By Reg Jones
Q: I read that the best day to retire under the Civil Service Retirement System at the end of leave year 2013 is Dec. 28, which confuses me because we’re always told to retire the end of the month or within the first three days of the month. I know the Dec. 28 is the end of a pay period, but wouldn’t it work out just as well if I retired on Jan. 2 or 3 since I’d get paid for the holiday of Jan. 1?
A: You can retire on any day that suits you. However, keep these facts in mind: First, if you retire at the end of a pay period, you will get credit for any annual and sick leave leave you earned during that pay period. That won’t happen if you retire before the end of a pay period. Second, because of a wrinkle in the law that only applies to CSRS employees, you can retire up to the third day in a month and be on the annuity roll in that month. However, if you retire after the last day of the preceding month, your first month’s annuity would be reduced by 1/30th for each of those three days. For example, if you retired on the third of the month, your first month’s annuity would be 27/30ths of the full amount.
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.
Q: I plan to retire at the end of this calendar year under the Civil Service Retirement System. My tour of duty is 8 a.m. to 4:30 p.m. Monday thought Friday. Everything I read says the optimum date to retire is Dec. 31. Human resources says I can only retire on the first, second or third of the month, and they want me to retire Jan. 1. It is my understanding that there is no advantage to retiring after Dec. 31 because the weekend days aren’t paydays and if I retire Jan. 1, I will lose one day of my January annuity. How can I convince HR that Dec. 31 is the correct date?
A: You can retire on any day, including at the close of business on Friday, Dec. 31. No one else has a say in that. However, your assertion that there’s no advantage to retiring after that date is incorrect. Because the leave year ends on Jan. 1, you could retire on that day and still get paid for any unused annual leave that exceeds the carryover limit. The minor downside is that you’d lose 1/30th of your first month’s annuity.