Retirement Planning Retirement PlanningRetirement Planning
Advice on how to prepare for life after government.

Endless Summer, Endless Questions

How about a few Q&As this week? It seems like most of your recent questions fall into one of three categories:
  • Basic Information Needed
  • The Rumor Mill
  • Help!

Let's look at some questions in each category.

Basic Information Needed

I have worked for 42 years under the Civil Service Retirement System and have chosen July 31, 2009, as the last day of work. Aug. 1 is the last day of the pay period. Since it falls on the 1-2-3 day rule, do you see any problems with this date that I might not see?

You will need to choose an official effective date of retirement -- either July 31 or Aug. 1. You already have the maximum amount of service that will be used to compute your CSRS retirement at 80 percent of your high-three average salary -- 41 years, 11 months of service is the most that can be used. Your sick leave can be added (for now, this is true only for CSRS retirees, not those under the Federal Employees Retirement System) to allow the computation to exceed 41 years, 11 months. Check with a retirement specialist at your agency to figure your sick leave credit as of July 31 (which falls on a Friday).

I would not recommend using Aug. 1, 2, or 3 as your official date, because you will get your last accumulation of annual and sick leave after completing the 80 hours of work for your final leave period, which ends as of the close of business on July 31. There's no benefit for you to have an additional three days of service, since they wouldn't be used in the computation of your retirement anyway.

Keep in mind that when a CSRS employee retires on the 1st, 2nd or 3rd day of the month, the first retirement check is docked by 1/30, 2/30, or 3/30 of the first month's payment. If your CSRS benefit was computed at $3,000 per month, then each of those days is worth $100.

If I am planning to retire in the middle of the year, would it be wise to take a lump sum for annual leave, or use all the accumulated leave as an extended "vacation," thereby getting a regular paycheck for up to eight weeks and an additional two months of longevity credit?

There are a couple of reasons why the answer to your question is usually no.

First, leave taken just before you retire, known as "terminal leave," generally is prohibited under Office of Personnel Management regulations.

Second, if you retired instead of extending your service while using your annual leave, you would be eligible to receive both a retirement check and a lump-sum annual leave payment. If you stayed on the job, you would get only the difference between the amount of your retirement benefit and your full salary, and you would have given up the payment for the annual leave.

Remember, the lump-sum payment for annual leave is not basic pay, so it doesn't have retirement contributions or Thrift Savings Plan contributions withheld. It also would not interfere with the earnings limit for receiving Social Security retirement benefits for those two months.

You've written, "If you're under CSRS, you should always consider leaving on one of the first three days of the month." If you retired on the last day of the month, however, wouldn't your retirement start the first day of the next month, which is the following day? If that's true, CSRS employees could retire the last day of the month or the 1st, 2nd, or 3rd day of the month and draw an annuity the next day.

Good point. The last day of the month is good for both CSRS and FERS employees. But CSRS employees also should consider retiring the 1st, 2nd or 3rd day of the month if there is a good reason to do so. For example, Dec. 31, 2009, is not a bad date to retire. But Jan. 1, 2010, is even better for CSRS employees, because:

  • You don't have to come to work since it is a holiday, but you still will be paid.
  • You will have completed the required 80 hours of work for the last pay period, so you would accumulate your last accrual of leave.
  • It is within the first three days of the month, so you still will receive 29/30 of your January retirement check.

Rumor Mill

I recently heard about a "Proposal to Reduce the Deficit and Achieve Savings for American Taxpayers" presented to President Obama by Republican leaders Rep. John Boehner of Ohio and Rep. Eric Cantor of Virginia. It includes raising the federal employee minimum retirement age to 62 and using a high-five rather than a high-three formula to calculate our pensions. Could you comment on the likelihood of that proposal being acted upon and if so, how long it might take to enact the legislation?

This is not a formal proposal or bill. There would be a huge lobbying effort to counteract any such change by groups like the National Active and Retired Federal Employees Association and unions representing federal employees. According to my friend Mike Causey of Federal News Radio, the chances of these changes happening are about the same as a city-block-size asteroid hitting the Earth. I agree.


I spent the last few years planning my retirement. I read everything I could find on the topic, checked all the numbers, requested an estimate from my agency, and thought I had everything lined up to retire. My last day of work was Jan. 2, 2008, and I still have not received my final retirement package from OPM. Today, I called the person handling my claim. If I can believe what I was told (and I don't), my claim will be completed by the middle of July.

Most retirees don't have to wait more than 90 days for their retirement claim to be processed. Some are processed within 30 or 60 days.

Processing a retirement case involves transferring the records of an employee's entire federal career from the last employing agency to OPM and locating other relevant records that might already be on file at OPM, such as previous retirement contributions records and divorce decrees. This is not done electronically -- yet. Once the package is compiled at OPM, a claims examiner reviews the employee's application to be sure that he or she is eligible to retire, that all forms are properly completed and signed, that the employee was classified in the proper retirement system and that all of the service is creditable. Then, the examiner computes the final retirement benefit.

Interpreting the rules can be difficult in some cases. For example, some service performed before a certain date falls under one set of rules. But if it was later, different rules apply. Sometimes an agency interprets the rules differently than OPM, which has the final say. Sometimes, information is missing -- which I believe was the problem in your case.

As I've said before, prepare for the worst, but expect the best.

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.

For more retirement planning help, tune in to "For Your Benefit," presented by the National Institute of Transition Planning Inc. live on Monday mornings at 10 a.m. ET on or on WFED AM 1500 in the Washington metro area.

CORRECTION: The original version of this column incorrectly stated that Social Security taxes are not withheld from lump-sum payments for annual leave. The column has been updated to correct the error.

Tammy Flanagan has spent 30 years helping federal employees take charge of their retirement by understanding their benefits. She runs her own consulting business at and provides individual counseling as well as online training for the National Active and Retired Federal Employees Association, Plan Your Federal Retirement and the Federal Long Term Care insurance Program. She also serves as the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars.

For more retirement planning help, tune in to "For Your Benefit," presented by the National Institute of Transition Planning Inc. live on Federal News Radio on Mondays at 10 a.m. ET on WFED AM 1500 in the Washington-metro area. Archived shows are available on

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