GovExec Daily: Choosing the Best 2023 Dates to Retire

Ross Gianfortune 
Deciding on when to retire is one of the biggest decisions a person can make. It’s a major life transition, with lots of things factoring into one’s decision on timing. In an era of high inflation, a worldwide pandemic and a looming recession, determining one’s best date to retire from federal service is as important as ever. Sticking around and delaying retirement can improve your financial situation, but is it worth it? Certain dates can be more lucrative than others, but are the the best dates for any particular person’s individual situation?

Tammy Flanagan writes the weekly Retirement Planning column for us here at GovExec, including the annual Best Dates to Retire column. She runs her own consulting business and also provides individual counseling as well as online training for the National Active and Retired Federal Employees Association. She’ll join me next to talk about the best dates to retire column here on GovExec Daily.

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Ross Gianfortune   
There are many factors that can determine anyone’s retirement plans. Family, employment, economics and many other things can change a person’s plans for when and how they;re going to retire. Many federal workers certainly are in line to retire this coming year and No one wants to retire at a bad time, either for their personal life or their finances. Thankfully, our guest today has over 30 years of advising federal employees on their retirement.

Tammy Flanagan writes the weekly Retirement Planning column for us here at GovExec. She runs her own consulting business and also provides individual counseling as well as online training for the National Active and Retired Federal Employees Association. Her annual Best Dates to Retire column is online now on GovExec.com and she joins me now to talk about the column. 

Welcome back to the program.

Tammy Flanagan
Thanks Ross, it is great to be here. And this is what I'm known for : the best date girl.

Ross Gianfortune  03:06
So can you walk us through sort of the process of picking a best date to retire? How does this sort of calculation happen?

Tammy Flanagan
Sure, let me back up and give you just a little bit of background because I think the whole idea of this magic retirement date or best retirement date got its start under the old system. And as we all know, most employees now are under the three tiered FERS retirement system. So you know, we're talking specifically about a best date for your government pension. So for a FERS employee, they can turn on their government pension, which is usually the first thing they collect in retirement, but some of them will delay Social Security or they'll take your dribs and drabs from their tsp at different times before they start a regular payment. So it's not quite the same not quite as of an emphasis for FERS employees. But there's still something to it. And I think this whole idea of a best date to retire when you're picking an exact date has more to do with maximizing your lump sum annual leave payment, than it has to do with being able to afford to retire being mentally ready to retire. It's really a matter of having this bridge of money that's going to hold you over while you're waiting for your initial retirement claim to be processed and have OPM start sending you the interim pay. So when we talk about a best date, and a lot of people think it is the the end of the year, which that traditionally has been that best date. It's really to maximize how much you're going to get paid out in a lump sum for your annual leave. Because for many employees, it's going to take several months if not six to eight months to fully adjudicate Your FERS or CSRS retirement claim. And so this chunk of money this lump sum payment is going to tide you over while you're waiting.

Ross Gianfortune 
Well, sure, to that end, I we're not in the middle of the pandemic necessarily, although who knows how long it's going on, people have certainly started moving on. Has it changed the calculus as far as delays and stuff at OPM?

Tammy Flanagan
For some reason, I shouldn't say for some reason, we all know that there have been a lot of issues with the pandemic affecting all different areas of our lives. And when it comes to retirement processing you the pandemic hit OPM, just like it hit the rest of us that teleworking really bog things down. Because if you're in a paper based system, you can't work from your home computer and access paper files that are in a mine in Pennsylvania. So the employees at OPM were at a disadvantage where they had to go back to the office once every week or every other week to pick up files and then take them back. So that was causing delays in itself. So yes, I think the pandemic has extended the delays in processing. So I've heard from a lot of people who are taking instead of three months to finalize a claim is taking six to eight months. But then there's still those cases that get through in two or three months. So it's not a guarantee that's going to take a long time. But it's that old saying, expect the best but prepare for the worst. And this is no exception.

