Ask The Experts: Retirement

By Reg Jones

Finding Your High-3

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The “high-3” is an essential element in the formula used to calculate your annuity. But what does the term high-3 mean? And how do you figure out what yours is?

The high-3 defined

Your high-3 is the average of your highest rates of basic pay over any three consecutive years of creditable civilian service, no matter when they occur in your career, with each pay rate weighted by the length of time it was received.

That three-year period starts and ends on the dates that produce the highest average pay. It starts on the first day that leads to the highest three-year average, not on Jan. 1, the first day of the month, or the date of a pay change.

Basic pay

Basic pay is the amount of salary from which retirement deductions are taken. It includes the salary you receive for your position and level as shown on an official pay table, including locality pay for the 48 contiguous states. In some cases, it may include such things as night and/or environmental differentials, premium pay, and special pay rates for recruiting and retention purposes.

However, it doesn’t include such things as bonuses, military pay, cash awards, holiday pay, travel pay outside the regular tour of duty, non-foreign area cost-of-living adjustments or lump-sum payments covering unused hours of annual leave. Nor does it include any salary supplements provided to employees who are covered by workers’ compensation.

Finding the start date

Your highest three consecutive years of average pay usually will usually be the ones that immediately precede the day you retire. If that’s the case, all you need to do to find the starting date for your high-3 calculation is to subtract three years from the date you plan to retire plus one day.

For example, if you want to retire on Jan. 3, 2015, your calculation would start with Jan. 4, 2015: Jan. 4, 2015 minus three years = Jan. 4, 2012.

One day is added because every year ends on the day before the next one begins. For example, the new year begins on Jan.1, but the old year ends on Dec. 31. So, if your birthday is Oct. 17, then Oct. 16 is the final day of the preceding year.

However, if your high-3 occurred earlier in your career, you’ll have to identify the last date on which your pay was at its highest then follow the process above to find the beginning date for your high-3.

Breaks in service

The three years used to calculate your high-3 don’t have to be continuous; however, they do have to be consecutive. For example, if your highest salary years were interrupted by a break in service, your high-3 could be made up of one period of service, a break of any length, and a second period of service. As long as your periods of service are consecutive, it doesn’t matter how many breaks in service you have.

Leave without pay

If you’ve been on LWOP for no more than six months in any calendar year, that period will be included in your high-3 calculation. Any period of LWOP beyond six months in a calendar year will not be included, and will be treated as a break in service.

Military leave

Unlike LWOP, if you were called to active duty in the armed forces, the six-month limit doesn’t apply. However, as a rule, you would have to make a deposit to the retirement fund to get credit for any period of LWOP.

Non-deduction or refunded service

A deposit also may be required if you have any periods of non-deduction or refunded service that fall within your highest three years of average salary. As a rule, this situation only arises if your high-3 occurred earlier in your career and likely when you were covered by CSRS.

Putting a dollar sign on your high-3

To find your high-3 average salary, you’ll have to go back through your pay slips or Standard Form 50s to locate each pay change and how long you received it. Each pay rate must then be weighted by the length of time it was received. So, for example, if you received $75,000 for three months in a year and $78,000 in the remaining nine, your average pay for that 12-month period would be $77,250 ($75,000 ÷ 12 = $6,250 x 3 = $18,750 + $78,000 ÷ 12 = $6,500 x 9 = $58,500, and $18,750 + $58,000 = $77,250).

Retirement date

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Q.I read that Aug. 1 is a best date to retire. Why not July 31? That is for those who work a 4-5-9 schedule (i.e., Aug. 1 is a non-work flex Friday).

A. As a CSRS employee, your only requirement is that you retire no later than the third day of a given month. Whoever wrote that Friday, August 1 was the best day to retire was probably accepting the fact that most employees complete their workweek on a Friday. By leaving at the close of business on that day, they’d receive a full week’s pay. Since you are on a flex schedule, nothing would prevent you from retiring at the end of your last work day. By doing so, you’d be on the annuity roll on Aug. 1, instead of Aug. 2. FYI. Since you’d be leaving in the middle of a pay period, you wouldn’t get any credit for annual or sick leave you would have earned if you had retired at the end of a pay period.

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Creditable service

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Q. I enlisted in the Marine Corps in 1984 and retired in 2004 with 20 years of service. In March 2006, I was hired as a Defense Department civilian and have been so to date. I completed my deposit for Military Service Credit in 2011 and have my letter for “paid In full.” I would like to retire at MRA 56 years, four months (1966). Does my time in service (military), if combined at retirement, override the minimum years of creditable service, therefore foregoing the penalty for retiring under age 60. My understanding is that you need MRA plus 30 years service to avoid a penalty. I would have 20 years military service and 16.5 years civil service. I might stay longer, but wanted to know my options. Read the rest of this entry »

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Retirement date

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Q. I am a CSRS employee. If I retire on Friday, Oct. 31, will I accrue my annual leave for that pay period? I will have worked the 80 hours, but technically the end of the pay period is Saturday, Nov. 1.

A. You may retire at the end of the day on Friday, Oct. 31, be on the annuity roll the following day, and get credit for the annual and sick leave you earned during that pay period.

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Sudden retirement

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Q. My mother is 66 and a letter carrier with 32 years of employment with the Postal Service. She loves her job, but as cuts are made and demands are harsher, she was wondering what would happen if she were to go to work one day and decide she wants to retire immediately. She wants to be sure that she could still get her accrued annual in a lump-sum payment. She als wants to know how long would it take for her to start receiving benefits? Read the rest of this entry »

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Minimum retirement age

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Q. I been a federal employee of 17 years now. I started my career at the age of 24 . At what age can I retired in order to receive my federal pension? Read the rest of this entry »

Retirement timing

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Q. I am a clerk, and I have been with the Post Service since October 2005. I will be 61 this month and am planning on retiring at age 62. Can you tell me when would be the best time to retire: at the end of this year or in March 2015? Read the rest of this entry »

When will annuity payments begin?

