Best Dates to Retire Q&A

Last week, I presented my annual Best Dates to Retire column and calendar. This week I thought we’d dive a little deeper into why some dates are better than others, in question-and-answer format.

Why is it important to retire at the end of the month?

When you’re old enough to be eligible for retirement and have enough service to get an unreduced benefit, your retirement will begin on the first day of the month after you retire. In other words, whether you retire on the 1st, 6th, 15th, or 31st of a month, your first retirement check will be for the month following your retirement date. Your last paycheck will provide compensation through the last day you are on the payroll. The reason why the last day is great is so that you can be paid your salary through the end of the month and your retirement will begin to accrue the first day of the following month.

For example, if you decide to retire on Friday, Feb. 12, 2021, your salary will be paid through close of business Feb. 12 and you would accrue annual and sick leave for leave period three of 2021. Your first retirement check would be paid for the month of March and would be dated April 1 (retirement payments are paid on the 1st of the month for the prior month’s payment). If you chose to retire on Feb. 27 instead, then you would be paid your salary through close of business on Feb. 26 (or Feb. 27 if you normally work on Saturday) and you would receive your first retirement payment on April 1 for the month of March. The difference is that if you retire on Feb. 10, you would forfeit 10 days of salary (Feb. 13-28 ), one paid holiday (Feb. 15) and another leave accrual for leave period four.

Also, you should be aware that due to retirement processing delays, the first payment may be an estimate, and it might not hit your bank account until after the first of the month. The final processing may take more than one month to complete. Once your retirement claim is finalized by the Office of Personnel Management, the payments will be retroactive to the starting date of your retirement.

Why is it important to retire at the end of a leave period?

Because annual and sick leave only accrue if you complete 80 hours of work (or whatever your scheduled tour of duty is) in a pay period. If you retire in the middle of a pay period, you won’t get a partial leave accrual.

You’ll be paid in a lump sum for the balance of annual leave in your account on the date of your retirement. This is your unpaid compensation, along with your final paycheck.

Are there only four great dates to retire in 2021?

Absolutely not. The last day of any month works very well, because you’ll be paid through the end of the month and your retirement will begin to accrue the next day.

Should I always choose the last day of the month even if it isn’t a work day?

In general, it doesn’t make too much difference. For retirement computation purposes, all months have 30 days. No credit is given for the 31st day of the month. So, for example, it doesn’t really matter if you make your retirement effective on Saturday, Jan. 30, 2021 or Sunday, Jan. 31. Feb. 28 constitutes three days (or Feb. 29, during leap years, constitutes two days).

A retirement specialist at your agency should be able to help you project your sick leave credit and confirm your retirement service computation date to determine if extra weekend days would increase your benefit. 

Does it make sense to work a few more days if that means my retirement will be computed on an additional month of service?

A month of additional service under the Federal Employees Retirement System is worth 1/12 of 1% of your high-three average salary in your benefit. (Some FERS retirement benefits use a 1.1% factor. For Civil Service Retirement System employees, the factor is 2%.) For example, if your high-three average is $80,000, then one month of additional FERS service credit would be worth 1/12 x 1% x $80,000 = $66.67 per year, or $5.55 per month. If $5.55 is make or break for you in terms of financial security in retirement, then it might be a good idea to consider working another year or two rather than another month or day of service.

What if the end of the month is a Monday or Tuesday? Should I just retire on the previous Friday?

May 31, 2021 is a good illustration of this situation. You may think that there is not much difference between Friday, May 28 and Monday, May 31, but the latter is a better date. This is because:

• Both dates allow your retirement to commence on June 1.
• May 31 is a holiday and you would be paid for this day and not have to report to work (unless you typically work on holidays). 
• If your annual salary is $80,000 (so your hourly pay rate is $38.33), one day of salary (eight hours worth) would be $306. That’s a nice bit of cash. 
• You will also receive credit for two additional days of service, which may add another month to your retirement computation.

You can download the Best Dates to Retire 2021 calendar here.