Selecting the Best Day to Retire

The retirement date for FERS employees is set at the first day of the month following the last day of work. The first annuity payment begins on the first day of the following month so retiring on the last day of a month will minimize the time between the final pay period and the first annuity payment. CSRS employees can retire up to the third day of the month and still receive the first annuity payment on the first day of the following month.

The high three average used in the calculation of your annuity payment is based on the highest paid 36 consecutive months of work so in most cases it is beneficial to complete the final month in order to affect the final annuity calculation.

Unused annual leave is paid in lump sum based on the hourly rate in place at the time of retirement. If you have more unused annual than you can carry into the next calendar year, it is usually best to retire before the use or lose deadline. If you have less than the maximum unused annual leave it is often best to wait for the next step-up resulting in a higher hourly rate.

Unused annual leave is taxable income in the calendar year it is received so retiring at the end of the year can defer the taxes owed to the following year.

Selecting the best day of the year to retire as a federal employee involves a thoughtful analysis of various factors that can impact pension benefits, taxes, and overall financial well-being. While there is no one-size-fits-all answer, taking the time to carefully plan and consider each aspect can lead to a more successful and satisfying retirement. Consulting with financial advisors, tax professionals, and human resources experts can provide valuable insights and guidance in making this important decision. Ultimately, the best day to retire is the one that aligns with your goals, financial situation, and vision for a fulfilling retirement.