Choosing Your Retirement Date
The perfect retirement date is a widely discussed and dissected topic. There have been multiple articles dedicated to several strategies you can employ to ensure you pick the right date. So, what exactly is the right date, and why does it matter?
End of a Pay Period
FERS employees have to work an entire pay period to accrue annual leave or sick leave for that pay period. If you only work eight of the 10 days, you will not receive prorated leave. This might not be that important to some pre-retirees, but others may want those 4 extra sick leave hours to boost their annuity calculation and 8 annual leave hours to increase their lump sum payout.
End of the Month
When you retire, your annuity starts on the first day of the following month. If your retirement date is June 30, your annuity payments begin on July 1, which means you never experience a gap in payment. If you retire on June 15, your annuity payments begin on July 1, and you will need to go 15 days prior to getting paid.
End of the Year or Leave Year
Retiring at the end of the year allows you to accrue additional annual and sick leave. You can carry over a maximum of 240 hours of accrued annual leave from the prior year. When combined with the possible 208 that you can accrue during the current year, that’s an impressive lump sum payout. If maximizing your lump sum annual leave payout is the goal, make sure to retire before the end of the leave year (the 2025 leave year ends on January 10, 2026). This is the last date to use or lose any leave over 240 hours. Another benefit to this strategy is that you will receive your lump sum payment for accrued annual leave in the next year, which means it will be taxed in the next year, when you potentially have a lower income due to retirement. The end of the year is a popular time to retire, and results in OPM receiving a flood of applications. This could lead to delays in processing, but hopefully, the new digital retirement system will make this a problem of the past.
Ultimately, the best retirement date is when you’re ready. Financially, that’s easier to determine because numbers don’t lie. Mentally and emotionally might be a bit tougher, especially since radical changes to the federal workspace may have prompted many to retire earlier than expected.
Still have questions about your federal retirement? For answers and advice, reach out to a Federal Retirement Consultant (FRC®) who understands your unique benefits.
