My recent Best Dates to Retire 2009 column sparked a series of questions from readers trying to pin down exactly the best day. Let's look at a few of them.
Working Around Weekends
You said the best date for a Federal Employees Retirement System employee to retire is the last day of the month so retirement benefits begin the first day of the following month. If a FERS employee retires on Aug. 29, 2008, however, wouldn't his retirement still commence on Sept. 1? I cannot see any disadvantage to choosing Aug. 29 as a retirement date, can you ?
This year it wouldn't make much difference if an employee under FERS retired on Friday, Aug. 29, or Sunday, Aug. 31. The only benefit to making the retirement effective on Sunday is accumulating two more days of service. This generally would not affect the retirement computation since FERS benefits are based on full years and months of service, and any leftover days are dropped. If sick leave becomes creditable under FERS -- as proposed in current legislation -- then I will write more about looking at the leftover days of service, since they might add up to another month when combined with unused sick leave. We won't count those chickens before they are hatched at this point.
In 2009, the benefit of retiring at close of business on Monday, Aug. 31 would be that it is a workday and the employee would receive one more day of salary in his final paycheck. For an employee who is earning $65,000 a year, a final day's wage would be $250. You're right that the retirement would begin on Sept. 1 either way, but it would be nice to receive compensation until the first day one is an annuitant! It isn't a big deal, but when you are winding down to the final days on the job why leave a day's wages on the table?
It looks like the day you retire would have to be a workday. For example, you can't retire on Saturday, Aug. 1, 2009, under CSRS. Is this correct?
Not exactly. You can select any retirement date you want. It can be a holiday, a Saturday, your birthday, whatever. If you choose to retire on the 1st, 2nd or 3rd of the month and you are covered under the Civil Service Retirement System (or CSRS Offset), you would become an annuitant the next day. But your first annuity payment would be docked by one to three days of retirement pay -- 1/30th, 2/30ths or 3/30ths of your monthly benefit. If your retirement payment is $3,000 per month, each day is valued at $100. If you retire on Monday, Aug. 3, 2009, for example, you would receive 27/30ths of August's retirement benefit, but salary for only Monday, since Saturday and Sunday would have been your days off. Is one day of salary worth more than three days of retired pay? Usually the answer is no. The only time I would recommend retiring on a Saturday or Sunday -- if they fall on the 1st through the 3rd of the month -- would be if adding one to three more days of creditable service would round your total service up to an additional month. Your retirement is computed on whole years and months of service. Any days shy of 30 are dropped off after adding on unused sick leave.
Best Days for CSRS
For most of those under CSRS, wouldn't July 3, 2009, be a better retirement date than July 1 or 2? Since Friday, July 3 is the observed holiday, July 2 would be the last workday. This would take a person to the end of the leave period, too.
I agree. Why bother with July 1 or 2 when July 3 would provide an extra holiday and get you to the end of the leave period? The exception would be if you were on a flexible work schedule and Friday was your regular day off, meaning the holiday would fall on Thursday.
I've always wondered if retiring on the 1st, 2nd or 3rd of the month in the middle of the year would affect the calculation of your cost-of-living adjustment at the beginning of the following year. It's based on number of months you were retired during the previous year, and you might not get credit for that first month since you weren't retired the full month.
Since you would become an annuitant that month, you would still count that month in the pro-ration of your first retiree cost-of-living adjustment. For example, whether you retire on Dec. 31, 2009, or Jan. 1, 2 or 3, 2010, you would still become an annuitant in January 2010. Therefore your first retiree COLA would be due on Dec. 1, 2010 -- and would be computed as 11/12ths of the 2010 adjustment -- and be payable on Jan. 1, 2011, which is the date of payment for the December retirement benefit.
I will be a CSRS retiree in 2009. If I retire on Aug. 1, 2009 -- a Saturday and the end of a pay period -- would I receive an annuity check for August from the Office of Personnel Management? Also, if I am a salaried employee, but worked overtime on Saturday, Aug. 1, would that month then be a good choice to get credit for the full pay period along with an annuity check for that month?
July 31, 2009, is a Friday so that makes it a good date for CSRS or FERS employees to retire. Aug. 1 is a Saturday and is not usually a workday for most federal employees, which is why I wouldn't choose Aug. 1, 2 or 3 as good retirement dates (see the previous question). If you were to work overtime and also choose to retire at close of business on Saturday, Aug. 1, then that would be a good date, since you would be compensated your salary for working that day, even though you would lose one day of retired pay.
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.