- The Washington Times - Tuesday, April 29, 2003

Picking the best day to retire can save federal and postal workers a lot of money in taxes and increase the cash-in value of their unused annual leave (vacation) by thousands of dollars.
The idea is to pick a time when you can carry over the maximum amount of unused annual leave, get paid for it at the highest hourly rate possible and still push that lump-sum payment check into the following year when your income (and tax bracket) as a retiree are usually lower.
The good news is that while the so-called magic day to retire (there is one for each of the major federal retirement systems) can and does change from year to year, it almost always happens in late December and early January. Those are about the most popular times to retire.
So feds looking for the magic moment to bail out should circle two dates on the calendar: Dec. 31, 2003, and/or Jan. 2, 2004.
The December date is best for the majority of retirement-age feds who are under the old Civil Service Retirement System (CSRS). The January date is best for the roughly 10 percent of federal workers eligible to retire who are under the newer Federal Employees Retirement System (FERS). Here's why:
Retiring on the right date ensures that most of the maximum amount of annual leave they can carry over during that period will be paid to them at the rate that would be in effect at the time they would have taken it.
Since the January 2004 pay raise (amount unknown) will be effective at the start of the first pay period beginning on or after Jan. 1, that means most of the annual leave payout will be at the higher 2004 rate. For a highly compensated worker with several hundred hours of annual leave, the add-on pay raise is a surprise bundle.
The rule of thumb is that workers under the FERS plan should retire near the end of the month. That's because their annuity begins on the first day of the month following retirement. So if you retire on the 31st, your annuity calculation begins the following day, on the 1st of the month.
Timing is different for CSRS workers. They can either retire at the end of a month or within the first three days of a month. That's so their annuity check picks up where their salary check ends.
That's why employees under the FERS plan should think about retiring Dec. 31 this year, if they are planning a December or January departure.
Workers under the old CSRS program, who want to retire in late 2003 or early 2004 should retire on Jan. 2. Most of the unused annual leave they carry over will be paid at the new, higher (2004) pay scales.
And that income will be counted as income for 2004 when income because the annuity is lower than salary should be lower and taxed at a lower rate.
The decision to retire including the month and day are your business. But if you want to leave this winter, and all other things are equal, picking the magic date for your retirement plan can boost your last payment, and cut your taxes.
How do I know these things? Simple, Tammy Flanagan of the Rockville-based National Institutes of Transition Planning discovered the quirk some years ago, and was kind enough to share it with me and you.

Wide open promotion spaces?
Although the predicted federal brain drain turned out to be a bust (actually the number of quits and retirements is well below normal), retirement-related openings provide the most chances for promotion. So keep an eye out for news reports (here) about agency buyouts and early-retirement offers.
And hold this thought: According to government data, about one in five nonpostal federal workers is expected to retire between now and 2005. The number could be lower if the economy stays sour and the stock market (where many feds have their 40(k) investments) remains feeble. But it could jump if the outside-of-government job market and the stock market each get hot.

Pay raise equity
Military personnel have little trouble getting the highest percentage pay raise proposed whether that plan comes from Congress or the White House. But for federal workers it takes a little more work.
In the last two years, President Bush proposed smaller percentage pay raises for civilians than for military personnel.
This year the House and Senate got what they hope is a head start on the pay-raise-parity issue. They each introduced a nonbinding resolution called a sense of Congress that says they want both groups to get the same percent.
It doesn't have the force of law, but it does put the White House on notice that a bipartisan majority in both the House and Senate will give the civilians the same as military personnel.

Cold feet, warm heart
The Pentagon has banned personal electric heaters that some employees had been using to fight off the chill. But it told workers it will "consider waivers for documented medical reasons" or in areas that are temporarily without heat.


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