Knowing When to Retire Can Make All the Difference

by | Mar 7, 2017

Last Updated May 14, 2024

If retiring as a FERS employee, your pension starts on the first day of the following month after you retire. So, it makes sense to retire on the last day of the month, no matter what day of the week, right?

Well, this is partly true. While the short answer may be yes, there are many things to consider when choosing when to retire.

Annual Leave When You Retire

When you retire, any annual leave you haven’t used is paid out to you in one lump sum payment. However, if you are in a “use it or lose it” scenario, and you want your leave paid out at retirement, then you must retire by the Leave Ending Date that year. Otherwise, you’ll lose that time. The Leave Ending Date changes every year, so you’ll need to check what the date is for that year.

Also, while you may get a big paycheck for unused annual leave, remember that this money is taxable. It is added to your income for the year which could you put you in a higher tax bracket.

Thrift Savings Plan

Be sure to find out about age restrictions on you TSP. Generally, you must be at least 59 ½ years old to withdrawal out of your retirement savings. If you are younger than that, you may have to pay an early age withdrawal penalty plus normal income taxes. The exception here is that if you retire or separate from service in the year you turn 55 or older, you can take withdrawals from your TSP without any early age penalty. This is called a waiver.

However, if you’re retiring before the age of 59 ½, you may want to consider leaving your funds in the TSP because of the early age withdrawal waiver.

Transferring your TSP to an IRA right away, if retiring before 59 ½, may leave you subject to the early age withdrawal penalty and cause you to lose the waiver.

Processing Time

OPM’s processing time for retirement applications is quite lengthy, so don’t expect to receive payments right away. It’s a good rule of thumb to make sure you have a few months’ worth of savings to rely on until your pension payments start coming in. Even requesting payments from your TSP can take 4-6 weeks.

Knowing all the little caveats can be helpful when picking a date to retire. Make sure you do your research before retiring so that you can maximize the benefits you’ve worked hard to get.


If you’re a federal employee worried about reaching retirement due to a disability, contact our firm today to learn more about Federal Disability Retirement.

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