42 months. By waiting one  work day or a bit longer to retire, Joe will
receive (42 * $42), or roughly $1,764 more! But the “cost” of this benefit is the one-time loss of one month’s annuity.

Of course, knowing how it works is not quite enough. In order to have a really good idea of what to do, you will need to run your individual numbers.

So, if you are thinking of retiring in December, you might want to put it off until January. Good luck!

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.