Lump sum annual leave check- LEO/FERS

[74vetguy]

Quick question. If a person makes more than 100K a year would it be better to retire on or near the last day of the calender year and take the annual leave check of approx 440 hr (pay less taxes) or wait until the beginning of the next year to retire and get the cola applied to the 448 hr?

Or does it make a differenc?

thanks in advance.

[hunters]

Your income in the new year will likely not be as high as your income the year before. Taxation could be less if you receive the lump sum leave payment after the new year.

Also, as you already figured, you will get the benefit of the pay increase on that money.

On the other hand, if you use some of that leave this year you get time off and you get to earn leave while using it. Can't do that with a lump sum.

If you wait until after the first of the year, there is possibly another tax strategy move you could do. You could allot your whole paycheck into the Health Savings account thus using before tax money to pay for any non-insurance covered health expenses. Get stuff done in the first week of the year, like new glasses, etc. I've been retired for awhile now so you would have to check this out to see what the expense and time requirements were and if you could comply.

The important thing is to have a few months worth of living expenses on hand. Retirement checks can be delayed and you may see only a partial payment for the first few months.

A very helpful website that I have found answering a number of questions for federal workers on retirement and other issues is www.federalsoup.com

You are doing the right thing by thinking ahead and planning. Good for you.

[Wheels]

Quick question. If a person makes more than 100K a year would it be better to retire on or near the last day of the calender year and take the annual leave check of approx 440 hr (pay less taxes) or wait until the beginning of the next year to retire and get the cola applied to the 448 hr?

Or does it make a differenc?

thanks in advance.

Keep in mind that in FERS you have to retire by the last day of the month to get your first pension check in a month (for instance in CSRS you can retire on Dec 31st, Jan 1st, Jan 2nd, or Jan 3rd and still receive your 1st pension check by February 1st. But in FERS you would have to retire by Dec 31st if you want that 1st check by Feb 1st).

Also, to get your annual leave money exempt from FICA taxes, you would have to leave much earlier than the end of the year. That money is taxed when you get it, not when you earn it. Idon't have any idea how long it takes to get that money.

Hope this helps,

Dave
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[grandma]

There are dates that could cause you to lose some money if you retire at the wrong part of the month/year.

http://www.govexec.com/story_page.cfm?articleid=33298

http://tinyurl.com/j4syp

as always, choices depend on what your needs are, and what they will be.....

[ICU_RN]

There are dates that could cause you to lose some money if you retire at the wrong part of the month/year.

http://www.govexec.com/story_page.cfm?articleid=33298

http://tinyurl.com/j4syp

as always, choices depend on what your needs are, and what they will be.....

Wow, awesome article! Thanks for posting!
I printed it out to save for future reference.
I'm just beginning my career but it's never too early to think about retirement!

ICU_RN

[Spaf]

Grandma,
Good find! there.
In FERS for Social Security to click in you have to wait a full month. So it's better to leave at the end of the month.
Also count how your pay periods evolve, to know what you will be receiving and when.
The extra leave days are a bonus. So it is good to max it out and December would be ideal. However, there are reasons for leaving ASAP, one being medical. And, thats not worth pushing the limits for a few extra dollars.

[74vetguy]

Thanks for the information.

[Spaf]

Retirement
The lump sum

When you are getting close to retirement, try and build your annual leave to the maximum. And on your chosen year take all the leave that is expendable (doctors, dentist), but save annual leave, and any payable leave. That lump sum can carry you over the month(s) that every thing else gets in place. And, What about that new boat!, car, home improvements!, debt pay off!, the vacation you never took!, etc, etc. The last year will be rough, but planned wisely it can be a big asset!

[Pilgrim]

Suppose one rolls the entire TSP balance over into an IRA. The goal would be income for life, that is, to never touch the principal but withdraw all earnings, probably monthly, and preserving capital at the expense of further growth. What would you expect the best approximate annual rate of return to be?

[atcsat64]

Retirement

The lump sum

When you are getting close to retirement, try and build your annual leave to the maximum. And on your chosen year take all the leave that is expendable (doctors, dentist), but save annual leave, and any payable leave. That lump sum can carry you over the month(s) that every thing else gets in place. And, What about that new boat!, car, home improvements!, debt pay off!, the vacation you never took!, etc, etc. The last year will be rough, but planned wisely it can be a big asset!


So, Spaf, your lump sum check came right away?

[bubba22]

FERS employees should go at the end of the month, CSRS should go 1/3/07. Annual leave will be paid out as if you were taking it for as many hours as you have. If the new pay increase is effective 1/7/07, your annual leave beyond that date will be paid at the new rate, regardless of whether you retire in DEC, JAN or even if you retired in NOV.

[Spaf]

So, Spaf, your lump sum check came right away?

Sorry, missed the post!

I retired July 31st. The leave check was in direct deposit August 28th. That was DOL-OSAM out of Dallas. The folks there worked very close with retirees, they did a real good job!

[atcsat64]

Sorry, missed the post!

I retired July 31st. The leave check was in direct deposit August 28th. That was DOL-OSAM out of Dallas. The folks there worked very close with retirees, they did a real good job!

Glad to hear that they worked for you! We have a lot of pending retirements in FAA and they (those in charge of the paperwork) are very behind. Lots of mis-information, rumors, partial or missed payments, etc... I'm not eligible for 6 years so not effecting me except for planning.

[vol46]

So if one retires on 12/31, the maximum one could receive for an AL check would be 648 hours?
Later, Vol46