Ask The Experts: Retirement

By Reg Jones

Pre-1989 nondeduction service and buyback

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Q. I worked as a temp from 1989 to 1994, when I was finally hired permanent, paying into FERS. What measure was passed disallowing me to deposit (make up) my FERS payment after Jan. 1, 1989? I’m losing five years toward my FERS retirement date while others before 1989 are allowed to buy back. It doesn’t seem fair that some can buy back their temp time and other can’t. I suspect during the hiring freeze in those days, there would be too many buying back those years, correct?

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Best date to retire

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Q. My service computation date is April 24, 1971, and I plan on leaving at the end of April after 42 years with a load of annual and sick leave. I have always been told to leave at the end of the year because of the annual leave business, but I want to start a consulting firm and devote my time to it. My father-in-law, a former federal employee, says just get out because it is time and I should not miss the beach and I can always bring my laptop.

A. As I’ve said over and over, the best date to retire is the one that fits your financial and emotional needs.

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Best date to retire

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Q. I am a FERS employee with 30-plus years of federal service looking to retire as soon as possible after turning 62. I will turn 62 on Jan. 28, 2015. What date is best to retire shortly after my 62nd birthday — the end of the pay period that includes Jan. 28 or some other day?

A. There is no best date to retire. There are only a few tips that, once you consider them, can lead you to the date that seems best for you. First, because you are a FERS employee, you’ll want to retire as close to the end of the month as possible. That way, the distance between when you retire and when you are placed on the annuity roll will be minimized. Second, retire at the end of a pay period so you can get credit for any annual and sick leave you earned during that pay period.

Third, if you have excess annual leave that will be lost if you retire after the new leave year begins, retire before that.

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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’m 60 with 10 years in CSRS, 25 in FERS, with about 2,900 hours of unused sick leave (900 of which were in CSRS) and about 440 hours of unused annual leave expected by the end of the year.

If I retire on Dec. 31 to try to maximize my unused annual leave lump sum, it looks like I will not qualify to apply up to 100 percent of my unused sick leave to time of service (except the CSRS portion).

If I retire on Jan 1-3, 2014, to be able to use the full (rounded in months) amount of my unused sick leave applied to length of service, then I miss out on the maximum unused annual leave (since only 240 hours can be carried over), but I will get my pension check effective Feb. 1. Or does the leave year actually end in 2014, thereby allowing around 440 hours of unused annual leave for the lump sum?

Since I turn 62 on Oct. 8, 2014, and the annuity formula changes to 1.1 percent, what’s the earliest I could retire and maximize unused annual leave, get to apply my unused sick leave, and get a check in a timely fashion? Dec. 31 2014?

A. If you retire Dec. 31, you’ll only get credit for half of your unused annual leave. Since the 2013 leave year doesn’t end until Jan. 11, 2014, you could retire any time up to that date and get full credit. However, since you are a FERS employee, retiring after Dec. 31 would mean that you wouldn’t be on the annuity roll until February.

If you waited until you were 60, the FERS component in your annuity would be calculated using the enhanced 1.1 percent formula. Although you would have only been able to carry 240 hours into the new leave year, you would be earning additional annual leave during 2014. If you retired at the end of the last pay period in December 2014, you’d be able to get a lump-sum payment for all that accumulated leave and be on the annuity roll on Jan. 1, 2015.

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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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Annual leave and retirement date

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Q. I work for a Veterans Affairs hospital under CSRS Offset. I was employed at the Postal Service from 1980 to 2001. I was reinstated at VA in 2008. I work Monday to Friday, 8 a.m. to 4:30 p.m. I am a GS-5. I have 178 hours of annual leave and 1,027 hours of sick leave. My service computation date is Feb. 12, 1987.

I am eligible to retire on my 60th birthday, which is March 28. I have planned a European vacation from March 21 to April 9. I want to take annual leave March 21-29. I have annual leave approved by my supervisor for March 21-31. (I used March 31 on my annual leave slip to coincide with my retirement date.)

