Timing your retirement from the federal service can make a big difference affecting how much you stand to make in post-federal work life. You worked all these years, you may as well make the most of it.
Believe it or not, depending on when you choose to submit your papers, a couple days can make a huge difference. Regular readers of the Federal Report are no strangers to the idea of optimizing their benefits. Getting the most out of your retirement does take a lot of planning. But if you are fortunate enough to be able to time it right, you stand to benefit financially, of course, but also mentally, knowing that you have made the most of your federal career even in retirement.
So, when should you retire?
Depending on how long you have been in federal service, your retirement benefit can vary greatly. Even the date can have a substantial impact.
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You may ask, “Well, I’ve been working at the IRS for 30 years, what does a day or two matter?”
Fair question. The answer lies in how the government calculates your length of service. Over your long career as a federal employee, you probably accrued plenty of sick leave. And unlike annual leave, it doesn’t pay out, but it still has value when it comes to extending your length of service as far as the benefits calculation is concerned.
At a recent webinar hosted by the National Active and Retired Federal Employees, federal benefits specialist Tammy Flannagan said length of service is calculated to the nearest completed month. So if you retire with 34 years, six months and 25 days of service, it will count as simply 34 years and six months. But if you add a few of days to the end, you can bring that number up to 34 years and seven months. You do want to make every day count, right? That extra month will increase your retirement benefit.
Another thing retiring feds may not know is that for the sake of making calculating months easier, the federal retirement programs will count every month as 30 days. For that reason, making your retirement date Feb. 28 gives you some bonus days, whereas retiring on Dec. 31 means you don’t get that “bonus” day added.
But say you still feel like you have a few more years in you. What should you consider when thinking about when to retire in the future? Flanagan said that there are a few things to consider when making the big decision. One, this is a major financial decision so do you have the savings necessary to sustain yourself?
“Remember that in retirement, you’re going to probably have 50 or 60 additional hours to spend that money,” Flanagan said. “So you may even find out that you’re going to spend more money in retirement than you spent while you were working, at least initially, during those go-go years when you might be doing some traveling, pursuing some new hobbies or activities or maybe just providing some care giving for a family member that may involve some travel expense.”
There is also the question of if you are mentally ready.
“For some, it’s going to take some time to really think through this transition to retirement,” Flanagan said. “And even the best laid plans can have some bumps along the way.”
She recommended giving yourself time to understand the change you are about to or are starting to go through as you enter this next phase of your life.
CSRS and FERS
The Federal Employees Retirement System (FERS) replaced the Civil Service Retirement System (CSRS) in 1987. Federal employees who were in CSRS and chose to remain with that system still have it. Everyone who started federal service since then can only be in FERS.
These two systems require different strategies when it comes to timing your last day. For CSRS, retiring within the first three days of a given month will mean that the benefit kicks in the following day. Otherwise, it won’t kick in until the first day of the next month. Because of that, it is generally best to make your last day on the third day of a month, especially if it lines up with the end of a pay period if you are in CSRS.
For FERS, no matter when in a given month you retire, your benefits begin to kick in the first day of the next month. Therefore, Flanagan said that generally those in the FERS program should pick a last day at the end of the month at the end of a pay period. Remember, leave for a given pay period only gets counted if you complete said pay period. Don’t leave money, or leave, on the table!
Of course, these timelines are assuming that benefits are processed quickly. Federal News Network recently reported that the monthly average processing time as of February is 89 days. With that in mind, it would be prudent to be financially prepared to wait a few months for your retirement benefits to come in.
No matter when you retire, if you plan it well, the payoff will be worth it in the end. Remember that throughout this process. Looking at calendars and getting back to people on email will soon give way to days where the word “outlook” only applies to how you view life.
