If you are not financially ready to retire when you reach eligibility to retire, a common response is to continue working longer. Last week we looked at the impact on one of the two factors that go into a retirement benefit calculation, your high-3. Now, let’s turn to the other, length of service.
Each year you continue to work will add a year of service to your retirement calculation; additional months are prorated.
If you are retiring under CSRS, each year of service (beyond the initial 10) is worth 2 percent of your high-3, each month 1/6th of 1 percent.
If you are retiring under FERS, each year of service is worth 1 percent of your high-3, each month 1/12 of 1 percent. If you retire at age 62 or later with at least 20 years of service, the multiplier for a year is 1.1 percent, each month 1/12 of 1.1 percent.
That’s the straightforward part. More complicated is the value of accumulating more sick leave. Full-time employees get 13 days of sick leave a year with no limit on how much you can carry from year to year. Any amount you earn but don’t use as you work longer will be added to what may be a substantial amount already to your credit.
I’ve said it before and I’ll say it again: Sick leave is the gift that keeps on giving. Not only can you use it when you’re under the weather but you can also use it for such things as childbirth, adoption, absence for funerals, family care, and bereavement. Good as those benefits are, I don’t think anything can compare with what happens when you retire, when unused hours of sick leave are credited to you as service time. Let me explain how.
When you retire, any unused sick leave hours will be converted into retirement months. By law, 2,087 hours equals one year of service. For retirement purposes, all days are 5.797+ hours long. That number is derived by dividing 2,087 – the total hours of work in a year – by 360. That last number is used because annuity payments are based on 12 30-day months.
Any hours of actual service beyond the last full month also will be converted into retirement hours in that way and will be added to the unused sick leave. Any days beyond the last full month are dropped. (Note: Unused annual leave is not credited as time served but rather is paid to you as if you had continued working for that time.)
Note: If you are a FERS employee who will have a CSRS component in your annuity, any sick leave hours up to the maximum number you had when you transferred to FERS will be credited to your CSRS annuity. Any sick leave hours above that amount will be credited to your FERS annuity.
To be eligible to retire you have to meet the age and service requirements I spelled out last week. Unused sick leave can’t be added to your actual service to make you eligible to retire. It can only be used to increase your annuity once you have met the eligibility requirements.
FYI: If you leave government before you are eligible to retire and later apply for a deferred annuity, you won’t get any credit for your unused sick leave. However, you can have your sick leave balance restored if you are rehired by the government.