The local human resources department is telling me that I must be physically at work on March 29 to use a retirement date of March 31, to clear the facility, that to be in an annual leave status on your retirement date is a violation of the terminal leave law at VA. Is this correct?

Can you please help me provide a reference that I am eligible to retire March 31 without being physically at work? They are saying the soonest I can retire is April 10 because that would be the soonest day that I could physically be at the facility after I am eligible to retire, due to being out of the country.

If I must be at work on my retirement date, could you suggest the least expensive date to retire?

A. Because the Office of Personnel Management’s leave regulations don’t address this one way or another, it’s been left to agencies to establish their own rules when it comes to granting requests for annual leave and determining whether an employee must be present on the day he or she retires or separates. Even then, there are exceptions — for example, if the retiring employee is too ill to come to work or when an activity is closed because of weather conditions.

Some agencies have more restrictive rules than others, probably a result of their response to earlier Comptroller General decisions that prohibited people from burning off their leave before retiring or separating (The Government Accountability Office calls this terminal leave). If your agency has such a rule governing the period before separation or a last-day rule, it should be in writing. Ask to see it.

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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. On Jan. 29, BEST received my package requesting retirement April 30. Should I change the date to March 31 to dodge the sequestration mess?

A. As the old song goes, “Que sera, sera. Whatever will be, will be. The future’s not ours to see. Que sera, sera.” In other words, you’re on your own.

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Retirement date and holiday

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Q. I am a CSRS employee looking to retire this year. If I were to elect July 3 as my retirement date, would I receive payment for the July 4 holiday since I was in a pay status the day before the holiday?

A. If you retired at close of business July 3, you’d be on the annuity roll July 4. Since you would no longer be an employee, you wouldn’t be paid for any day after the 3rd. The fact that the 4th is a holiday is irrelevant.

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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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Retirement date

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Q. I am 59 and a CSRS Offset employee with 33+ years of CSRS coverage and am at the top of the GS-15 payscale. About 21 of those years were under CSRS Offset, so I know the deduction will be somewhere around 52.5 percent of my Social Security earnings. I am exempt from windfall elimination provision because of more than 30 years of Social Security coverage.

I am concerned that if I retire Jan. 3, 2014, my final paycheck and my lump sum for leave will add another year to my number of years covered by Social Security and raise the deduction amount to 55 percent. That equals about $3,750 per year. Even though I could get this back in Social Security, I don’t plan to claim Social Security until I am at least 66.

Am I correct in my estimation that waiting to retire in January will add another year to my Social Security earnings? If it does, will this mean my federal pension will be reduced by $3,750 per year with no corresponding payment of Social Security? This works out to a reduction in benefits of about $22,500 if I don’t claim Social Security until 68. If I am correct, would Dec. 3 be the best date to retire to ensure that Social Security is not reduced for earnings in 2014, or should it be earlier to ensure the lump-sum payment for leave occurs in 2013?

A. Here are the rules. Take your total years of CSRS Offset service — with partial years rounded up to the next higher year — and divide it by 40.

Take the product and multiply it by your estimated Social Security benefit at age 62. That will be the amount by which your CSRS annuity will be reduced. Doing the arithmetic is up to you. After you’ve done it, you can make a decision about when to retire.

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Step increase, retirement and high-3

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Q. I am planning to retire the month after I receive a step increase. Will this increase be factored into my high-3 for retirement annuity purposes, or must I extend my retirement date to take advantage of this? If so, for how long?

A. Yes, it will be included. However, since you high-3 is made up of 78 biweekly pay periods, the impact it will have on your annuity depends on how long you are receiving it. If you only received the increase for one pay period, its effect on your annuity would be marginal at best.

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Retirement date

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Q. I am a CSRS employee and plan on retiring Sept. 1. I believe if you retire the last day of the month or the first two days of the next month, you will receive your first retirement check at the end of that month.  Sept. 2 is Labor Day. Is there a benefit to making my retirement date Sept. 2? All three days — Aug. 31, Sept. 1 and Sept. 2 are nonworking days for me.

