Best Dates to Retire - CSRS / FERS:
2011, 2012 and 2013
Edward A. Zurndorfer, Certified Financial Planner
A previous
column discussed the best dates for CSRS and FERS employees to
retire during 2009 and 2010. This column discusses the best dates to retire
during 2011, 2012 and 2013.
One aspect of choosing a retirement date that every employee should be aware
of: Assuming they have fulfilled minimum age and service requirements, every
federal employee -- no matter which retirement system he or she is covered by --
is eligible to retire on any day of the month he or she wants to. "Any day"
includes weekends (Saturdays and Sundays) and federal holidays. In other words,
there is no requirement that an employee "be at his or her desk" in order to
retire.
Before presenting these recommended retirement dates, it is
important to review the rules and some issues that employees covered by the
Civil Service Retirement System (CSRS) (including CSRS-Offset employees) and
those employees covered by the Federal Employees Retirement System (FERS) should
be aware of concerning the "effective date" of their retirement and what that
date means.
Employees covered by either CSRS or the CSRS-Offset who retire on the first,
second or third day of the month will have their retirement take effect on the
next day and their first retirement check will be dated the first day of the
next month. For example, if a CSRS or CSRS-Offset employee retires on Jan. 1,
2010, then the employee's retirement becomes effective on Jan. 2, 2010, the
retiring employee's first CSRS annuity check will be dated Feb. 1, 2010. If the
employee retires on any day of the month other than the first, second or third
of the month, then the retiring employee's retirement takes effect on the first
day of the following month with the first annuity check dated on the first day
of the following month. For example, if a CSRS or CSRS-Offset employee retires
on Dec. 31, 2009, then the employee's retirement becomes effective Jan. 1, 2010
and the employee's first annuity check will be dated Feb. 1, 2010.
Another consideration for CSRS and CSRS Offset employees: the first
cost-of-living adjustment (COLA) taking effect the January 1st following the
year in which the employee retires. The first COLA will be prorated according to
the number of months a retired employee was retired prior to the effective date
of the COLA. This proration is determined by taking the number of months
starting from the previous December 1st that employee was retired as of the
first day of the month. For example, if an employee retired on Jul. 31, 2010
thereby making the effective date of retirement Aug. 1, 2010, then the retired
employee would receive 4/12 of the COLA that becomes effective on Jan. 1, 2011.
This is because the employee would be retired (as of the first day of each
month) for four months (Aug. 1st through Nov. 30) for the 12 month period
starting Dec. 1, 2009 and ending Nov. 30, 2009. This means that if a retiring
CSRS or CSRS Offset has a choice between retiring on the last day of a month
versus the first day of the following month, the employee should retire on the
last day of the month thereby receiving 1/12 more of the next year COLA. Of
course, this assumes that unlike January 2010 (in which there will be no COLA
for CSRS annuitants), there will be a future COLA starting in January
2011.
For employees who are covered by FERS or who are "Trans"FERS*, no matter
which day of the month an employee retires, retirement takes effect on the first
day of the following month with the first annuity check dated on the first day
of the following month. For example, a FERS employee retires on Jan 1, 2010.
Retirement takes effect on Feb. 1, 2010 and the first annuity check will be
dated Mar. 1, 2010. If, however, the employee retires Dec. 31, 2009, then
retirement takes effect on Jan. 1, 2010 and the first annuity check will be
dated Feb. 1, 2010. In other words, in this example retiring one day earlier at
the end of December results in the first annuity check being issued one month
earlier.
Another issue facing retiring federal employees is the
treatment of unused annual leave at the time of retirement. All retiring
employees are paid in a lump sum payment for unused annual leave at the time of
retirement. This payment will be directly deposited into the retiring employee's
same bank account that is used for direct deposit of the employee's payroll
check. Many federal agencies will deposit this lump sum payment for unused
annual leave into this account usually on the same day that the retiring
employee's final paycheck is directly deposited - within two to four weeks of
the day of retirement. The lump sum payment for unused annual leave is subject
to federal and state income taxes and Social Security (FICA) and Medicare Part A
payroll taxes.
The retiring employee must be in "employee status" for the entire pay period
if he or she wants to accrue the full amount of annual leave hours for the last
pay period the employee is in employee status. Retiring before the end of a pay
period will result in the employee not accruing any annual hours for the last
pay period. In choosing the best days to retire in 2011, 2012 and 2013, the
issue of accruing the full amount of annual hours for the last pay period the
retiring employee works is considered. Since most federal employees are on a
Monday to Friday, 80 hour bi-weekly payroll schedule, it is therefore assumed
that the best day of the week to retire will be a Saturday - the last day of a
pay period, or a Sunday - the first day of a new pay period in which the
employee will no longer be in employee status.
One other factor is used in considering the best days of the months to retire
in 2011, 2012 and 2013: No more than three days can elapse between a retirement
date at the end of the month and the first day of the following month.
With these issues and rules in mind, the following table lists the best
retirement dates for federal employees (working a Mon. to Fri. bi-weekly 80 hour
schedule) who are eligible to retire during 2011, 2012 or 2013:
Best Dates to Retire - CSRS and FERS:
2011, 2012 and 2013
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*"Trans"FERS refers to those employees who transferred to FERS from
CSRS and who are eligible for both a CSRS and a FERS annuity.
About the Author
Edward A. Zurndorfer is a Certified Financial Planner and Enrolled Agent in
Silver Spring, MD. He is a seminar speaker at federal employee retirement
seminars throughout the country for the National Institute of Transition
Planning, Inc. , and an author of numerous publications on federal employee
benefits.
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Overview - CSRS
