Rethinking the Best Date to Retire

By Tammy Flanagan

February 4, 2011

Here's a new wrinkle in choosing the best date to retire under the Federal Employees Retirement System: It might not be the last day of the month.

I recently received the following e-mail from one of my readers, Jerry:

I am a FERS employee who is eligible to retire and will have 27 years, 11 months and six days service on Dec. 31, 2012. In looking at your column "The Magic Date," I noticed that the leave year ends on Jan. 12, 2013. Your article indicated that a FERS employee would do best by retiring on Dec. 31, 2012, as they would start drawing a retirement annuity on Jan. 1, 2013, and get their first check on Feb. 1.

There are 27 pay periods in that year, which starts on Jan. 1, 2012. Would it not be better for a FERS employee to retire on Jan. 12, 2013? They would get an extra regular paycheck that would be more than the retirement annuity they would receive on Feb. 1, they would earn an extra eight hours of annual leave and four hours of sick leave, and they would get an extra 12 days longevity computed into their retirement annuity. In my case, that would give me 27 years, 11 months and 18 days before my sick leave is figured in. Am I missing something?

No, Jerry, you are not missing something, you are on to something. Let's plug some hypothetical numbers into this example:

If Jerry retires on Dec. 31, 2012:

If Jerry retires on Jan. 12, 2013:

The Bottom Line

If you are retiring under FERS, there might be something to be said for leaving at the middle of the month, or at the end of a pay period. Here's a summary of the pluses:

If you plan to take this approach, then be sure to stay at least one full pay period into the next month. If you were to retire on the 5th of the month, for example, the benefit of a few days of salary and possibly another accumulation of leave would not offset the loss of a month of retired pay under FERS.

And finally, a note to CSRS employees: Don't do this! Under CSRS, your monthly retirement check is more than your paycheck after you have reached around 25 years of service (46.25 percent of your high-three average salary). So it wouldn't be worth losing a month of retirement to gain a final paycheck and leave accrual. For the end of the 2012 leave year, the best date for CSRS employees would be Thursday, Jan. 3, 2013. For any month, consider the last day of the month, or the first three days of the following month if you are retiring under CSRS, or CSRS Offset.

For the best dates to retire throughout 2012, stay tuned. I plan to map out the dates on the calendar in the next few months.

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.

By Tammy Flanagan

February 4, 2011