Mike Causey

Retirement Planning Hits Perfect Storm

If you are thinking about retiring in December or January be advised that this year the calendar has created a perfect storm. To be able to navigate it check Se...

Federal News Network Staff

May 7, 2008 4:00 am

4 min read

Some people are clock-watchers. Every office has one. These are the folks who frequently don’t get much done, but can’t wait to not do it somewhere else.

I once worked, briefly, with a copy editor who sometimes came in dressed in a monk’s cassock and carrying a shepherd’s staff. The problem was that it was a newspaper, not a monastery. Quirky colleagues are one reason so many people love the TV series, The Office.

But as folks get closer to retirement, many folks who never qualified as clock-watchers find themselves watching the calendar. Counting dates, numbers of pay periods, etc. Many want a date that will give them the maximum retirement benefit, the biggest lump sum leave payout and the largest tax break. It’s the modern day version of the search for the Holy Grail.

December and January are the most popular months for retirement. For people who plan to retire then, the answer is usually the same: Dec. 31 if you are under FERS and January first, second, or third for those under CSRS. Usually it’s January 3. But not always.

It’s things like this that add spice to life!

But this year the calendar creates what one reader calls a “perfect storm” situation. Here’s her question-comment, followed by the definitive answer:

I know the best date to retire for CSRS employees is either the second or third day of the month, but the end of 2008 is a “perfect storm” for retirement.

January 3 is the last day of the leave year, a Saturday, and, for some of us, the last day of a pay period.

I attended a retirement seminar in 2007 (sponsored by the government and taught by a contracted company), and asked the presenter what the best day to retire in 2008 was. He though a bit, and told me December 31. He said you could not retire the last day of the leave year.

Today I called my agency’s retirement counselors office and asked them if they’d ever heard of that rule. After a considerable delay, they said no. It would be fine if I retired either January 2 or 3 — I would be able to cash in all my annual leave (including use or lose) and I be entitled to all accrued leave for that pay period.

What does your retirement guru say about the best date to retire in 2008 for CSRS employees? Confused In New Mexico

The Retirement Guru, naturally, is Tammy Flanagan. We passed the buck to her and here’s what she said:

“To maximize your lump sum annual leave payment, I suggest that you consider January 2, 2009 if you are under CSRS and December 31, 2008 if you are covered by FERS.”

Here’s why from Tammy’s articles in GovExec:

Best Dates to Retire 2008

When to Retire

Retirement Dates Q & A

We double-checked this with the National Institutes of Health’s outstanding Human Capital Group. This is what they are telling their folks:

If you are covered by (FERS), you must retire on the last day of the month in order to have your annuity commence the next day. If you are covered by the (CSRS) or CSRS-Offset, you must retire on the first, second, third, or last day of the month to have your annuity commence the following day.

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For those of you who have wondered why so many individuals choose to retire at the end of the year, here’s why, retiring at the end of the calendar year will typically maximize your lump sum payment for your unused annual leave, including use or lose. It will also ensure that the lump sum payment for some of your annual leave, likely the majority of it, will be paid at the new pay rate. Additionally, the lump sum annual leave payout will be made in the following tax year when you may have less taxable income. With that said, if you are covered by FERS, the best end of year retirement date in 2008 is December 31, 2008. However, if you are covered by CSRS or CSRS-Offset, the best date is likely January 2, 2009.

Nearly Useless Factoid

When asked, most polled said they were going to take their economic stimulus checks and pay bills or save it or do something rational with it. But don’t be surprised if coworkers, family members or friends choose to splurge a little on lipstick. It seems that in tough times, there is tendency for lipstick sales to increase. There’s even a phrase for it: lipstick indicator.

To reach me: mcausey@federalnewsradio.com