Which Way is Up – A Retiree’s Conundrum
There are two primary federal retirement systems, the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS). Currently less than 2% of federal civilian non-postal employees are under the CSRS plan while the vast majority are in FERS. Both retirement plans are discussed and we show you how to determine your eligibility date. You may or may not be financially, emotionally, or physically prepared to retire on your eligibility date. Each person must evaluate their own unique personal situation before making this critical decision.
This section will help you determine when you are eligible and then visit the annuity page to determine what your monthly annuity payment will be when you leave. Explore the Phased Retirement option. Final rules were published in early August of 2014.
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Use our retirement cost analysis spreadsheet to determine exactly what you will have to live on in retirement and left over after paying your monthly bills. Two free reports are available for download; How to be Emotionally and Physically Prepared When You Retire and How to be Financially Prepared When You Retire. Share these free reports with others in your organization to help them prepare as well.
To determine when you first become eligible for either CSRS or FERS retirement use the Eligibility Menu on this page to get started. There is much more to consider with this life altering decision and we offer many planning tools on this site to help you decide if the time is right for you to leave. The sooner you start planning the better off you will be when you actually leave. If you have questions about unique eligibility issues not fully covered here visit our "Ask the Expert" section to talk with our benefits and finance experts. Linda Sherman, our Benefits and HR forum host, has 18 years experience in human resources and benefits and she also has an extensive finance background.
Federal employees considering leaving for greener pastures should explore all oportunities. Here is an article that discusses early retirement options when leaving federal service for the private sector:
“Retirement is wonderful if you have two essentials — much to live on and much to live for.” – Author Unknown
Each year someone asks what the best retirement date is for the upcoming year. There isn’t one stock answer to this because of so many mitigating personal and regulatory factors and the significant differences between CSRS and FERS laws.
For the most part, voluntary CSRS retirements are best the first three days of the month and your annuity will start on the next day. If you retire on the 3rd of the month you will get paid through the 3rd and your annuity will start on the following day. Your first annuity check will be for a partial month, less the three days you worked. However, if you choose to leave on the 4th or later your annuity won't start until the first of the following month. The end of the month works best for FERS employees in many cases. Under the FERS system your retirement begins on the first day of the following month. This is also allowed for non-voluntary CSRS retirements.
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You also need to consider your annual leave accrual and when your 80 hour work week ends. This way you might end up with additional annual leave to be paid out shortly after you leave. Then mix in your sick leave to determine how many months of additional time will count towards your total annuity calculation. If you turn in 2090 hours, a few hours over a full year, that will add a year to your annuity calculation. FERS and CSRS employees now receive full credit for their sick leave balance.
Don’t confuse your “Annuity Start Date” with your “Date of Final Separation” that you list in block 2, Section B of either the SF-2801 CSRS Retirement Application or SF- 3107 FERS Retirement Application forms. Your retirement commences at the close of Business on the "Date of Final Separation." Your annuity starts as noted above for CSRS and FERS immediate retirement.
Unlike most personnel actions, retirements are always effective at the end of the work day. If you select Friday as your retirement date, and Friday is a scheduled workday, then the retirement is effective after your scheduled hours for Friday. If you are a CSRS employee working Monday through Friday, and you are considering retirement dates of Friday the first, Saturday the second or a Sunday the third, Friday might be the best day to retire. This is because Saturday and Sunday are your days off, so you do not receive pay for those days from your job. However, the annuity could begin on Saturday.
Pay Attention to the Details When Planning Your Exit
To determine how much you will have to live on estimate your gross annuity and complete our retirement costs spreadsheet. After determining that you have the resources to retire comfortably, the following discussion will help you set your most advantageous retirement date.
Any day can be a great day to retire, provided you meet the eligibility requirements and you are personally ready to retire. The retirement day can be a workday, a non-workday or even a holiday. Retirement dates often coincide with special dates such as, your birthday, attaining 30 years of service, the holiday season, the end of the year or another personal event. However, the selection of a retirement date can have significant financial consequences. Some points to consider when selecting the perfect date include:
1. Annuity Commencement. Annuities only start on specific days. Consider selecting a retirement date that minimizes the days in a non-pay status. To avoid days in a non-pay status, work until the beginning date of your retirement annuity.
Unlike most personnel actions, retirements are always effective at the end of the work day. If you select Friday as your retirement date, and Friday is a scheduled workday, then the retirement is effective after your scheduled hours for Friday. If you are a CSRS employee working Monday through Friday, and you are considering retirement dates of Friday the first, Saturday the second or a Sunday the third, Friday might be the best day to retire. This is because Saturday and Sunday are your days off, so you do not receive pay for those days from your job. However, the annuity could begin on Saturday.
