Ask The Experts: Retirement

By Reg Jones

Retirement date

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Q. I submitted a retirement application under CSRS because I have more than 30 years and am over age 55. I chose Aug. 31 as my retirement date because it is the last day of a month. I am aware it is not at the end of a pay period, so it isn’t as good as retiring on June 1 or 29, or Nov. 2 or 30.

Would a retirement date of Sept. 3 be better than Aug. 31? It seems that I would be paid for the Labor Day holiday, and since I must have a duty day to retire, then the 3rd would be the day to come in to work.

A. Same old question; same old answer. You would gain two days’ pay and lose three days of your first month’s annuity. The decision is up to you.

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Best date to retire

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Q. I am a CSRS employee who plans to retire this year. I will have a large annual leave buyback, so I want to leave before the end of the 2013 leave year. I read one article that advised to retire Dec. 28 (the start of new pay period) and others that relay Jan. 3, 2014.

While I understand that the 3rd is the max to stay and get a retirement check the following month, i.e., February, am I correct that if you retire Dec. 28, you miss out on two full days of pay, i.e., the 30th and 31st? Or is the February check prorated to add those days?

Also, if OPM works applications by date of retirement, it seems that Jan. 1, 2014, is a better retirement effective date than Jan. 3, when everyone else is being told is the best day to retire. Does that make sense?

A. Dec. 28, 2013, is the end of a pay period, not the beginning of one. If you retire on the 28th, you’ll be on the annuity roll in January and entitled to a full month’s annuity. If you retire Jan. 3, you’ll earn one week’s more pay, but you’d only be entitled to 27/30ths of the January annuity payment. It’s up to you to decide which date is best, the 28th, 29th, 1st, 2nd or 3rd. If you retire after Dec. 28 but no later than Jan. 3, you wouldn’t be given credit for any annual or sick leave because you wouldn’t have completed a pay period when you retired.

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Best time to retire

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Q. I am a FERS employee who has 846 hours of sick leave as of Feb. 13. I will be 69 years old in June and have 24 years (including military time) at the Veterans Affairs Department. I would like to retire next January. I am a GS5-8. Is January the best time to retire?

A. The best day to retire is the one that fits your physical, emotional and financial needs. In general, it ought to be at the end of a pay period, so you can get credit for any annual and sick leave you earned during those two weeks. Also, if you have any hours of annual leave that exceed 240, it should be before the leave year ends, so you don’t lose those excess hours. And, because you are a FERS employee, it should be no later than the last day of a month. That way, you’ll be on the annuity roll in the following month. Now it’s up to you to decide which day is best for you. The 2013 leave year ends Jan. 11, 2014.

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Dec. 31 or Jan. 11?

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Q. I’m planning on retiring at the end of the year. I’m not sure if I should retire Dec. 31, a Tuesday, which would be the first week of pay period #2, or wait until Jan. 11, the end of pay period #2. I will have 42 years, four months and five days of service as of Dec. 31.

A. The difference is simple. If you retired Dec. 31, you’d receive one extra day of pay and be on the annuity roll in January. If you retired Jan. 11, 2014, you’d earn an additional two weeks pay, plus any annual and sick leave you earned during that pay period. However, you wouldn’t be on the annuity roll until February.

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Retirement date

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Q. Is Feb. 8, 2014, a good time to retire?

I am a CSRS employee. I was looking at Dec. 28, 2013, but I am not sure about my sick leave. If I have 160 hours of sick leave on the books, will this count as an additional month added to my retirement? My goal is to have 33 years. For either date, when would I receive my first retirement check?

A. Typically, a good day to retire is one that is at the end of a pay period (to get credit for any annual and sick leave earned during that period), before the end of the leave year (to receive a lump-sum payment for all unused annual leave, including any that exceeds the annual 240 hour limit), and, for CSRS employees, no later than the third day of a month. Keeping the latter point in mind, if you retired Feb. 8, you wouldn’t be on the annuity roll until March and be entitled to your first annuity payment in April.

One hundred and seventy-four hours of unused sick leave equals one month. However, unused sick leave doesn’t stand alone. It is added to any hours of actual service that don’t add up to a month when an employee’s annuity is calculated. Like sick leave days, a day of unused actual service is 5.797+ hours long. That figure is derived by dividing 2,087 (the number of hours in a work year) by 360 (the number of days in a retirement year).

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Retirement date

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Q. I am a CSRS employee, and I already qualify for an immediate retirement. I plan to retire on May 3 at 4:30 p.m. On the retirement application (SF 2801) under Section B, block 2 is called “date of final separation.”

I entered May 3 because it is at the end of a pay period. Will I receive eight hours of annual leave since my last work day is at the end of the pay period. Will my first retirement check come on June 1 since I retired during one of the first three days of a month?

A. If you retire at the end of a pay period, you will receive credit for any annual and sick leave earned during that period. If you retired no later than May 3, you’d be on the annuity roll in May and entitled to your first annuity payment June 1. However, you wouldn’t receive it then because the sending of your retirement application by your agency and the Office of Personnel Management’s processing of it would take longer than that. And when the processing had been done, you’d be placed in interim pay, retroactive to June 1. Your full annuity amount would be determined after that. When it was, you’d receive any additional pay you were due retroactive to June 1.

