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The Optimal Retirement Date for Federal Employees Before 2030

Writer's picture: Dan De La TorreDan De La Torre

Updated: Feb 5

Key Financial Factors to Consider  when Federal Employees select the ideal retirement date.


Retirement planning is a critical phase in a federal employee's career, and selecting the best date to retire can significantly affect your financial future. Proper timing can help you maximize your benefits and ensure a seamless transition into retirement. 


For those under the Civil Service Retirement System (CSRS) or the Federal Employees Retirement System (FERS), choosing the right retirement date is key. While the best date may vary based on individual circumstances, there are strategic times that can help federal employees optimize their retirement benefits. 


Here’s a complete guide to help federal employees determine the best retirement dates through 2030. 

 

Key Considerations for Selecting a Retirement Date 

Retirement System Rules: The rules for retiring under the Federal Employees Retirement System (FERS) and the Civil Service Retirement System (CSRS) differ in terms of when annuities start and how benefits are calculated. Understanding these variations is crucial when choosing the most advantageous date to retire. 


Pay and Leave Accruals: Retiring at the end of a pay period ensures that you receive full credit for all the leave you accrued during that time. Opting to retire at the end of a month can also maximize your leave accrual and lump-sum payments. This approach is especially beneficial for employees with substantial leave balances. 


End of the Leave Year: Retiring at the end of the leave year allows you to cash out the maximum amount of accumulated annual leave. Federal employees are allowed to carry over up to 240 hours (30 days) of annual leave. By retiring at the end of the leave year, you can be paid for this leave, which can significantly boost your final paycheck. For example, in 2024, the leave year ends on January 11, 2025. 


Maximize Service Credit: For FERS employees, retiring at the end of the month offers a financial advantage. Your annuity will begin on the first day of the following month, so retiring on the last day ensures your annuity starts immediately, minimizing any gap between your last paycheck and the first annuity payment. CSRS retirees, on the other hand, should aim to retire within the first three days of the month for a similar benefit. 


Avoid the Social Security Offset: If you're planning to retire before reaching Social Security's full retirement age, it’s essential to understand how the Government Pension Offset (GPO) might affect your benefits. This is particularly important for those who rely heavily on Social Security income. 


For those planning to retire around age 62, retiring in the month you turn 62 can help synchronize the start of your federal annuity with the beginning of your Social Security benefits. 


Social Security Earnings Test :The Social Security Administration (SSA) applies an earnings test for individuals who claim Social Security benefits before reaching their Normal Retirement Age (NRA), currently 67 for those born in 1960 or later. This test determines how much of your benefits are withheld if your earnings exceed specific thresholds. For anyone reaching NRA after 2024, the annual earnings limit is set at $22,320. For every $2 earned over this limit, $1 is withheld from your benefits. 


High-3 Salary Calculation: Your federal retirement benefits are determined by your "high-3" average salary—the highest average annual pay you earned during any three consecutive years of service. Timing your retirement to include recent pay raises can optimize this high-3 calculation, ultimately increasing your annuity. 


Avoiding the “Golden Handcuffs”: The "golden handcuffs" refer to the temptation to delay retirement due to incentives such as reaching key service milestones or waiting for cost-of-living adjustments (COLA). Delaying retirement by just a few months can result in a significant boost to your benefits, particularly around these milestones. 


Optimal Retirement Dates from 2024 to 2030 

Based on key considerations, here are some of the best dates to retire from federal service in the coming years: 


  • 2025: January 10 (End of Leave Year), January 31 (Month-End) 

  • 2026: January 10 (End of Leave Year), January 31 (Month-End) 

  • 2027: January 9 (End of Leave Year), January 31 (Month-End) 

  • 2028: January 8 (End of Leave Year), January 31 (Month-End) 

  • 2029: January 13 (End of Leave Year), January 31 (Month-End) 

  • 2030: January 12 (End of Leave Year), January 31 (Month-End) 


These dates are strategically selected to coincide with the end of the leave year or month-end, ensuring a smooth transition into annuity payments and maximizing the payout for accumulated leave. 


Additional Factors to Consider 

Cost-of-Living Adjustments (COLAs): Retiring in December, just before the calendar year ends, can make you eligible for COLA increases sooner, aligning your retirement with these annual adjustments. COLAs are applied each year and can significantly affect the long-term value of your annuity. Federal retirees under CSRS receive COLA adjustments in January after retirement, while FERS retirees have their first COLA prorated based on the months they've been retired. Timing your retirement to maximize COLA benefits can have a lasting positive impact on your finances. 


Health and Life Insurance: To continue your health and life insurance benefits into retirement, ensure you meet the eligibility requirements. Generally, you must have been enrolled in the Federal Employees Health Benefits (FEHB) and Federal Employees Group Life Insurance (FEGLI) programs for the five consecutive years immediately prior to retirement. Additionally, it's important to understand how your retirement date may affect your Social Security and Medicare eligibility and benefits. 


Thrift Savings Plan (TSP) Withdrawals: Your retirement date can also influence how you manage your TSP. Withdrawing funds too early could result in penalties unless you meet the age requirements or select options like monthly payments or annuities. Careful planning can help you avoid unnecessary penalties. 


Financial Readiness: Before finalizing your retirement date, ensure you have a complete picture of your retirement income sources, including your annuities, TSP, Social Security, and any other pensions. Participating in pre-retirement seminars and consulting with your HR office can offer valuable guidance in assessing your financial readiness for retirement. 


Planning Steps for Federal Employees Approaching Retirement 

1 Year Before Retirement: Confirm your eligibility for retirement, obtain annuity estimates to understand your future income and attend pre-retirement seminars to get a better understanding of the process and options. 


6 Months Before Retirement: Notify your supervisor of your intent to retire, finalize your retirement application and ensure that all documentation, including service credit deposits and beneficiary forms, is in order. 


3 Months Before Retirement: Submit your retirement application and finalize your health and life insurance elections. Be prepared for a short income gap while your application is processed. To cover this gap, make sure you have sufficient savings set aside to handle your monthly expenses during the interim. 


Conclusion 

Each federal employee’s retirement journey is unique. When planning your retirement, it’s important to consider your individual goals, including: 

  • Your desired retirement lifestyle and the costs associated with it 

  • Your health and life expectancy 

  • Family considerations and dependents 

  • Potential for part-time work or a second career and how this might impact benefits or earnings tests 


Choosing the best date to retire from the federal government requires thoughtful planning to optimize your benefits and ensure a smooth transition. Aligning your retirement date with key financial and administrative factors, while preparing thoroughly with the help of HR and a retirement coach, can greatly enhance your retirement experience. 


For ongoing guidance, federal employees should regularly consult resources such as the Office of Personnel Management (OPM) or seek expert advice from FedAdvantage, which can provide personalized support and help navigate the complexities of federal retirement planning.  


A hand circling a date on a calendar with a red pen, signifying a retirement date.

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