TSP Considerations for Picking a Retirement Date (2024)

FAQs

TSP Considerations for Picking a Retirement Date? ›

To maximize the retirement benefit, employees may decide to retire on their birthday or a subsequent birthday quarter to increase their benefit factor. If planning to retire at the beginning of a calendar year, consider the cost-of-living allowance (COLA) when choosing a retirement date.

To maximize the retirement benefit, employees may decide to retire on their birthday or a subsequent birthday quarter to increase their benefit factor. If planning to retire at the beginning of a calendar year, consider the cost-of-living allowance (COLA) when choosing a retirement date.

The last day of the month is a preferred date to retire from federal service because the first FERS or CSRS pension payment starts on the first day of the first month after the month in which a federal employee retires, resulting in the initial interim pension check the following month.

As a general rule, the end of the month is good for those with pensions, as those often start on the first day of the month after retirement. In this scenario, retiring on the 31st means that you won't have a gap in pay.

If you retire on December 31, 2023, your COLA would be based on the CPI for 2024, and you would receive your first COLA May 1, 2025. If you retire instead on January 1, 2024, that single day's difference can delay the first eligibility by up to one year and you wouldn't receive your first COLA until May 1, 2026.

A member who retires on December 31st may receive their COLA one year earlier than someone who retires on January 1st of the following year.

Dec. 31 is a popular date to retire because you can start the new year in a new tax profile as a retiree. It also helps you with the annual leave that you will receive at the end of the year.

You must work at least 5 years with the Federal Government before you are eligible for a FERS Federal Pension, and for every year you work, you will be eligible for at least 1% of your High-3 Average Salary History.

Your “high-3” average pay is the highest average basic pay you earned during any 3 consecutive years of service. These three years are usually your final three years of service, but can be an earlier period, if your basic pay was higher during that period. Your basic pay is the basic salary you earn for your position.

Does retirement date matter? ›

The specific date on which you start your retirement could impact several different factors that affect your retirement finances. These include benefits from your former employer, Social Security distributions, and taxes, to name a few.

What is the 3% rule in retirement? The 3% rule in retirement says you can withdraw 3% of your retirement savings a year and avoid running out of money. Historically, retirement planners recommended withdrawing 4% per year (the 4% rule).

Normal Pension Age (NPA)

If you take your pension at your NPA, your last day of service is the day before that date. Your benefits are paid from your birthday.

The time of year you choose to retire can potentially have a big impact on your retirement income and the taxes you owe. Ultimately, the best time of year to retire will depend on your individual circ*mstances, but you should consider some key things before making your decision.

No-Go Retirement Years

It might be difficult to think about a time when you will slow down dramatically, perhaps even requiring help from family, friends or healthcare providers. If you're fortunate, this won't happen until you are well into your 80s or 90s.

The 3% rule in retirement says you can withdraw 3% of your retirement savings a year and avoid running out of money. Historically, retirement planners recommended withdrawing 4% per year (the 4% rule). However, 3% is now considered a better target due to inflation, lower portfolio yields, and longer lifespans.