The Interim Period
What's wrong with my pension?
- June 11, 2020
- 2:06 PM
Written By: Joseph Polakovic
An often overlooked part of retirement planning is the interim period that exists between the Federal Employees’ retirement date and the date they receive their first full pension check. Most people are surprised when they learn of this.
Choosing A Retirement Day
If you’re planning ahead and request a pension estimate online or from your Human Resources department, you will notice that all the reports subtly train you to retire on the 1st of the month. Ignore this! The day you choose to retire is a big deal and should always be on the last day of the month (for FERS employees), learn more about why here. It maximizes payout and minimizes the time in-between paychecks. If you retire at the end of the month you’ll typically receive your first pension check around 31 days later, but that pension check might be significantly less than what you were expecting.
Once you’re retired, you’ll find that the government is going to drag their feet in getting you your full benefit. In fact, most retirees will only receive around half of their expected benefit for the first 3-5 months, not including the one month you’ll wait for the first check to even arrive. During this time, the Office of Personnel Management will withhold part of your pay while they verify that everything in your retirement packet is accurate. If you don’t account for this, then you could end up in trouble right out of the gate. On top of the reduction in your pension payment, if you’re under the age of 62 and are eligible for the FERS Special Supplement you won’t receive the supplement at all during this interim period. It’s important to note that this will all be back paid eventually and then your checks will normalize.
Plan Ahead!
- Retire on the last day of the month to shorten the interim period
- Develop a plan to have some additional liquidity to start retirement. Selling back annual leave can be helpful here! Read our article here on annual leave strategy
- Know what your benefits are to ensure no mistakes are being made with your pension
Understanding this nuance is all part of proper planning. To ensure your retirement starts off smoothly make sure you get all the relevant information. For any questions or assistance please schedule a free consultation below or send us an email at info@castlewestfinancial.com.