2. End of pay period. Consider retiring at the end of a pay period for maximum leave accrual. If you retire at the end of a pay period, you receive additional hours of leave accrual, four hours of sick leave and eight hours of annual leave (if you earn eight hours per pay period). The eight hours of annual leave is paid in a lump sum after retirement and the four hours of sick leave may be used to increase the amount of service used in the annuity computation. For retirement purposes, the term “end of the pay period” means the end of your bi-weekly scheduled work hours. Therefore, if you are working a compressed work schedule and you complete your 80-hour tour-of-duty on Thursday, you can retire at the end of the day on Thursday to receive the maximum annual leave accumulation for the pay period.
3. End of the leave year. Maximize the lump sum annual leave payment by retiring at the end of the leave year. If you accumulated the maximum annual leave carryover from the prior year (usually 240 hours) and you accumulated additional annual leave in your last year (up to 208 hours if you earn eight hours per pay period and did not take annual leave), the result could be 448 hours of annual leave paid to you upon retirement. There are two additional benefits to receiving the lump sum annual leave payment at the end of the leave year:
4. Creditable Service. Maximize the full months of creditable service used in the retirement annuity computation.
The annuity is computed using only whole months of service. Additional days of service are not used in the computation. For example, if you are retiring with 30 years, 8 months and 29 days of federal service, your annuity is computed using 30 years and 8 months of service. The 29 days of federal service are not used in the computation. If you worked one additional month and did not use your sick leave for the month, the years of service would be 30 years and 10 months of creditable service. By working one additional month, you receive two months of service – one month for the extra month worked and an additional month when combining the eight hours of sick leave with the 29 days that would have been lost. For more information on how sick leave is used in the annuity computation see: https://www.federalretirement.net/sickleave.htm.
5. TSP Contributions. Maximize your TSP contributions for increased deferred compensation. You can contribute up to 100% of your bi-weekly earnings to TSP before you retire to maximize the amount in TSP, as long as the contribution does not exceed the annual contributions limit, currently $18,000 in 2016. Contributions to TSP, 401ks and IRAs can only come from earned income. The retirement annuity is not considered earned income, therefore, this may be your last opportunity to build this tax-deferred retirement fund.
6. COLA. Consider the Cost-of-Living Adjustment (COLA) for a maximum annuity increase in the year after retirement. The COLA increases the annuity amount for the next year based on increases in the Consumer Price Index. The COLAs are effective on December first of every year and are included in the payment the annuitant receives in January. If you have been retired less than a full year, the COLA is simply prorated by one-twelfth of the COLA for each full month you received benefits. In deciding which day to retire, the COLA consideration is only important if you are not retiring at the end of a month. If you select the third as your retirement date, you will not receive a full COLA for this month when the COLA is due the following year – hence losing one-twelfth of the COLA increase for this partial month. This only occurs in the first year of retirement. In the second year of retirement you will receive the entire COLA.
You likely cannot utilize all of these suggestions in selecting the optimum retirement date. Occasionally, the stars align and you can use several of these suggestions at once. The key to selecting a retirement date is choosing a date that is most beneficial to you; to retire informed and without regret.
The amount of a CSRS or FERS annuity paid by OPM is based primarily on the amount of creditable service an employee performs and the employee’s high-3 average salary. Both CSRS and FERS allow service credit for up to 6 months of nonpay status in any calendar year. If a furlough period does not cause an employee to be in a nonpay status for more than 6 months in a calendar year, the furlough period will be included as creditable service in determining the employee’s total creditable service used in the annuity computation. If the total amount of time an employee spends in a nonpay status in a calendar year exceeds 6 months, the amount of nonpay status in excess of 6 months in the calendar year will not be creditable for retirement purposes. Refer to OPM's addendum for information on furloughed creditable service.
The beginning and ending dates of leave years 2018 through 2030 shown below apply to most employees. However, some agency payroll systems use a different pay period schedule. Employees should contact their agencies to verify the beginning and ending dates of a particular leave year.
Leave Year | Leave Year Beginning Date | Leave Year Ending Date | Deadline
to Schedule "Use or Lose" Annual Leave |
---|---|---|---|
2018 |
January 07, 2018 |
January 05, 2019 |
November 24, 2018 |
2019 |
January 06, 2019 |
January 04, 2020 |
November 23, 2019 |
2020 |
January 05, 2020 |
January 02, 2021 |
November 21, 2020 |
2021 |
January 03, 2021 |
January 01, 2022 |
November 20, 2021 |
*2022 |
January 02, 2022 |
December 31, 2022 |
November 19, 2022 |
2023 |
January 01, 2023 |
January 13, 2024 |
December 02, 2023 |
2024 |
January 14, 2024 |
January 11, 2025 |
November 30, 2024 |
2025 |
January 12, 2025 |
January 10, 2026 |
November 29, 2025 |
2026 |
January 11, 2026 |
January 09, 2027 |
November 28, 2026 |
2027 |
January 10, 2027 |
January 08, 2028 |
November 27, 2027 |
2028 |
January 09, 2028 |
January 06, 2029 |
November 25, 2028 |
2029 |
January 07, 2029 |
January 05, 2030 |
November 24, 2029 |
2030 |
January 06, 2030 |
January 04, 2031 |
November 23, 2030 |