A Date for New Year’s

By Tammy Flanagan

December 17, 2010

In a new survey by Government Executive's research arm, the Government Business Council, 35 percent of federal managers said the impending two-year pay freeze is likely to cause them to retire sooner. A little less than 20 percent said it will lead them to retire later, while 38 percent said it won't make any difference.

If you're in that first group, you might be thinking about good dates to retire next year. And if that's the case, you should know it pays to consider your decision very carefully.

For example, Feb. 28, 2011, is a better date to retire than Feb. 26. Let's look at why that's the case.

At first glance, you might not think there would be much difference. Feb. 26 is a Saturday at the end of a pay period and Feb. 28 is the following Monday -- and also happens to be the last day of the month. But there could be thousands of dollars of difference between the two dates for some people.

Either date will allow your retirement to begin on March 1. And either way, your first retirement check will be paid on April 1 for the month of March. So far, it doesn't really matter which day you choose.

But Feb. 28 is a Monday, so you would be paid your salary for that day if you select it as your retirement date. If you retire on Saturday, Feb. 26, then you'd lose that last day of salary. Monday wouldn't be included in your final paycheck or in your first retirement check. For someone earning $65,000 per year, one day's salary would amount to $250.

Also, choosing Feb. 28 instead of Feb. 26 will give you four more days of service. That could add a month to your retirement computation if you have 26 to 29 days left over in your length of service computation. You might think my math is off, but keep in mind that for retirement planning purposes, every month has 30 days -- even February.

If four more days adds another month to your length of service, then that's a few more dollars in your lifetime retirement check. Suppose your high-three average salary is $65,000. An additional month of service under the Federal Employees Retirement System would add $4.50 a month to your retirement. Under the Civil Service Retirement System, it would add $9. Do the math: $9 times 12 months equals $108 a year. Over 30 years, that adds up to $3,240. Figure in annual cost-of-living adjustments, and during a typical lifetime, you could get more than $6,000 in additional retirement income.

If you are covered under CSRS or CSRS Offset, you also might consider March 1, 2, or 3 for the same reasons outlined above. Under CSRS, your retirement will begin the day after you retire if you choose one of the first three days of the month as your retirement date. This is not true under FERS; all voluntary retirements under FERS begin the first day of the month after you retire.

By the way, there's nothing magical about Feb. 28, 2011. The same logic can be applied to any month of the year. For more detail, see my column on the best dates to retire in 2011.

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 federalnewsradio.com or on WFED AM 1500 in the Washington metro area.

By Tammy Flanagan

December 17, 2010