Ross Gianfortune  06:11
As always, preparation is key. But you mentioned some of the dates towards the end of the year. What are some other kind of factors that go into that? What are some of the other best dates to retire?

Tammy Flanagan
Sure. Well, another thing to think about, and this, again, is directed, mostly to FERS employees, but it could also apply to CSRS, is we always, I always tell people to think about retiring towards the end of the month, if not the last day of a month. So I don't care if you're leaving in February or July or, or the end of December. If you retire towards the end of the month, you'll be paid your salary for either most or all of that month. And then your retirement is going to commence the first day of the following month. So you know, if I were to retire, let's say November 15, versus you retiring November 30, both of us are going to get our first retirement check for the month of December. But you would have gotten paid for the whole month in November, because you stayed on board until the end of the month. So sometimes it's nice to have that paycheck continue until the very last minute, and then your retirement benefits starts the next day. So the end of the month has always been a good time for FERS employees, especially those with a lot of service, where their retirement benefits going to be in the 1000s of dollars a month.

Ross Gianfortune 
Let's sort of talk about the reverse of that. What are the kind of common mistakes? What are some of the bad dates? What are you sort of see with people that you talk to where they have some trouble on a date side of things?

Tammy Flanagan
Yeah, I think the biggest problem that I find with people when they're planning to retire is retiring before they've gotten everything squared away. And what I mean by that is, let's say that you have served in the military, and you want that military service to count towards your federal civilian retirement, which is going to require you to make a military service deposit. Well, some people will wait till the last minute to start processing that payment. And sometimes it's not quite done, when they're ready to walk out the door. And if there's an issue with that, or if there's anything that's going to cause a delay, you don't want to retire before that's all completed. Or you might have a situation where you move from one agency to another. And maybe some of the records of that prior service didn't follow you to your current employer will make sure you have a clear history of your federal career. Because if you don't have it, then your agency doesn't have it, that's a sure sign that you're going to have the problem when it gets to OPM because your agencies not gonna be able to send them that complete career history. So make sure you really understand what you're entitled to. It's all been documented, you got that final retirement estimate, it looks good. It's enough for you to live on, when combined with either your second career or your social security and your TSP. So don't be in a hurry to retire before you feel that you're both financially as well as mentally ready. You know, I see a lot of people who want to jump off the ledge because they had a bad day or because of the pandemic and they got used to teleworking and don't want to come back to the office. You know, give it six months before you make that kind of a decision that you hadn't been planning on for for quite some time. Because retirement is one of those life events that's really life changing, right? It's a big, one of the big ones in your lifetime.

Ross Gianfortune  
Well, to that end, do you see a lot of people who don't take it seriously enough who do kind of as to use your example, have a bad day, don't want to go back to the office? Did they just snap decision on some of this stuff?

Tammy Flanagan
There's there are some folks in fact, most folks I should say do plan ahead. You know, they try to do what's right they try to make the proper plans stick with the plan and, and kind of follow an outline of here's here's what I had planned to do on this date and then the next date. However, you'll find some folks who just don't have the understanding of how these benefits work together what to expect as far as withholdings from your payment, the only thing they're going on is the fact that I'm old enough to retire, I have enough service to retire. And so I'm leaving. And with a wing and a prayer, I'm hoping that is going to be enough money to pay my bills, and I'm not going to have to sell the house or move in with my kids. So it's not hard to figure out what you're entitled to. But you have to sometimes seek it out, you know, someone's not always going to come to you and say, Hey, let's sit down and talk for two hours about your retirement, you may have to have a list of questions, you may have to do some research on your own. But the answers are out there, you can find the answers to your questions. And be careful of who's providing the answers. Because if it's a salesman who's selling you life insurance, you might get a different answer than if you talk to an HR person who's trying to help you understand the difference between a survivor benefit, and an insurance policy. So I know there's a lot of pitfalls. And there's a lot of things along the way that can trip you up. So take your time, and do the research and talk to people who are experts in that field. You know, don't talk to a painter if you need a plumber. Right?

