First Year of Retirement ; image: smiling older man
  • Taking a glance at the first year of your federal retirement.
  • What happens in the first four weeks after you’ve officially retired?
  • Six month to nine months after retiring, we explain what to be aware of.

At the end of the year, there is a large spike in federal workers retiring when compared to the rest of the year. As such, this piece explores how a federal employee can expect their first year of retirement from the government to go.

Retirement Date

Picking what day you declare your retirement can be crucial, especially for feds who have decades of service under their belt when exiting their federal post. The reason for this revolves around the accumulation of annual leave and the lump sum disbursement that is paid for unused annual leave. (This is also why there is a large uptick in incoming retirement applications on the last day of every year.)

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Once you’ve said your goodbyes, left your keys and such with the HR department, they will send your retirement packet off to iron mountain to be processed. Congratulations! You’re on your way.

Approximately 2 Weeks after Retirement Date

This is when you receive the check for your unused annual leave. The payment is generally taxed as ordinary income and subject to a 20% federal tax withholding. Your old HR department should be able to provide an estimate of this dollar amount, which is based on how much annual leave over the course of one’s federal career.

Approximately 3 – 4 Weeks after OPM has Received the Application Packet

The first annuity payment is issued from FERS or CSRS. This is an ‘interim payment’ that disburses a reduced estimated amount of what is due to the annuitant, typically 60-70% what the monthly income deposit will actually be. This cash shortage creates a critical need for savings to tap into during the months that interim deposits are issued. In November of 2023, the average processing time for retirement claims was 39 days for packets that were error-free. For claims that were submitted with errors, the processing time shot up to 119 days. So ensuring your retirement packet is prepared properly directly impacts the length of your FERS or CSRS income’s interim status.

It is also important to remember that state income taxes, dental and vision premiums, and FLTCIP premiums have to all be paid out-of-pocket and is the new retiree’s responsibility. Once OPM has fully processed the retirement packet, these costs can be elected to be deducted directly from one’s FERS or CSRS payments.

Regarding the withdrawal of TSP savings, it is important to have a sturdy financial plan. There are stringent rules that apply to the TSP that are not an issue with other employer-sponsored plans like 401ks or IRAs. Therefore, it is important that if a federal employee is working with a financial planner, that this professional is acutely aware of the intricacies involved when withdrawing money from the TSP. (You can schedule an appointment with a fed-focused advisor here.)

Once interim payments are received, and retirement documents are still pending with OPM retirement services, there will most likely be minimal communication from OPM. One thing federal retirees have to adjust to in this time is going from a bi-weekly paycheck to a monthly pension deposit, but this transition can be painless with a proper plan.

Approximately 3 – 9 Months after Retirement Date

OPM should have processed your retirement application by now. You will receive a personalized statement entitled “Your Federal Retirement Benefits.” This statement confirms the payment amount and details individual elections, including the amounts to be deducted from each monthly payment for taxes, health insurance, and other items as applicable. It also provides information that will be needed to prepare your tax returns.


Until Next Time,

Benefits Ben, STWS

**Written by Benjamin Derge, Financial Planner, ChFEBC℠ The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.

First Year of Retirement ; image: smiling older man

Ready to Retire? The First Year of Retirement from Federal Service