As a FERS participant retiring with an immediate annuity it’s important to understand you will not get your first pension check immediately. If your retirement application is not particularly complicated, you may get your first full annuity check in five to six weeks.
If the OPM finds any incorrect or missing information on your application, it can take six months or longer to complete processing your retirement. Add to this, OPM often experiences a backlog of retirement applications during the end of the calendar year.
After Your Last Paycheck, You’ll Be Put Into Interim Pay Status
As you wait for the OPM to complete processing your application, you’ll receive an interim retirement payment. These payments are approximately 80% of your full net annuity and, if you’re lucky, you’ll start receiving interim payments four weeks after you retire. In reality, it usually takes longer.
While you’re in interim pay status, the OPM will withhold funds for federal income tax. Your FEHB and FEGLI premiums will not be withheld while you’re receiving interim pay but your coverage will continue. Once the processing of your application is complete, the OPM will begin withholding for these premiums retroactive to the start date of your annuity.
How To Prepare For The FERS Annuity Delay
Ideally, during your working years, you’ve set up emergency savings as part of your overall retirement plan. Savings accounts offer easy-to-access funds you can use to cover expenses while you wait. If you retire in the year you turn age 55 or older, you can take a distribution from your Thrift Savings Plan (TSP). Remember – withdrawals from your traditional TSP balance are subject to federal income tax.
“Your annual leave lump sum can help cover expenses as you wait for your full annuity payments.”
Another Option: Your Annual Leave Lump Sum Payment
If you manage your accrued annual leave strategically, you can maximize the lump sum payment you receive at retirement. Your annual leave lump sum can help cover expenses as you wait for your full annuity payments. As long as you retire before the new leave year begins, you won’t lose the annual leave that’s above your “carry over” limit. Since some agency payroll systems use a different pay period schedule, contact your agency to verify the beginning and ending dates of a particular leave year.
Plan For The Delay During Your Working Years
Even in the best case scenario, you’ll have to use other sources of income to cover expenses until your interim annuity payments start. If you haven’t planned for the delay, you may be unprepared for an income gap in the first few months of your retirement.
