Best Dates to Retire, Revisited

Three weeks ago, I published my annual Best Dates to Retire column, covering 2012. It features a downloadable calendar highlighting the best dates each month, depending on your retirement system.

Not surprisingly, readers had some questions about when they should plan to retire, based on their individual situations. This week, I'll address some of them.

Will you please do the best dates to retire in the last half of 2011?

That information is included in the Best Dates to Retire 2011 column I wrote last year.

I want to retire in December 2012. I will have annual leave that will be more than 30 days when I retire. Will I lose the leave if I don't retire on Dec. 31, 2012, since the leave year ends that year on Jan. 12, 2013?

You can retire on Jan. 12, 2013, and still be paid for all of your accumulated and accrued annual leave. The "use it or lose it" deadline would be the last day of the leave year, Jan. 12. Keep in mind that the trade-off for retiring on that day and earning your last leave accrual, along with your salary, is that you will forfeit your January 2013 retirement check. Under either the Civil Service Retirement System or the Federal Employees Retirement System, you would become an annuitant on Feb. 1 and your first retirement check for the month of February would be payable on March 1.

If you don't mind losing your final leave accrual, then you could retire on Dec. 31, 2012, (under FERS) or Jan. 3, 2013, (under CSRS) and you would be entitled to your January retirement payment (payable Feb. 1).

As a FERS employee, I understand it's better to retire at the end of the month. However, there are few times when the end of the month also is the end of a pay period. So which would be better under FERS -- working until the 2nd of a month (end of pay period) or leaving on the 30th (of a 31-day month, also the end of a pay period)?

Since FERS regular retirement benefits begin on the first day the month following your retirement, I would never recommend retiring on the first few days of the month. (CSRS is different.)

For example, you could retire Saturday, June 30, 2012, and you would be paid your salary through June 29. You would earn a final leave accrual since it is the end of the leave period, and you would become an annuitant on July 1. That would mean your first retirement payment would be for the month of July, payable on Aug. 1.

On the other hand, let's say you chose to retire Friday, Nov. 2, 2012, which is also the end of a leave period. Under FERS, you would not become an annuitant until Dec. 1 and your first retirement payment would be paid on Jan. 1, 2013. You would have forfeited your November retirement benefit altogether and you would have been paid your salary only for Nov. 1 and 2. In this example, I would have retired on Wednesday, Oct. 31, even though it isn't the end of the week or the leave period. Not all months end nicely at the end of a leave period, so sometimes you have to make trade-offs.

Thanks for the great columns. I am under FERS and have three years until I reach my minimum retirement age. However, due to the retirement system changes under consideration, I am hoping that early retirement will be offered, so I can retire ahead of them.

Remember, for now all the talk about changing federal employee benefits is just that -- talk. Many federal employee unions and associations are trying to convince members of Congress not to tamper with the retirement system. There is always a possibility that changes will be enacted (especially since many Democrats seem to be going along with Republican proposals that feds under FERS should contribute more to their pensions), but it is too early in the game to start planning an early retirement.

I've been watching these games play out for more than 25 years and have seen the same suggestions come up over and over again. Switching from a high-three average salary to a high five for the purposes of determining retirement benefits is nothing new. (In fact, federal retirements were computed on a high five prior to 1970.) Likewise, proposals to increase the federal retirement age are among those we've heard many times before.

My feeling is that Congress is more likely to change benefits for employees hired after 2012. I think there's a possibility that the FERS basic retirement benefit will be eliminated. Most private sector employers no longer can afford to offer pensions and many state governments are also taking drastic steps to eliminate or modify their retirement systems. Eliminating a defined benefit at the federal level for future employees would allow them to choose whether they want to work in the private sector with a 401(k) plan or in the federal government with the Thrift Savings Plan.

Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.

For more retirement planning help, tune in to "For Your Benefit," presented by the National Institute of Transition Planning Inc. live on Monday mornings at 10 a.m. ET on federalnewsradio.com or on WFED AM 1500 in the Washington metro area.