Before retiring, consider financial, emotional needs


My Oct. 1 column was a look at some of the issues prospective retirees need to consider. This column continues the discussion:

Leave accrual. If you retire at the end of a pay period, you’ll get credit for any annual leave you earned. It will be added to any other unused annual leave you have and included in your lump-sum payment. You’ll also get credit for four hours of sick leave — some of it, if you are under the Federal Employees Retirement System, or all of it, if you are under the Civil Service Retirement System, will be added to your actual service and used in the computation of your annuity.

If you retire before a pay period ends, you won’t get any credit for sick or annual leave accrual in that pay period.

Taxes. When you retire will affect the amount of taxes you’ll have to pay in your retirement year and the one that follows. For example, if you retire Dec. 29, 2012, you’ll be taxed on your salary for the entire year. However, your taxes in 2013 will be much lower, even if you received a substantial lump-sum payment. That’s because your annuity will inevitably be smaller than your salary was.

Further, a portion of your annuity will be tax-free because it represents a return of the contributions you made to the retirement fund — contributions on which you were already taxed. You can find out how that will affect you by going to and reading the Internal Revenue Service’s Publication 721, “Tax Guide to U.S. Civil Service Retirement Benefits.” The tax guide applies to both CSRS and FERS retirees.

Financial considerations. In this column and the last, I’ve given you the basics to calculate what your annuity would be, how much you’d receive when you cash in your unused annual leave and so forth. Among other financial considerations on the plus side of the ledger: what you have in your Thrift Savings Plan account, how much cash you have in the bank, any other negotiable instruments you’re holding onto and the amount of life insurance that will be available to your survivors.

And on the minus side: your mortgage, outstanding loans, |educational expenses for you or members of your family and monthly out-of-pocket expenses.

Working out how many dollars will be coming in and how many going out will require some serious number crunching. It would be a good thing to figure out before you retire. To get the job done right, consult a financial adviser. However, be sure you pick someone who doesn’t have a financial stake in what you decide.

Emotional considerations. Now’s the time for some honest reflection. Ask yourself if now is really a good time to retire. Think about what you’re going to do after you retire. While no longer having to go to work may sound like a dream fulfilled, in the long run it may not be. Most of our lives we define ourselves by what we do. Saying “I’m a retiree” doesn’t have the same ring to it as “I’m an accountant,” “I’m an engineer” or “I’m a park ranger.”

These days, most retirees don’t really retire. They get involved in community activities, join volunteer organizations and start second careers. If you think you are ready to retire but haven’t thought about what you’re going to do with all that free time, it’s time you did. If you are married, hanging around the house isn’t going to cut it. As the old saying goes, “I married you for better or worse, but not for lunch.” And if you aren’t married, spending all your time with a book or a TV will soon grow old.

After you work your way through the financial issues, understand why you are leaving government now and have a fix on what you’ll do after you retire, you’ll be in a better position to pick a retirement date that is right for you.
Of course, sometimes that best retirement date may simply turn out to be the one you have to accept if you want to take advantage of an early retirement opportunity or are catapulted out the door by a reduction in force.


About Author

Reg Jones was head of retirement and insurance policy at the Office of Personnel Management. Email your retirement-related questions to

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