- The Washington Times - Monday, June 19, 2006

About one in five Washington area residents are retirees, but federal retirees, unlike many of their private-sector counterparts, get a guaranteed-for-life pension and annual cost-of-living adjustment (COLA).

And for the second year in a row, federal retirees are in for a bigger percentage adjustment than the pay raise on-the-job feds will get.

At best, the January pay raise for the area’s 300,000-plus civil servants will be worth 2.7 percent. That is the amount being pushed by Congress, although the Bush administration continues to back a 2.2 percent adjustment. Those are the only two numbers in play, and 2.7 percent is the odds-on favorite.

Meanwhile, federal retirees, former military personnel and Social Security recipients are midway in their COLA countdown. With four months to go in the inflation watch, the retirees are looking at a 2.9 percent raise. That will go higher if inflation, as measured by the Labor Department’s Consumer Price Index, rises between now and the end of September.

This year, federal and military retirees and Social Security recipients got a 4.1 percent COLA while the federal pay raise was limited to a national adjustment of 3.1 percent. After locality pay was factored in, feds based in the Washington-Baltimore area got a 3.4 percent pay raise, still less than the retirees on a percentage basis.

The federal pay raise in January boosted the median salary here to just more than $80,000. The COLA for retirees increased the median payment for those retired under the Civil Service Retirement System to about $25,300.

The fact that the COLA is going to be bigger than the pay raise has prompted many working feds to ponder retirement to get the COLA.

Here is some advice: Retire if you want, but not to get the COLA.

The reason is that COLAs are prorated based on how long the person has been retired.

For instance, someone who retired in January this year would be entitled to eleven-twelfths of the 2007 retiree increase. But those who retired in April would get eight-twelfths of the final increase. By waiting until this month, the retiring fed would qualify for only six-twelfths of the raise for the coming January.

Feds who wait until October, when the 2007 COLA figure will be set, will get only two-twelfths of the raise.

But if you are planning on leaving in December or January — the most popular retirement months — time it so that you leave on Dec. 31 if you are under the Federal Employees Retirement System or by Jan. 2 if you are under the old Civil Service Retirement System.

By picking the best date, you can carry over the maximum amount of unused vacation (annual leave) time and get paid for most of it at the higher 2007 pay level.

For some high-paid workers, timing retirement can boost that lump-sum payment by thousands of dollars and push it into the 2007 tax year.

Mike Casey, senior editor at Federal News Radio AM 1050, can be reached at 202/895-5132 or [email protected]

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