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from 2001, you can then accrue another 200 (assuming 8 hours per pay period for 25 pay periods), for a total of about 440 hours of annual leave. Note: You cannot accrue leave for a pay period (pay period #26 in this case) which you did not complete.
Most employees plan their annual leave so as to carryover the maximum the year prior to their actual retirement, and then accrue the maximum through the next 25 pay periods. Most employees are looking to maximize their annual leave lump sum payment. This is a wise move for a couple of reasons: (1) this money can be your financial bridge until your regular monthly retirement annuity kicks in from OPM; (2) the lump sum payment is paid to you in the next tax year, thus reducing any taxes due on this lump sum payment. Generally speaking, your annual leave lump sum payment is taxed at a flat rate of 27% -- so temporarily changing your withholdings won't have any effect.
Assuming that you have 440 hours of annual leave to cash in as of December 31, and assuming you are a GS employee anticipating a pay increase effective on January 12, 2003, then here's how your actual annual leave lump sum payment will work out… 56 hours
(7 days) of your 440 hours will be paid at your old 2002 hourly pay rate; the remaining 384 hours will be paid to you at the new, and higher, January 12, 2003 hourly pay rate that you would have received had you not retired. This is because the annual leave is paid at the salary the employee would have earned if he/she would have remained employed until the leave was exhausted. (Learn more from OPM.)
The obvious "negative" about retiring at the end of the year is that it also happens to be when most federal and postal employees retire - which always slows the process down some. The other "negative" is that you get fewer days (but not many fewer) of your annual leave paid at the new, and higher, 2003 hourly rate.
We always suggest maximizing your annual leave lump sum payment, so that you can use those funds to carry you through the transitional period when your final paychecks stop coming from your agency, and when your new payroll office, OPM, starts your monthly annuity payments.
Please remember, you can always retire on any day you wish. For more info on "best date" to retire, check in with FederalNewsRadio's Mike Causey and Tammy Flanagan.
JANUARY 11 DATE (FERS). OK, now let's take a look at the January 11th date. First, you will have maximized your High 3 computation. That's the good news. Here's the bad...by retiring on January 11th, your FERS annuity will not commence (begin to accrue) until
the first day of February, for payment in March. Not a terrible thing, but something to consider.
A January 11 date maximizes annual leave accrual prior to the end of the leave year--in this case the leave year also ends on January 11th, the end of pay period #26. If you carried over the maximum (for most employees the maximum carryover is 240 hours) annual leave from 2001, you can then accrue another 208 (assuming 8 hours per pay period for 26 pay periods), for a total of about 448 hours of annual leave. Note: You cannot accrue leave for pay period #26 unless you complete the pay period.
Most employees plan their annual leave so as to carryover the maximum the year prior to their actual retirement, and then accrue the maximum through the next 25 or 26 pay periods. Most employees are looking to maximize their annual leave lump sum payment. This is a wise move for a couple of reasons: (1) this money can be your financial bridge until your regular monthly retirement annuity kicks in from OPM; (2) the lump sum payment is paid to you in the next tax year, thus reducing any taxes due on this lump sum payment. Generally speaking, your annual leave lump sum payment is taxed at a flat rate of 27% -- so temporarily changing your withholdings won't have any effect.
Assuming that you have 448 hours of annual leave to cash in as of January 11, and assuming you are a GS employee anticipating a pay increase effective on January 12, 2003, then here's how your actual annual leave lump sum payment will work out...all 448 hours of your annual leave lump sum payment will be computed using the new, and higher, January 12, 2003 general pay increase hourly rate. (Learn more from OPM.)
The obvious "negative" about retiring at the end of the year is that it also happens to be when most federal and postal employees retire - which always slows the process down some. The other "negative" is that your annuity does not begin accruing until the first of February, for payment in March. Which essentially means that once you get your final paycheck from your former agency, and your annual leave lump sum payment, your without any pay or annuity due until OPM starts sending your monthly annuity payment beginning in March.
We always suggest maximizing your annual leave lump sum payment, so that you can use those funds to carry you through the transitional period when your final paychecks stop coming from your agency, and when your new payroll office, OPM, starts your monthly annuity payments.
Please remember, you can always retire on any day you wish. For more info on "best date" to retire, check in with FederalNewsRadio's Mike Causey and Tammy Flanagan.
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