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High-3

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Q. I just retired under CSRS and my last day at work was Jan. 3. For purposes of the high-3, how is the three-year period defined? Three true calendar years? Three calendar years limited to 365 days each? A total of 1,095 calendar days (three 365-day periods)?

My salaries were:

1/4/10 to 1/30/10 = $92,992

1/31/10 to 1/28/12 = $99,239

1/29/12 to 1/3/13 = $102,074

Specifically, Feb. 29, 2012, was a leap year’s extra day and, being at my highest salary, my working that day should benefit the high-3 figure.

If Feb. 29, 2012, did not exist (or does not exist in the mind of the Office of Personnel Management), it appears my high-3 would be $99,965.24.

If OPM takes into account that extra day and goes back a total of 365 x 3, my starting point of computation would instead become Jan. 5, 2010. If OPM takes into account that extra day but still goes back to Jan. 4, 2010, as a starting point, they’d use a total of 365, 365 and 366 days in 2010, 2011 and 2012, respectively.  In either of these latter two scenarios, my high-3 would increase.

A. Seventy-eight consecutive pay periods.

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Retiring on last day of pay period

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Q. Is it true that to receive credit for annual leave and sick leave for the final pay period upon retiring, you must work all 14 days of the final pay period (and thus retire on the last day of the final pay period)? If you retire on the first to 13th day of a pay period, will you receive no annual leave or sick leave credit for the final pay period?

A. To receive any credit for annual and sick leave earned during a pay period, you must complete your tour of duty during that pay period. For most employees, that’s 80 hours. You won’t receive any credit for it if you leave before the end of the pay period.

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Retiring at the end of a pay period

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Q. If one has a Monday through Friday normal tour of duty, and retires on the Friday preceding the Saturday end of the pay period, does one get full credit for annual and sick leave for that last pay period worked? Or should one retire on the end of the pay period? In 2021, the end of the leave year is Saturday, Jan. 1 (based upon extrapolation of the Office of Personnel Management’s schedule of leave year ending dates), and in 2022, the end of the leave year is Saturday, Dec. 31.

A. You are only required to complete your tour of duty — normally 80 hours — to earn sick and annual leave for a pay period. Therefore, you could retire at the end of business on a Friday and get credit for any leave you earned during that pay period.

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Retirement date

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Q. What are the advantages and disadvantages of retiring Dec. 29, at the end of the pay period versus staying until Jan. 3, 2013?

A. If you are a CSRS employee, you’d gain four additional days of pay and lose three days in your January annuity payment. If you are a FERS employee, you’d gain the same four days of pay but you wouldn’t be on the annuity roll until February. Whether you were covered by CSRS or FERS, you wouldn’t earn any additional sick or annual leave by staying until Jan. 3.

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Extra hours of annual leave

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Q. Since we have 27 pay periods in 2012, ending Jan. 12, 2013, do I receive an extra eight hours of annual leave, since annual leave is based on 26 pay days. I receive eight hours per pay period, which normally gives me 208 hours per year. Do I receive an additional eight hours?

A. Yes.

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Leave accrual

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Q. I will have 15 years of federal service on Dec. 7, and have been looking forward to accruing eight hours of leave per pay period. Because my service computation date falls in the middle of a pay period, I am expecting to have to wait to start accruing my eight hours during the next full pay period starting Dec. 16. Because my SCD is so late in the calendar year, I am starting to feel like I won’t really benefit from my accrual “upgrade” until two full pay periods later. Here’s my logic:

If I remained (hypothetically) at six hours per pay period for the rest of the calendar year, I’d get six hours for pay period 26 and then 10 for pay period 27 for a total of 16 hours. In contrast, after my accrual change to eight hours per pay period, I’ll get eight hours for both pay periods 26 and 27 for a total of 16 hours. It seems that it wouldn’t be until the first pay period of next year that I’d actually start to benefit. Do I understand this correctly?

A. By law, the waiting periods for advancing to steps 2, 3, and 4 is 53 calendar weeks, to steps, 5, 6, and 7, 104 calendar weeks, and to steps 8, 9, and 10 156 calendar weeks. Check with your payroll office to find out when the change in your leave accrual rate will be effective.

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Leave accrual

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Q. I’m considering retiring on July 3, 2013. My current and projected sick leave balance is as follows:

Currently as of pay period 14 = 2,320.45

End of this calendar year projection = 2,372.45

Projected amount as of June 29, 2013 = 2,428.45 (last pay period before retirement)

If you apply the Office of Personnel Management’s sick leave conversion to the 2,428.45 sick leave hours at the time of my probable retirement (July 3, 2013), the conversion table states that I’ll be one hour or .55 hours shy of having one year and two months of sick leave applied to my retirement.

In 2013, pay period 14 will end on June 29, 2013 and I would like to retire the following week. Will I be able to accumulate two hours for the one week, or is leave only accrued for an entire pay period basis?

