About half of all federal and postal workers who retire, do it either at the end of, or the beginning of, the year. For some it is a financial decision. By retiring in late December or early January, they can carry over the maximum amount of unused annual leave and get a tax break. Most, if not all, of the leave will be lumped into their retirement-income tax year. Also, if there is a pay raise (which there isn’t this year) most of that leave would be paid at the new, higher rate.
The number of December retirees is expected to be up for a variety of reasons. Some people — facing another year without a pay raise — decided it was time to pull the plug. Their high-three annuity calculation isn’t going anywhere and, for the first time in two years, people who were already retired got a 3.6 percent cost-of-living adjustment. Some figured they have a better chance of getting a raise (in the form of a COLA) retired than they do working.
Last year 18 federal agencies, from Agriculture, Air Force and the Army to the IRS and the U.S. Postal Service, offered limited buyouts. In most instances, workers had to be retired no later than early November to Dec. 31, 2011.
The Federal Retirement Thrift Investment Board (which handles your Thrift Savings Plan) says the number of investors who are under the old CSRS retirement program declined last year. Some FERS employees also stopped investing. Some may have made hardship withdrawals (which preclude you from investing for six months) for college or Christmas. But many of them are probably people who simply retired. They may leave their money in the TSP but they can no longer contribute to it.
So why do people chose to retire, or stay put. Here’s what some of your colleagues are saying:
“…I’ve been telling my boss that I can stay home as a retiree and my CSRS retirement income (38 years of service) plus TSP and the Voluntary Contribution account will be more than my take home pay while working. The possibility of future COLAs for retirees makes it even better…” B.C. with Navy
“I served my time with Uncle Sam and am happy that I did. I retired three years ago. I have a positive thought (among many positive thoughts about retirement): At least when you are retired, you don’t have to worry about losing your job!” T, an IRS retiree and loving itj!
” If maximum income is your goal it NEVER pays to retire. You are always going to make more money if you are working (and building your high-three) than you are retired. I think these people who say they will have more, because they will stop contributing to the TSP, not have to commute, can dress like street people, etc., really don’t like their jobs. For them retirement is probably a good thing, but it is not going to increase their income.” Realistic Lifer
So should you go or stay? And why? Our first guest on today’s (10 a.m.) Your Turn radio show is David Snell. He’s a former OPM official and now director of retirement services for the National Active and Retired Federal Employees. If you have comments or questions for him email me at email@example.com.
In the second half of the show we’ll talk with Stephen Losey and Sean Reilly from the Federal Times about what didn’t happen to feds last year, and why and whether the outlook for 2012 if grim, bright or more of the same.
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