Retirement Dates: Q&A

By Tammy Flanagan

August 3, 2007

Over the past two weeks, we've looked at factors to consider in choosing exactly when to retire, and the best dates to retire in 2008. During that time, several of you have written in with questions and comments about setting a date. Here are some of them, with my responses.

I am under the Civil Service Retirement System. I began employment May 12, 1975, with the U.S. District Court for the District of New Mexico, and have been with this agency to this date. My date of birth is 12/4/52. My next in-step raise will be Nov. 26, 2007. Would it be beneficial to retire on my employment anniversary date, at the end of 2007, or on Jan. 31, 2008?

First of all, can you afford to retire and do you have a plan for your "life after retirement?" Your first eligibility date would be Dec. 4, 2007 (your 55th birthday). The earliest "best date" for you to retire would be Jan. 3, 2008. After that, choose any of the dates I highlighted last week. Every day that you continue working, your retirement benefit will increase (both your length of service and your high-three average salary will reflect the additional day of service and higher pay). My advice is to request a retirement estimate for Jan. 3, 2008, and a second estimate for July 3, 2008, and compare the two. This will show you the amount of retirement income you will have so that you can do some financial planning.

Sept. 3, 2007, is a very good day for CSRS employees. I picked that day because it is a holiday (Labor Day) and just after the end of a pay period. I will get paid for the holiday, I pick up three more days' service time, and my CSRS annuity starts the next day. I will need to check out on the prior Thursday, since Friday is the normal day off for people working 4/5/9. My wife and I will be out camping in our new motor home when my retirement kicks in. I also will get September, October and November credit toward the next retiree cost of living allowance.

I can't argue too much with your logic. It sounds like you've thought it through. The only thing I would suggest is that if you don't need the extra three days of service credit to make up another month for the computation of your retirement, I would consider retiring on Aug. 31. Otherwise, your first retirement check will be docked three days of retired pay and you will only get one day of salary to make up for it.

I will have 18 years in the civil service on Aug. 3, and I already have 20 in the Air Force. I will be 59 on Aug. 28. Can I retire this year, and if so, what would be the difference between that and waiting for 2008?

There is more to this question than meets the eye. I assume you're covered under FERS. If you are planning to keep your military and civilian careers separate, then I would wait until you have at least 20 years of civilian service. You could retire today if you wanted to, but your retirement would be subject to a reduction of 5 percent for each year you are under age 62, and you would not be eligible for Social Security or a FERS supplement. If you wait until you're 62, you will get a boost in the computation and you will be eligible for Social Security benefits as well. You also will be eligible for an unreduced benefit with a FERS supplement when you have 20 years of service, since you will be over age 60 when that occurs. See my previous column on this subject: Mixing Military and Civilian Retirement (May 11, 2007).

Do the end-of-year annual leave payment rules apply if you leave in the middle of the year? If I retire in August and I'm due a step increase in September and have enough annual leave, will I be paid for my leave at the higher rate?

The January pay adjustment is different than a step increase. The January adjustment is awarded to all employees, whereas a step increase is given only if you have completed the required service to earn it. So the answer is, if you leave in August, your annual leave payout would be projected at the salary that you were earning on the day you retired. Here's a column that I wrote on this subject Taking Your Lumps (Jan. 19, 2007).

In the example involving "Thomas" in the "When to Retire" column, it says he retires on Friday, Jan 2, 2009, which is the last workday in the leave year -- implying that this is a significant factor. But the accompanying leave chart indicates the leave year actually runs through Saturday, Jan 3, 2009. Why is it desirable for Thomas to retire on a workday, rather than on the actual last day in the leave year? Would retiring on Jan. 3 jeopardize his being paid for the 208 use-or-lose hours of annual leave, which exceeds the usual 240 carryover limit, or is there some other reason why it wouldn't be wise for him to retire on Jan. 3?

As long as you've completed the 80 hours for the pay period, you have earned the leave for that period. For most employees, Friday is the end of the work week and the day when their 80 hours is completed. If you choose to retire on Saturday, Jan. 3, you would still have your retirement begin the next day (under CSRS), but you would lose an additional day of retired pay, since the first payment would be pro-rated due to retiring after the end of December. For employees working a flexible schedule, their work week may end on a different day.

Under FERS, if you retire in the middle of a month, is the high-three average calculated back three years from the exact date of retirement? Or is it the prior three calendar years? If your high-three is in fact your last three years (as it usually is), you would compute your salary rates starting with the date that is exactly three years prior to your retirement date.

Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.

By Tammy Flanagan

August 3, 2007