A. No. You must complete a pay period to get credit for any annual and sick leave earned during that pay period. However, don’t despair. Unless you will be retiring with an exact number of years and full months of service, you’ll have some leftover days that will be converted to sick leave hours and added to your actual sick leave hours, thereby increasing the probability that you’ll be credited with an additional month in the computation of your annuity.

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Mid-pay period retirement and annual leave

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Q. If you retire in the middle of a pay period, do you get credit for four hours of annual leave, or do you have to work the full pay period to get any credit for annual leave?

A. You have to complete a pay period to get credit for annual and sick leave.

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Pay period ending and retirement date

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Q. I am under FERS. I turn 65 on Nov. 20 and will have completed 12 years and one month as a federal civilian. My service computation date is Oct. 10, 2000. Is it possible for me to retire effective Nov. 28, or do I have to wait until the end of the pay period?

I will have over 300 hours of annual leave to sell back on Nov. 28.  Because my hourly pay is $69, will that $20,700 affect the annual limit from Social Security limit in 2013?  I will be applying for Social Security starting on my 65th birthday.

How soon should I apply for retirement — 60 days prior to Nov. 28? Earlier?

A. No, you don’t need to wait until the end of a pay period to retire. The only disadvantage of not doing so is that you wouldn’t receive credit for any annual or sick leave you would have earned during that pay period.

Regardless of the date you pick, it’s recommended that you submit your retirement application at least 60 days in advance.

As for the impact on any Social Security benefit you are entitled to, you may be protected by the Social Security first-year rule. To find out more about it, got to www.socialsecurity.gov/retire2/rule.htm.

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Retirement date

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Q. I work compressed schedules, 12-hour shifts. If I have already completed my 80-hour requirement by mid-pay period, can I out-process early and still make my retirement effective at the end of the pay period, which is Saturday at midnight for shift workers?

A. Your retirement date is the last day you are on the employment rolls. It’s the day you separate from the service. If you want, you can retire when you have completed your final 80 hours of duty or you can wait until the end of the pay period. Whether you can complete the process before the end of the pay period and have the effective date be at the end of the pay period is up to your agency.

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Retirement date

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Scenario 1:  I am considering retiring on Dec. 31, 2013, which is in the middle of a pay period. Can a person retire in the middle of a pay period?

Scenario 2:  What if I decide to retire at the end of the pay period (Jan. 4, 2014) instead? This way, I could collect my full sick leave, which goes into effect on Jan. 1, 2014. My concern is that I could still receive my first retirement check for the month of January and all my 2013 accrued vacation time as though I retired Dec. 31, 2012. Or will I be penalized on both accounts under this scenario?

Note: I will be 57 years old with 20 years of FERS service as of Dec. 12, 2013.

A. 1. You can retire on any day of the week you want. However, if you retire in the middle of a pay period, you won’t get credit for any annual or sick leave you would have accrued if you’d stayed to the end of the pay period.

2. Since the 2013 leave year ends Jan. 11, 2014, you can retire any time up to that date and get full credit for any unused annual leave. If you retire on or after Jan. 1, you’d get full credit for any unused sick leave in the computation of your annuity. However, there’s a downside. If you retire after Dec. 31, you won’t be on the annuity roll until February.

One other thing to keep in mind: Since you’ll be retiring under the minimum retirement age +10 provision, your annuity will be reduced by 5 percent for every year (5/12 percent per month) you are under age 62 unless you postpone the receipt of your annuity to a later date.

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Annual and Sick Leave Credit in CSRS Retirement

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Q. In reference to your response on July 6 regarding retiring under CSRS at the end of a pay period to receive credit for annual and sick leave for the last pay period, I am on a 5/4-9 alternate leave schedule with the second Friday of the pay period as my regular day off. Since I complete 80 hours on the second Thursday of each pay period, would I receive full sick and annual leave credit for the last pay period if I retired at the end of the day on the second Thursday (on May 3, 2012, or May 31, 2012)?

A; Yes. When you finish your tour of duty for a pay period, you can retire and get credit for any annual and sick leave you earned during that pay period.

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Retirement dates and leave payouts

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Q: I am an employee under the Civil Service Retirement System, 6C, facing mandatory retirement the second week of January 2012. I anticipate finishing 2011 with 448 hours of annual leave on the books. Jan. 1, 2 and 3 would be the ideal retirement dates. In 2011, Pay Period 26 ends on the last day of the year. I’m now looking at Dec. 31, a Saturday, as the retirement date on the paperwork in order to receive the full annual leave 448-hour lump-sum payment.

Do you see any problem with that date given the information provided? Additionally, I would imagine the lump-sum payment, which will be a direct deposit sometime in January 2012, will be counted as 2012 income and not in the 2011 tax year. 

A: No, I don’t see a problem with retiring on that date; and yes, your lump-sum payment will be taxed in the year it’s received.

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Best day to retire?

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Q: If I retire Dec. 31, a Friday, my first annuity check would begin on Feb 1, 2011. However, I would lose credit for any leave accumulated in that last pay period because I did not work the full pay period, which ends Jan. 1, 2011. Is this correct?

A: If Friday, Dec. 31, would be the last day of a pay period and you retire at the close of business, you would get credit for any annual and sick leave you earned during that pay period.

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