Best Time To Retire

**mlk_man** · 03-20-2006, 01:58 PM

I've been trying to decide when the best time of the year to retire is. I've pretty much settled on the last day of the year.

My reasonings are that you can save all your vacation time over and above the current "use or leave" limits and then cash all this in. My current limit is 240 hours so theoritically, I could cash in 480 hours. This would give me 6 pay checks.

Also, if you take out a lump sum payment on your TSP, which I plan to do, this won't go thru until most likely Jan. so you wouldn't have to pay taxes on it for about 14-15 months, or the following April. If you take this money and throw it into a regular investment account, you can make earnings on the money that you will use to pay for these taxes for 14-15 months. Yes, you'll also owe capital gains on the earnings.

I plan to do this either this Dec. or next. Any input is much appreciated.

M_M

**cowboy** · 03-20-2006, 02:16 PM

Hi MM! Here is something you may want to check into. The USDA and agencies allowing a retiring person to take his annual leave up to the date of retirment. In other words you may be able to stop working several months prior and take annual leave up to the time you retire. This adds to time served and a slightly larger monthly retirement check. I know some people that dont retire till February and use annual leave even though they quit working in December. Then your annual leave shows as a salary in the new year.

**mlk_man** · 03-20-2006, 02:18 PM

Actually, I guess I should say I'm not really "retiring", I'm quitting.......

**mlk_man** · 03-20-2006, 02:19 PM

Thanks Cowboy, see above post.....................

Originally Posted by cowboy

Hi MM! Here is something you may want to check into. The USDA and agencies allowing a retiring person to take his annual leave up to the date of retirment. In other words you may be able to stop working several months prior and take annual leave up to the time you retire. This adds to time served and a slightly larger monthly retirement check. I know some people that dont retire till February and use annual leave even though they quit working in December. Then your annual leave shows as a salary in the new year.

**EW_ret** · 03-20-2006, 03:37 PM

The lump sum payment for annual leave would be greater at end of a colander year if you did not use much of annual leave earned that year (240+208= 448 max). It could even be larger for those who were approved more than the 240 hours carryover from prior year.

If you separate the beginning of January it could be worth a few bucks more because the lump sum is paid going forward from date of separation, or retirement. Starting with the first full pay period in January the yearly COLA is added in, for most federal employees. This gives you more dollars per hour of leave in the lump sum payment.

**mlk_man** · 03-20-2006, 04:14 PM

Would this only be for someone who is actually "retiring"?

Originally Posted by EWGuy

The lump sum payment for annual leave would be greater at end of a colander year if you did not use much of annual leave earned that year (240+208= 448 max). It could even be larger for those who were approved more than the 240 hours carryover from prior year.

If you separate the beginning of January it could be worth a few bucks more because the lump sum is paid going forward from date of separation, or retirement. Starting with the first full pay period in January the yearly COLA is added in, for most federal employees. This gives you more dollars per hour of leave in the lump sum payment.

**EW_ret** · 03-20-2006, 04:49 PM

The hourly rate paid on a lump sum distribution is an accounting thing. It’s paid the same to all who separate, or retire, be they FERS or CSRS. If you separate January 4th, and the leave year ends January 7th, you get paid three days (approx 18 hours) at your old hourly rate (5th-7th) and the remaining 430 hours at the new pay rate. Of Course, if you are retiring on January 4th, you will not get any annuity payment for January. Your first monthly annuity payment will be paid March 1st for the month of February.

**Spaf** · 03-20-2006, 05:26 PM

We are not all equal...and...you have to run the numbers!

Since I'm with FERS, I'll limit my yak to that system. Your social security benifits is based on your birthday. [See your Social Security Statement] At age 62 I can retire on my birthday with reduced benifits (full retirement age 66). I'm gonna choose 62, (because of some health issues with my employer). Concerning the right month. If I wait till January, I'll be working for nothing, and in fact loosing money (gas, travel, motels, supplies, etc), and time. For FERS you want to retire on the last day of the month, so you don't have a gap before/when benifits take over the following month. You get paid for annual leave, but not sick leave. 240 hours AL would come close to a month's pay, more would be gravy.

My 2 cents............................

...........................Spaf

**Wheels** · 03-20-2006, 06:27 PM

Originally Posted by Spaf

[U] For FERS you want to retire on the last day of the month, so you don't have a gap before/when benifits take over the following month.

Spaf I think this is moot since he said he was quitting, not retiring.

Mlk, here's a couple of things to consider. That annual leave check is going to take a bit of time to get to you so I wouldn't count on it to cover living expenses right away.

As far as the lump sum on your TSP, you said you wouldn't have to pay taxes on it for 14-15 months but I'm pretty sure TSP is going to withold 20%.

As far as when to quit, one thing to consider is your salary. If you are FERS and your salary is high enough to put you over the FICA limit, then you may want to consider going a few months earlier. That way your annual leave check will come before the end of the year and there will be no FICA (6.7%) taken out of it.

Dave
<><

**EW_ret** · 03-20-2006, 06:34 PM

SPAF,

That’s correct if your FERS and are you retiring from federal service. A FERS employee must retire by the end of the month in order to get their annuity starting the first of the following month. If you’re CSRS, you have an option to retire on the 1st, 2nd, or 3rd of month and have your annuity start the following day

I was addressing M_M question on when best to separate (quit job) to maximize your lump sum payment for annual leave. If your just quitting your job, there is no issue with collecting an immediate annuity so you can separate the beginning of January.

Where I worked, the pay period ends January 6, 2007 (Saturday) so one could separate January 5th (Friday). This would be your last workday. The lump sum payment would be one day (6 hours) at 2006 hourly rate, and 242 hours at the new 2007 rate. This is assuming one had not taken any annual leave in 2006 and earned 8 hours per pay period (208 hours a year) with 240 hours annual leave carry over from 2005.

**mlk_man** · 03-20-2006, 07:05 PM

All good points, thanks guys!

I just passed 15 years of "total" service this year, so I'm currently getting 12 hours per paycheck.

That 20% that Wheels says the TSP will take out bothers me. I assumed it worked liked an IRA where they ask you if you want them to take out 20% or not. I'll have to check into this more................

What is the FICA limit?