Earlier this year, we covered the best days for FERS retirement. Because FERS benefits kick in on the first day of the next month, the best days to retire each year are the last days of the month. That’s because those who decide to wait until the second or third day of the month for their federal employee retirement will have to wait almost 30 days for their official retirement date to be set — and another 30 days after that to receive an annuity check.
As December is upon us, the final “best day of the year” for federal employee retirement is fast approaching. The end of December is already a good time to retire for FERS employees, but it has additional benefits because it is the end of the year.
Keep reading to find out why December 31st is the best day for federal employees to retire under the Federal Employee Retirement System.December 31st is the best day for federal employees to retire under the Federal Employee Retirement System (FERS).Click To Tweet
FERS Employees Can Retire in December to Avoid Tax Confusion
One of the main benefits of retiring in December is that your taxes wrap up neatly at the end of the year. You won’t have to worry about tracking income next Spring if you leave service at the end of this fiscal year. Plus, you may find that your tax bracket or tax rate changes unexpectedly from year-to-year, leaving you paying more taxes than expected. If you want a smooth tax season without surprises, retire by the end of the year.
Paid Leave Ending Dates Fall in Early January
Another reason to plan your retirement for the end of December is to maximize your paid benefits. When you retire, any paid leave you have left will be paid out to you. This is often seen as a nice bonus for employees and can cover their expenses until their first annuity check arrives in a month. However, some employees are on a “use it or lose it” paid vacation plan. Employees who don’t use their paid time off will lose the benefits at the start of the next year.
This means that FERS employees either need to use their paid time before the leave year ends, or file for federal employee retirement before your vacation leave expires. According to the Office of Personnel Management, the dates for the 2018-2019 leave year are as follows:
- Leave Year Start Date: January 07, 2018
- Leave Year End Date: January 05, 2019
- Last Date to Schedule “Use It or Lose It” Leave: November 24, 2018
FERS employees need to file for retirement before December 31st if they want to receive their paid leave payout before they lose it.
Note: Under the Federal Employee Retirement System, the OPM has “Leave Year” dates set through 2020. If you’re not retiring this year, use their chart to plan your leave and retirement in the coming years.
Also, your paid leave check is also taxable. It may be better to use some of your paid leave instead of saving it to make sure you don’t accidentally push yourself into a higher tax bracket. We recently created a guide for crediting unused sick leave and other hours so you can get the most out of your leave check.
Plan for the Month Before Your FERS Benefits Kick In
If you are able to successfully retire on December 31st, meaning your benefits kick in on January 1st, you still won’t receive your first annuity check until the start of February. Use the time leading up to your federal retirement to plan for this month when you will live without a paycheck. Make sure any mortgage or auto payments are covered and check to make sure you have enough cash to cover your bills throughout the month.
The worst way to start your retirement is to fall into debt because you didn’t plan for the month between your retirement date and the first check.
Learn More About Federal Employee Retirement As You Plan to Leave Service
If you’re preparing to retire this month or sometime in the next year, make sure you know everything you need to know about federal employee retirement planning.
MyFEDBenefits has a team of local benefits specialists across the country. Find a specialist near you who can review your benefits and make sure you’re getting the coverage you need.
Finding the best day to retire is just the first step. Making sure you are financially prepared for the next 10, 20, and even 30 years is the goal for retiring into a healthy, happy life. Find out if you are ready to retire by contacting MyFEDBenefits today to schedule your free retirement review.