Taking Your Leave


Sep 29, 2016

 


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#40417 Sep 29, 2016

Best Dates to Retire: Taking Your LeaveBy Tammy Flanagan3:00 PM ETLast week, I presented my annual calendar showing the best dates to retirein 2017. I noted that there are a lot of different factors to considerin settling on a date, and the best days aren.t necessarily the same forall employees.One of the most significant considerations is how much annual leaveyou have accrued and what you can be paid for it. Let.s look at a coupleof examples.Stockpiling LeaveDan plans to retire on Dec. 31, 2017. He will carry over 240 hours ofannual leave on Jan. 8, 2017 (the maximum he is allowed to keep in hisaccount at the beginning of the leave year).Throughout his final year of employment, Dan plans to save the annualleave that he earns each pay period. If he retires on Dec. 31, 2017, hewill accrue 25 leave accruals. He earns 8 hours per leave period, sothat will be an additional 200 hours of leave plus the 240 hours that hehad at the beginning of the year.If Dan doesn.t use any annual leave during 2017, he will be paid for440 hours of unused annual leave. If his annual pay rate is $73,045,then his hourly pay rate is $35 per hour. Dan.s annual leave paymentwill be worth $35 x 440 = $15,400.This payment may be subject to federal, state, Social Security andMedicare tax withholding. The lump sum annual leave payment is notsubject to withholding for insurance premiums, Thrift Savings Plancontributions, or Civil Service Retirement System or Federal EmployeesRetirement System deductions.Close CallDebbie is planning to retire on Jan. 7, 2017. She will be paid hersalary through close of business on Friday, Jan. 6. She also will bepaid for all of her accumulated and accrued annual leave, even if herbalance exceeds 240 hours. Debbie has 20 years of federal service and isretiring at age 62.Her FERS retirement benefit will be computed as follows: 20 x 1.1% x $65,000 (her high-three average salary) = $14,300 $14,300 / 12 = $1,191 per month Her salary is $61,750 per year or $29.58 per hour

Debbie will have a balance of 300 hours of annual leave on Jan. 7,2017, for a lump sum payment of $8,874 (subject to federal, state,Social Security and Medicare tax withholding). She will also be paid hersalary through close of business Jan. 6, which includes the Jan. 2holiday. That will be a gross salary payment of $1,183 for her finalfive days of employment ($29.58 x 40 hours).Debbie will make an additional contribution to her TSP account of 100percent of the $1,183 salary (minus the required withholding forretirement and insurance). In addition, she accrued an additional eighthours of annual leave, which was worth $236.64 ($29.58 x 8).If Debbie retired on Dec. 31, 2016, she would be eligible for theJanuary FERS retirement benefit. But she would forfeit that benefit bywaiting until Jan. 7, 2017 to retire. As long as she has 20 years ofservice on Dec. 31, it may be just as well to retire on Dec. 31 andenjoy an additional week of retirement.Debbie traded a month of retirement benefits ($1,191) for a week ofsalary ($1,183) and an additional accrual of annual leave ($236.64). Shecame out slightly ahead, especially since she was able to put moremoney in her TSP account. But it was a close call.Photo: Bureau of Land Management Oregon and Washington, via Flickr

By Tammy Flanagan3:00 PM ETBest Dates to Retire: Taking Your Leave

Best Dates to Retire: Taking Your Leave Accrual of annual leave is an important factor to consider in deciding when to move on.



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