Full-time federal employees have many valuable benefits, including annual leave and sick leave. When strategically coordinated, they can result in a financial boost for your retirement.
Annual Leave – The Basics
The amount of annual leave you accrue as a federal employee increases with your years of service.
Less than 3 years = 104 hours or 13 days/year
3 years but less than 15 years = 160 hours or 20 days/year
15 years or more = 208 hours or 26 days/year
You are allowed to carry over a maximum of 240 unused accrued annual leave hours per year. Upon retirement or separation, any unused accrued annual leave will be paid to you in a lump sum.
Sick Leave – The Basics
Sick leave is accumulated at the same rate regardless of your years of service – 104 hours per year. There is no limit on how much sick leave you can carry over. For a voluntary retirement, sick leave cannot be used to reach your required creditable service, but it is used to calculate your creditable service for your annuity. If you separate from service, you won’t be reimbursed for unused sick leave, but it will be reinstated should you get reemployed by the government.
Strategic Use
Optimizing the use of your accrued leave prior to retirement can make a big impact. Remember that the most annual leave you can carry over is 240 hours, anything over that amount will be lost. Assuming you take two weeks off for vacation per year, it won’t take long to reach the limit, especially in the latter stages of your career when you’re getting 208 hours per year. This is when you should consider using annual leave instead of sick days.
There is no cap on how much sick leave you can accumulate. Over the course of a 30-year career, an employee who never took a sick day could accumulate enough hours to add 1.5 years to their annuity computation. Plus, OPM has made it clear that credit for unused sick leave can get you to the 1.1% annuity multiplier available to employees retiring at age 62 or older with at least 20 years of service.
Sacrificing your annual leave could mean a lower lump sum payment, but the boosted amount of your annuity payments might more than make up for that over time. Plus, don’t forget that your lump sum payout for unused annual leave is subject to taxes, and, depending on your income level and location, that could result in the government taking as much as 40%.
For more information on maximizing your benefits, reach out to a specially trained Federal Retirement Consultant®.
