The Best Date to Retire? Follow This Simple Rule for FERS Employees
We all see the article about the best day to retire in a particular year. What if that date doesn’t work for you? Can you retire in a different month? The answer is yes, and follow this simple tool to make sure you always choose the best date to retire, no matter the month!
What is the best date to retire for FERS employees?
So Why does the retirement date matter? There are several reasons, but the most important is how the federal employee retirement system accruals your payments. The rules state that your pension will accrue on the first after the month of your retirement. Then, the first payment should be paid in the month after that. So, what is the optimal retirement date? It is the last day of the month.
Let’s review this example. An employee decided to retire on the last day of March. The pension accrual starts on the first day of the following month, April 1st. The first payment date should be the month after, May 1st.
Everything sounds great and easy, right? Well, what if March 31 happens to be on a Wednesday, and you decide to retire on a Friday since it is the end of a pay period? Because you waited until April 2nd to retire, the pension now accruals on the first of the following month, May 1st. The first pension of your federal retirement paycheck will now be June 1st. You delayed your pension by a month.
If Its This Easy, What Are the Best Days to Retire Articles About?
Most of the time, the end of the month does not fall on the end of a pay period. However, there are a few times in the year when the stars alight, and the last Friday of the month happens to be the end of a pay period. If you retire on these days, you will not delay your retirement, and you will get the full leave and sick leave accrual. It is up to you to decide how important that is to you.
Is December 31 the best date for federal employees to retire?
December 31 is the most popular retirement date for FERS employees. A popular strategy is to save as much annual leave as you can that year to enjoy a big annual leave payout. The leave lump sum payout is a big advantage of retiring on December 31. Moreover, since the leave payout won’t come until next year, the taxes due on that payout also get deferred to the next year.
A potential disadvantage to retiring at the end of the year is that it is the most popular date to retire, so OPM and your agency will get a huge influx of applications. That means delayed processing time and waiting for your pension to be adjudicated. Another side note is that you must retire no later than December 31 to get credit for your annual leave. Once it is past that date, you will be subject to the “use it or lose rules.”
Reach Out to Us!
If you have additional federal benefit questions, contact our team of CERTIFIED FINANCIAL PLANNER™ (CFP®) and Chartered Federal Employee Benefits Consultants (ChFEBC℠). At PlanWell, we are federal employee financial advisors with a focus on retirement planning. Learn more about our process designed for the career fed.
Preparing for federal retirement? Check out our scheduled federal retirement workshops. Sign up for our no-cost federal retirement webinars here! Make sure to plan ahead and reserve your seat for our FERS webinar, held every three weeks. Want to have PlanWell host a federal retirement seminar for your agency? Reach out, and we’ll collaborate with HR to arrange an on-site FERS seminar.
Want to fast-track your federal retirement plan? Skip the FERS webinar and start a one-on-one conversation with a ChFEBC today. You can schedule a one-on-one meeting here.
