Timing your retirement isn’t rocket science, but no cake walk

When a federal or postal worker must decide when to retire, timing isn’t everything, but it sure is up there with whatever is number one.

Picking the best year, month and even day can mean thousands of extra dollars in payment for unused annual leave, a boost in the final paycheck if a new pay raise goes into effect and a big tax savings in the first full year of retirement. There are reasons why December, January and February are the most popular months, and why Dec. 31 is best for some people but Jan. 1, 2 or 3 are better for others.

And it’s important to know that the average time for processing a retirement application is about two months.

Unlike many if not most current private sector workers who won’t get a company pension, feds under the Federal Employees Retirement System and Civil Service Retirement System will get a defined lifetime benefit from the government. For CSRS retirees that annuity is still fully indexed to inflation. Retirees get full cost of living adjustments to keep pace with inflation, as measured by the Consumer Price Index-W. FERS retirees get full COLAs up to 2 percent and a diet COLA on the amount over that level.

Congress and the White House have again proposed eliminating the FERS catch-up. But Democrats in control of the House say that is dead-on-arrival. So for now, and maybe forever, people under the CSRS and FERS programs have total or partial protection from inflation, that is if you believe the CPI-W is the proper yardstick.

Picking the best date means the retiree can cash in the maximum amount of unused annual leave, and that most of it will reflect any new pay raise effective that month. For many high-grade workers with lots of leave, that can be worth tens of thousands of dollars.

Because the 2019 December-January retirees will get their lump sum payments at the higher rate in 2020, that won’t be part of their 2019 tax bill.

And for feds under the FERS program there is the question of Social Security, and what to do with your new raise. Financial planner Dennis Damp suggests workers either bank the pay raise amount in their rainy day fund or increase their Thrift Savings Plan contributions by the same amount as the actual 2019 raise.

Benefits expert Tammy Flanagan, who first came up with the best-dates-to-retire concept, says feds under FERS also need to consider Social Security. It will be one of the three legs of their imaginary retirement stool which also includes the FERS benefit plus the TSP.

Tammy will be my guest today on our Your Turn radio show at 10 a.m. EDT, streaming on www.federalnewsnetwork.com or on 1500 AM in the Washington, D.C., area. Tammy literally has all the answers. The show will also be archived on our home page.

Nearly Useless Factoid

By Amelia Brust

One of the largest bio-mass migrations on the planet — some claim it can be seen from space — is the Sardine Run off South Africa’s eastern KwaZulu-Natal coastline. Between May and July, which is winter for the southern hemisphere, millions of silver shimmering sardines stretching for 4.3 miles come to spawn and therefore create a feeding frenzy, both for ocean predators and fishermen.

Sources: Deutsche Welle /YouTube

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Jun 18, 2021 Close Change YTD*
L Income 22.8950 -0.0718 2.88%
L 2025 11.7475 -0.0782 5.61%
L 2030 41.3301 -0.3582 7.07%
L 2035 12.3983 -0.1179 7.71%
L 2040 46.8639 -0.4865 8.36%
L 2045 12.8274 -0.1425 8.91%
L 2050 28.0756 -0.3333 9.49%
L 2055 13.7453 -0.2025 11.70%
L 2060 13.7453 -0.2024 11.70%
L 2065 13.7452 -0.2024 11.69%
G Fund 16.6073 0.0007 0.53%
F Fund 20.8808 0.0657 -2.22%
C Fund 62.4507 -0.8275 12.61%
S Fund 82.8816 -1.0758 11.60%
I Fund 38.5980 -0.6987 10.58%
Closing price updated at approx 6pm ET each business day. More at tsp.gov
* YTD data is updated on the last day of the month.