How Do I Pick a Retirement Date?

Jul 3, 2023 | Retirement, Retirement Planning

Choosing the right retirement date is an important decision for federal employees. It requires careful consideration of various factors that can significantly impact retirement benefits and overall financial security. Below are just a few factors to take into consideration as you begin to plan your retirement.

CSRS and FERS Retirement Differences

One of the primary considerations for federal employees is to understand the retirement system they are enrolled in. CSRS and FERS have different retirement structures, which impact the benefits and calculations. In both systems, it may be best to work until the end of the month because your retirement starts the next day. Therefore, you’ll receive your first monthly benefit for the next month without delay. Choosing a day near the beginning or middle of the month could leave you without compensation for a short period of time. Employees who are in the Civil Service Retirement System (CSRS) do have an advantage. Those employees can choose to retire on the first, second, or third day of the month and receive benefits the next day in a prorated amount, depending on the day picked.

Maximize Your Benefits by Selecting the End of the Month

Selecting the end of the month as the retirement date offers several advantages. First, it allows employees to accrue additional service credit and income for the entire month. Additionally, choosing the end of the month aligns with the annuity computation cycles, ensuring a smoother transition and timely processing of retirement paperwork.

Selecting the End of a Biweekly Pay Period Creates Financial Efficiency

Federal employees are paid on a biweekly basis, and retiring at the end of a pay period can have financial benefits. It allows individuals to maximize their leave accrual, as unused annual leave can be converted into a lump sum payment upon retirement. By retiring at the end of a pay period, employees can carry over the maximum amount of annual leave into retirement, providing a financial cushion during the transition period.

Lump Sum Payment of Annual Leave for Financial Flexibility

Accrued annual leave represents a valuable asset for federal employees. Upon retirement, they have the option to receive a lump sum payment for their unused leave in addition to their annuity. This lump sum payment can provide a significant financial boost and serve as a safety net for unexpected expenses or investments. However, it’s crucial to consult with financial advisors to evaluate the tax implications and determine the most advantageous approach based on individual circumstances.

Age as a Factor

The age at which a federal employee chooses to retire can impact their retirement benefits. While eligibility for retirement benefits varies between CSRS and FERS, both systems have age-related considerations. For example, retiring before reaching the minimum retirement age may lead to penalties or reduced benefits for FERS employees. On the other hand, delaying retirement beyond the minimum age may provide additional benefits, such as higher annuity payments or increased Social Security benefits. Evaluating these age-related factors is crucial to optimizing retirement income.

Looking for assistance in choosing the best date? We can help!

If you are looking for a guide through the retirement process and to put together a financial plan, Benchmark Financial Group can help. It all starts with gathering your information, discussing your goals, and preparing a plan so that we can help you maximize your income in retirement. With the right strategy, you may be able to get your income equal to or exceed your pre-retirement net income. To get started, schedule an appointment today with Benchmark Financial Group by filling out the form online or calling David Raetz at 913-534-8256 to discuss your financial needs. Benchmark Financial Group is happy to help you navigate your options and determine the best path to move toward your financial goals.

*Securities and Advisory Services Offered Through CreativeOne Securities, LLC  Member FINRA/SIPC and an Investment Advisor.  Benchmark Financial Group, LLC and CreativeOne Securities, LLC are not affiliated.

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