Unused sick leave you have to your credit will be added to your actual service and used to increase the amount of your annuity. Image: everydayplus/Shutterstock.com
By: FEDweek StaffLet’s look at how to pick a retirement date that increases the dollar value of your annuity.
Your annuity computation will be based on a formula set in law, plus two variables: your highest three consecutive years (actually 36 months) of basic pay (your high-3) and your years of service.
If you are like most federal employees, your high-3 will get higher the longer you work. That will happen through step increases, annual pay raises, and promotions. If you are like most employees who are eligible to retire, you’ll do that when you’ve come as close as possible to spending a full year at your highest pay level. That’s usually around the end of a calendar year, since annual pay increases take effect with the first full pay period of January.
Another factor in picking a date to retire is the value of your annual leave. When you retire, you’ll receive a lump-sum payment for any annual leave you haven’t used. As long as you retire before the end of the leave year, you’ll be paid for every one of those hours you have to your credit, even if they exceed the amount you can carry over from one year to the next. (For most employees, the maximum carryover is 240 hours).
Further, the value of that annual leave will be projected forward and paid at the higher hourly rate in effect when the new pay raise (fingers crossed – although so far in 2025 no raise has been proposed for 2026) goes into effect sometime in January.
Finally, there’s sick leave. Once you’ve met the age and service requirements to retire, any unused sick leave you have to your credit will be added to your actual service and used to increase the amount of your annuity. The more you have, the greater its effect will be.
To illustrate: 174 hours of sick leave will increase your service time by one month, 348 by two months, 1,044 by six months, and 2,081 by one year.
If you have more than 2,081 hours, the same increases will be added on to that number to get you credit for more than a year. That’s why sick leave the gift that keeps on giving.
Using the above information you’ll be able to pick a retirement date that both meets your needs and improves the dollar value of your retirement.
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See also
The Gift of Annual Leave for Federal Employees
Alternative Federal Retirement Options; With Chart
Primer: Early out, buyout, reduction in force (RIF)
Retention Standing, ‘Bump and Retreat’ and More: Report Outlines RIF Process
