Question: I’m trying to decide on a retirement date. Should I go out before the end of the year to capture the COLA?
Answer: There always is a surge of federal employee retirements around the turn of the year. Often this is for personal reasons — starting both retirement and a new year together — but there can be financial advantages, too.
One of them is that the value of unused annual leave (vacation) is paid as if the individual were still employed, including a boost for time after a January raise is paid. And the general 30-day limit on carrying such leave forward doesn’t apply to cashing it out in a retirement before the end of a leave year (Jan. 6, in this case).
However, “capturing” an upcoming cost-of-living adjustment is not a reason to retire before year’s end. While most federal retirees will receive a 2 percent COLA in January, it is prorated by how many months they have been retired, if less than a full year.
And if you’re retiring under the Federal Employees Retirement System under age 62, you won’t get any COLA unless you were in an occupation that requires earlier retirement, or were disabled.