Ross Gianfortune   
Yeah, I know that certainly in talking with, you know, relatives of mine in the retirement age bracket, you know, the the preparation part of it, some public servants. So I'm not. That is so incredibly, incredibly key. We're in this inflation time, there's this sort of threat of a recession. Should people be wary of retiring during a time of uncertainty economically?

Tammy Flanagan
Yeah, I think it's a tough time to retire, actually, because number one, we are in this high inflationary time. And I get questions every day from people who want to leave this year. And they're saying, When do I have to go by in order to get the eight point was a point 7% Cola that's coming in January, is too late, you know that that cola is for people who have been retired for a whole year. You know, a COLA is so important for longevity protection. So you don't care if you get a cola, the first year you retire, you want to call it every year for the next three decades. And that's going to protect and preserve the buying power of your retirement. So that cola planning is not necessarily something you're going to plan, the best date to retire around. But you want to retire, make sure that there is a cola, and make sure you understand that with FERS, there's not a cola until you're 62. So I've gotten a lot of calls from people who left at 57, saying, where's my cola? Well, you're not going to get one for five more years. And that comes as a surprise. And again, lack of planning, you have to understand how these benefits work. And also the fact I guess with FERS, there's what we've come to call a diet cola, you know, if the cost of living has gone up, based on the CPI by 8.7%, the FERS retirement system was set up that it's if it goes up higher than three, you get 1% Less so you get this diet cola, which over time over decades, is going to reduce your buying power, which means you need to have adequate savings to compensate.

Ross Gianfortune  
Just because we're coming up on Open Season, I know everyone's going to be thinking about it. Which will be will be for Be on the lookout for I know you recently had a column on our site about it. So I'd be you know, silly to not ask you about it. So what should What should people keep their eyes out for as Open Season your purchase?

Tammy Flanagan

I think I'm the only person on the planet who looks forward to open season for some reason I like it because it's something different. Your prices change and benefits change, it's a little chance for me to put some puzzle pieces together. But what I think people should do during Open Season if nothing else, like the bare minimum would be to look at your current health plan. And every year your health plan puts out a brochure and you'll find the 2023 brochures probably already published on your plans website. On the front cover, it's going to say here's how we change here's our new premiums, you know, check this page out for any changes and read that because some of the plans are going up you know more than the average of whatever it is 8.6% or 7.6%. Some are going up 20% Some are actually going down. So check the price of your plan check the deductible check the catastrophic limit and look at your family history. Look at what's happening is somebody now have a chronic illness is somebody looking for knee replacement surgery next year. You know what's going on with your health and the health of your family because that might direct you to the best health plan for what you need. You know, for example, I have a friend who actually needs a heart transplant in the plan that he's in, uses a Transplant Center in Cleveland to Ohio and he lives in Pittsburgh, Pennsylvania. So we found him another plan where the transplant centers right there in Pittsburgh that has wonderful hospitals for that type of surgery. So, you know, look at the things that you need you the answers that are there, either on the Plan website or in the plan brochure. It's worth it to take that time because who else has chosen a chance to choose between 20 or 30 different health plan choices you know, in most, most cases, it's Take it or leave it but for federal employees and retirees you have an opportunity every year to design a plan that's best for you and your family and find a price that works for your budget.

Ross Gianfortune  
Homework, homework homework, we gotta get people doing their homework preparation. Again, preparation is worth so much on all of these things, but certainly when it comes to your financial future, pre and post retirement Tammy, thanks so much for being on the show with us.

Tammy Flanagan
Thanks, Ross. Thanks for the opportunity.

Ross Gianfortune
Thanks for listening to GovExec Daily. Our show was produced by Adam Butler and hosted by me, Ross Gianfortune. We want to thank Tammy Flanagan for joining the program. Our music is the song “Signals” by Catfish Dancing. Be sure to rate, review and subscribe on Apple Podcasts or Google Podcasts or wherever you get your podcasts.  You can email us any feedback at podcast @ govexec.com or hit us on Twitter @ Govexec. 

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