Retiring at the end of 2026: FERS start date, annual leave payout, COLA and first payment

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Last updated November 2, 2026

Published November 2, 2026 · By the OnPAR Federal Retirement Education editorial team · Last reviewed Nov 2026

Short answer: If you're retiring at the end of 2026 under FERS and separate on Thursday, December 31, 2026, your annuity starts January 1, 2027, the first day of the month after you separate (5 CFR 842.204). January's annuity is paid on the first business day of February, Monday, February 1, 2027 (OPM). Because the 2026 leave year doesn't end until January 9, 2027, your "use or lose" annual leave hasn't been forfeited yet on December 31, so it's included in your lump-sum leave payout (OPM).

What changes if you retire at year-end

Late December is a popular retirement date, and the rules line up in a specific way this year:

Annuity start date. For an immediate voluntary FERS retirement, the annuity begins on the first day of the month after separation. Separating on December 31, 2026 means a January 1, 2027 start. Separating on December 1 would also mean a January 1 start, so the last weeks of December give you extra salary without delaying your annuity (5 CFR 842.204(b)).
Leave year. OPM's 2026 leave year runs January 11, 2026 to January 9, 2027. The deadline to schedule "use or lose" annual leave in writing is November 28, 2026 (OPM leave year dates).
2027 pay. The President's alternative pay plan says 2027 base pay and locality pay for civilian employees will not change from 2026 rates (H. Doc. 119-189). Under that plan, working into January 2027 doesn't add a raise to your High-3. Congress could still change 2027 pay. See the 2027 pay raise and your High-3.
Open Season. FEHB, PSHB and FEDVIP Open Season runs November 9 to December 14, 2026 for plan year 2027 (OPM Open Season). You make this choice while you're still an employee.

Who it affects

FERS employees with an immediate retirement (MRA+30, 60 with 20, 62 with 5, or MRA+10) planning to leave in November or December 2026.
Anyone with more than 240 hours of annual leave. Most employees can carry over 240 hours. Leave above your ceiling is "use or lose" (OPM).
Not covered here: CSRS, disability retirement, postponed MRA+10, and early-out or discontinued service retirements. Some of these have different start-date rules. Ask your HR office.

Annual leave: why December 31 matters

OPM says your lump-sum payment covers all accumulated and accrued annual leave, including use-or-lose leave that hasn't been forfeited yet. OPM's own example: someone with 288 hours who separated just before the end of the leave year was paid for all 288 hours. If they had separated after the leave year ended, the 48 hours over the 240-hour ceiling would have been forfeited (OPM lump-sum fact sheet).

A few more OPM points:

The payout equals what you'd have been paid if you stayed on the rolls using up that leave. If a general pay adjustment takes effect during that period, the payment must reflect it.
Unused sick leave isn't paid out. Under FERS it can add to your service credit instead. See sick leave credit.
The lump sum isn't in your final paycheck, and it can take several months while your agency audits your leave. Keep your final leave and earnings statement and ask for your SF-1150.
If you return to federal service before the lump-sum period ends, you'll have to repay part of it.

Worked example

Illustration only, using OPM's formulas. Your HR office and OPM compute your actual figures.

Pat is 62, has 25 years of FERS service and a High-3 of $95,000, earns $100,000 a year in basic pay plus locality, and has 280 hours of annual leave on December 31, 2026.

Item	How it's figured	Result
Annual pension	1.1% x 25 years x $95,000 (62+ with 20+ years)	$26,125 a year
Monthly pension	$26,125 / 12	about $2,177, before survivor reduction and deductions
Annuity start	First day of the month after a Dec 31 separation	January 1, 2027
First regular payment date	January annuity, paid first business day of the next month	February 1, 2027
Hourly rate	$100,000 / 2,087 hours	about $47.92
Leave payout	280 hours x $47.92	about $13,416
If Pat separated after Jan 9, 2027 instead	40 hours over the 240-hour ceiling forfeited if unused	about $1,917 less

Sources: OPM FERS computation for the 1% and 1.1% formulas, and 5 U.S.C. 5504 for the 2,087-hour divisor.

Your first COLA

FERS COLAs generally start at age 62. Special-provision, disability and survivor annuitants are exceptions (OPM). Your first COLA is prorated one-twelfth for each month you received benefits before it takes effect on December 1 (OPM COLA).

Based on that rule, an annuity that starts January 1, 2027 would get 11/12 of the COLA effective December 1, 2027. An annuity that started in December 2026 would get the full amount. The December 2027 COLA rate hasn't been announced yet. For how this year's 2.6% is prorated, see prorated COLA 2027.

Getting your first payment fast

OPM says it is committed to issuing your first pension payment within seven days of retirement if you submit a complete retirement package by your separation date (OPM). Until your case is finished, OPM usually pays "interim" payments, which are part of your final benefit. Health and life insurance continue during interim pay (OPM). Details: your first FERS payment and the online application.

Health coverage: use Open Season before you go

To keep FEHB in retirement, you generally need to be enrolled in any FEHB plan for the 5 years right before your annuity starts (OPM eligibility). Switching plans at Open Season doesn't break that. After you retire, you can change plans only at Open Season or with a qualifying life event, not just because you retired (OPM). See the FEHB Open Season checklist for retirees.

TSP: the age-55 rule

The IRS says the 10% early-withdrawal tax doesn't apply to distributions from a plan like the TSP if you separate from service in or after the year you reach age 55 (IRS Publication 575). If you turn 55 at any point in 2026, separating on December 31, 2026 counts. If you separate in 2026 before the year you turn 55, it doesn't. See how your FERS pension and TSP are taxed.

Next steps

1. Confirm your eligibility and run your numbers with our FERS retirement calculator, pension calculator and MRA calculator.

2. Check your annual leave balance now. If you'll be over 240 hours and aren't retiring before January 9, 2027, schedule the extra leave in writing by November 28, 2026.

3. Review your FEHB or PSHB plan between November 9 and December 14, 2026.

4. Ask HR for an annuity estimate and start your online retirement application early. Use our retirement countdown and FERS retirement checklist.

5. Questions? Book a free call.

Sources

Questions and answers

If I retire on December 31, 2026, when does my FERS annuity start?

For an immediate voluntary FERS retirement, the annuity starts on the first day of the month after separation (5 CFR 842.204), so January 1, 2027. OPM pays each month's annuity on the first business day of the next month, which is February 1, 2027 for January.

Do I get paid for use-or-lose annual leave if I retire December 31, 2026?

Yes. OPM says the lump-sum payment includes use-or-lose leave that has not yet been forfeited. The 2026 leave year ends January 9, 2027, so on December 31 that leave has not been forfeited.

When is the deadline to schedule use-or-lose leave in 2026?

OPM lists November 28, 2026 as the deadline to schedule use-or-lose annual leave in writing for the leave year that ends January 9, 2027.

Is unused sick leave paid out when I retire?

No. OPM says the lump-sum payment covers unused annual leave only, not sick leave. Under FERS, unused sick leave can be added to your service credit.

Will I get a COLA in my first year if I retire at the end of 2026?

Regular FERS retirees get COLAs only from age 62. OPM prorates the first COLA by one-twelfth for each month you received benefits before it takes effect on December 1, so an annuity starting January 1, 2027 would get 11/12 of the COLA effective December 1, 2027.

Can I avoid the 10% penalty on TSP withdrawals if I retire at 55 in 2026?

The IRS says the 10% additional tax does not apply to distributions after you separate from service in or after the year you reach age 55.