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Q. I plan on retiring on June 28, 2014. When should I expect my first annuity payment?

A. I can’t tell you that. What I can tell you is that you would be on the annuity roll in July, with your first month’s annuity payable on Aug. 1. Depending on much time it takes your agency to get your paperwork to OPM, you might not see your first interim payment until September. When your annuity is finalized, you’ll receive any additional money you should have received but didn’t.

When to retire on disability

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Q. I am 62 and have 7 years of service under FERS. My disabilities have worsened, and I must retire fairly soon.  I have some other income from a state pension that will help while I apply for SSDI, but I need to know when would be the best time to retire.  I do not believe my retirement will amount to more than enough to cover my life and health insurance with a little to spare according to a recent retirement estimate I received from HR.  So given that, is there a particular day of the month, being paid bi-weekly, when I should set for my retirement date? Read the rest of this entry »

VERA for 2014?

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Q. My wife is thinking of early retirement at age 50 with 22 years in. Is there any Voluntary Early Retirement Authority (VERA) for 2014?

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Retirement date

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Q. What are the differences if my retirement date is Nov. 29, 2014, or Dec. 1, 2014? I will be retiring from the Postal Service as a Level 18 postmaster. I am retiring under CSRS. My service computation date is July 6, 1979. I will be turning 55 on Nov. 16. I have worked continuously at the Postal Service, and I have 1,848.84 hours of accumulated sick leave.

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Retirement date and leave

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Q. Can you please comment on any pros and cons to retiring Nov. 29, 2014? I will have a prior balance of 208 hours of annual leave and 192 hours in 2014 accumulated as of that date and do not want to forfeit the use-or-lose balance.

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Special retirement supplement and TSP

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Q. I am looking at retiring in January 2015. I will be 56 years old Oct. 15. I will have 30 years in as of Dec. 24. Waiting until the end of leave year to cash in all available annual leave. I am looking at cashing out my Thrift Savings Plan in a lump sum to pay off all debts. Will that income be considered part of earned income so that the special retirement supplement is reduced?

If so, would it be in my interest to retire at the end of 2014 so that my annual leave hits that year instead of 2015? I will have more than 1,800 hours of sick leave accrued by the end of 2014. Can that be used to offset the age so that I could perhaps retire earlier so that the TSP lump sum is counted in 2014?

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SRS and lump-sum payment for annual leave

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Q. Does the lump-sum payment for annual leave count against maximum earnings to be eligible for the special retirement supplement? Also, if I choose a retirement date and the application begins processing, can I back out before that date?

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First annuity check

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Q. I retired Jan. 3 from the Department of Health and Human Services/Indian Health Service with almost 45 years of service. My entrance on duty was May 3, 1969. I am covered under CSRS. I was expecting to receive my first annuity check Feb. 1. However, there was no electronic deposit in my bank account. I tried calling the Office of Personnel Management, but all I got was a busy signal. Therefore, I contacted OPM via email. I haven’t heard back from them as the automatic response I got indicated that it could take up to 30 days to respond.

I also contacted my human resources folks where I worked and was told that I was expecting too much from OPM. They indicated that OPM does their calculations in 30-day increments. Since I retired on Jan. 3, I did not meet the 30-day increment. They said that OPM would be working on my annuity during February and that I “might” receive an interim annuity check on March 1. However, they couldn’t guarantee it.

I did review the “best” date to retire and all the information I reviewed did indicate that Jan. 3 would be the “best” date to retire since I would not only get credit for the holiday but that I would also receive credit for the entire month of January. I did receive my lump-sum annual leave with my last paycheck, and this was extremely helpful. I am wondering how long I will have to wait for my first annuity check. My last earnings and leave statement indicated that my retirement data was sent to OPM on Jan. 27.

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Best retirement date

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Q. I have read a number of articles noting the best dates to retire in 2014. For example, I have seen March 22 and Dec. 28. As a GS-13 FERS employee who will have about 32 years of service at age 61 as of Dec. 28, does it really make that much of a difference to wait until Dec. 28 versus March 22 (at which time I will already be 60) in terms of my FERS annuity? I have about 1,800 hours of sick leave, have been maximizing my Thrift Savings Plan contribution most of my career, and I was eligible for buyout this past October. I’m thinking it’s time to go in 2014.

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CSRS annuity and taxes

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Q. My accountant, a CPA, has a question about the Form W-4P (withholding Certificate for Pension or Annuity Payments) where it states to put down the “additional amount, if any, you want withheld from each pension or annuity payment.” He is asking me to tell him how much of my monthly pension payment is not taxable. My human resources specialist has given me a federal retirement benefits estimate if I retire from the federal government March 3. My total CSRS annual net retirement annuity is estimated to be $128,412, and my monthly annuity after health insurance premiums are deducted is estimated to be $10,701. How much of that monthly net pension is not taxable?

It is my understanding that my cumulative CSRS retirement contributions, which are listed on my civilian leave and earnings statement are my after-tax contributions to my retirement.

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Retirement eligibility

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Q. I am a CSRS employee. If I turn 55 on. Jan 21 2015, but plan to retire Jan 3, 2015, will I be penalized for being under age 55?

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1.1 percent calculation at 62

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Q. When do you get the 1.1 percent calculation? I will turn 62 in January 2016. If I retire in February of that year, would I get the 1.1 percent, or would I have to finish out that year?

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Best retirement date

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Q. I’m a FERS employee. What would be the best date for me to retire if I turn 60 on Dec. 4, 2014? The end of December? (31st) Or wait until the end of the leave year in January 2015?

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