A. Because you are a CSRS employee, you can retire up to the third day of any month and be on the annuity roll in that month. However, your first month’s annuity would be reduced by 1/30 for every day you weren’t on the roll. For example, if you retired Sept. 2, your annuity for that month would be 28/30 of the usual amount.

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Retirement date

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Q. When is the last day of 2013 that I can retire and get a lump-sum payment for unused annual and sick leave?

A. Assuming that you are talking about retiring at the end of the 2012 leave year, the answer is Jan. 12, 2013.

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Retirement date

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Q. I plan on retiring in 2013 under FERS immediate annuity under the 30-year/minimum retirement age with no penalty for age.

I am FERS code 8, and my annuity computation date and retirement computation date are both Feb. 8, 1983.

1. Is the earliest date that I can retire on to give me 30 years Feb. 8, 2013?

2. My 30 years will consist of FERS employment, “bought back” military time and “bought back” (via a redeposit) CSRS time. Will I qualify to receive the FERS annuity supplement even though I will not have 30 years of FERS-only time? Can I use military time and previous CSRS time to qualify to receive the FERS annuity supplement (i.e., the 30 years needed)?

A. The earliest date you can retire is the close of business on Feb. 7. At that point, you’ll have completed 30 years of service. If you retired Feb. 8, you would have competed 30 years and one day of service. Because you’ll be retiring at your MRA with 30 years of service, you’ll be entitled to the special retirement supplement. However, by law the SRS will be based solely on your actual years of FERS employment.

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Questions about specific retirement date

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Q. I am in CSRS and plan to retire at 4:30 pm. May 3. I will have my 80 hours in by that time. My three questions:

1. Do I enter the date May 3, 2013, in Block B Question 2 of the retirement form (SF-2801) as my “Final date of separation”? I think I read an article that there is a difference between a retirement date and the final date of separation.

2. Will I earn eight hours of annual leave for that pay period?

3. Will my annuity start on May 4, with my first check received in early June?

A. The final date of separation is the last day you are employed by your agency. If you leave at close of business Friday, May 3, you’ll be on the annuity roll Saturday, May 4, and receive your first annuity payment June 1. That payment will be for only 27/30th of a month. Since you will have completed 80 hours during that final pay period, you’ll get credit for eight hours of annual leave and four hours of sick leave.

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Retirement date

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Q. I am a 61-year-old FERS employee with 26 years of service. Given the various proposed legislation to whittle down the deficit, would it any make any sense for me to retire before the end of year in an attempt to protect my benefits from any adverse proposed changes?

A. Your best bet is to keep your eyes and ears open. Since most changes to benefits are prospective, it should give you enough time to decide what to do.

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Retirement date

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Q. I am contemplating retiring Dec. 31, Jan. 2 or Jan. 3. I am not sure how the CSRS annuity check is computed. Based on a full month? Or if I retire during the month, is it prorated, or is that month lost.

1. When does my CSRS pension start if I retire on Dec. 31? Do I receive an entire month’s (January 2013) pension check? When would I receive it?

2. If I retired on Jan. 2 or 3, when would I receive my annuity check? Is it prorated for January?

3. Also, since the leave year ends Jan. 12, would it be advantageous to retire on that date? When would I receive my annuity, and would it be prorated?

A. 1. If you retired Dec. 31, you would be on the annuity roll in January with a benefit payable Feb. 1. When you actually began receiving your annuity would depend on two things: when your agency got your paperwork to the Office of Personnel Management and when OPM processed it.

2. If you retired Jan. 2 or 3, you’d be on the annuity roll in January, but your annuity for that month would be reduced by 1/30 for every day you weren’t retired.

3. If you retired after Jan. 3, you wouldn’t be on the annuity roll until February, with the first annuity payment due March 1.

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