When You Can Expect That First Retirement Check

And what to do while you’re waiting. 

Health insurance open season isn’t the only thing on some federal employees’ minds this time of year. It’s also the time when a lot of people retire. As usual, it’ll be all hands on deck at the Office of Personnel Management to handle the onslaught of end-of-year retirement claims.

Just look at the numbers from the last couple of years for applications filed at the end of the previous year. In January 2021, 13,850 retirement claims arrived at OPM. In the months since, from February to October, the monthly average has been 7,501. In January 2020,17,134 claims were sent to OPM for processing. For the rest of that year, the monthly average was 6,814.

If you’re lucky (and you’ve had an uncomplicated federal career), your retirement claim will be processed and finalized within five or six weeks from when it is received at OPM. If you’re not so fortunate, be prepared for a four to six month wait—and in some cases, even longer.

If you need to mail your retirement application to your benefits office or a consolidated human resources center, you might consider using a delivery service like FedEx. It costs more than regular mail but you can track your application and know that it will be received in a timely manner.

During the time between receiving your last paycheck and your first full retirement payment, you will be placed in an interim pay status so you’ll have some income during the time your retirement claim is being processed. The only withholding OPM does during this period is for federal income tax. When the personnel agency finishes processing your application, they will begin withholding health benefits and life insurance premiums retroactive to the start date of your annuity. (But don’t worry, your health and life insurance coverage will continue while you're receiving interim pay.)

Generally, unless you specify a monthly withholding rate or amount, OPM will withhold federal income tax as if you are married and claiming three allowances. If you want to make updates to your federal tax withholding, you should go to OPM Retirement Services Online or contact OPM by phone or by mail. Before you make any changes, note that you could be penalized by the IRS if you don't have at least 90 percent of your yearly tax liability either withheld from your annuity or made via estimated payments to the IRS.

For state income tax, you must specify the dollar amount you want withheld from your monthly payments. The withholding must be in whole dollars. If you don't know how much to have withheld, contact your state's tax office for assistance.

OPM no longer withholds money from annuity checksfor the purchase of savings bonds. For more information on savings bonds, visit Treasury Direct.

You can also arrange to make allotments from your retirement check to certain organizations, such as:

  • American Federation of Government Employees
  • Fraternal Order of Retired Border Patrol Officers
  • National Association of Postmasters of the U.S. Political Action Committee
  • National Rural Letter Carriers Association Political Action Committee
  • National Active and Retired Federal Employees Association
  • National Treasury Employees Union
  • Treasury Employees Political Action Committee

If the organization you want to make an allotment to isn't listed above, contact them and ask them to provide the banking information needed to forward payments. You can have up to two allotments for a checking or savings account. You must maintain at least a $100 net annuity payment. The allotment must be for a minimum of $50. The accounts must be maintained at a U.S.-based domestic financial institution. 

While you’re waiting for your retirement claim to be finalized, you might decide to make your first post-separation withdrawal from your Thrift Savings Plan account. Be aware that this also could take longer than you think. We’ll look at TSP withdrawals in more detail next week.

The bottom line is that it’s important to have cash on hand when transitioning to retirement while you’re waiting for the dust to settle and your payments to start arriving in your bank account.