If you’re a federal employee preparing to retire, you might be wondering what happens to all the sick leave and annual leave you’ve built up over the years.
Will you lose it?
Will it get paid out?
Can it boost your pension?
Here’s what you need to know — and how we help you make the most of it.
This one surprises a lot of people: while you won’t get paid for your unused sick leave, it does count toward your creditable service in your pension calculation — but only if you’re retiring under an immediate annuity (not MRA+10 or deferred).
That means:
- 2087 hours of unused sick leave = 1 additional year of service
- If you have 1,043 hours, that would count as 6 extra months
This extra time is added to your total years and months of service for pension purposes — which can slightly increase your FERS annuity.
Example:
If you had 29 years and 8 months of service, and 960 hours of sick leave, you’d cross the 30-year mark — which could impact your eligibility for the FERS Supplement and your final pension calculation.
We help you calculate your sick leave conversion and apply it correctly in your retirement estimate.
Your Unused Annual Leave Is Paid Out as a Lump Sum
Unlike sick leave, annual leave is paid out in a lump sum after you retire.
Here’s what that means:
- The payout is based on your hourly rate at the time of separation, including locality pay
- If you retire just before a federal pay raise, you won’t benefit from the higher rate
- The more hours you’ve accrued (up to your agency’s cap), the larger the payout
Example:
Let’s say you retire with 300 hours of annual leave and your hourly rate is $50. That’s a $15,000 lump sum check, typically paid 4–6 weeks after retirement.
We help you time your retirement date strategically to maximize this payout and align it with your tax planning.
Retirement Timing Matters
If you retire mid-month, your leave balance stops accruing on your separation date. Retiring at the end of a pay period can help you squeeze in that last accrual and potentially a little extra in your final check.
We help you:
- Pick the right retirement date based on leave and payroll timing
- Coordinate with your agency’s payroll department to confirm your balances
- Understand how your payout will affect your income and taxes that year
How We Help You Maximize Your Leave Benefits
During your retirement consultation, we walk through:
- Your most recent leave and earnings statement
- Calculating your projected sick leave conversion
- Estimating your annual leave lump sum
- Timing strategies to maximize value and avoid surprises
You’ve earned every hour — we’ll make sure you get every dollar and day of credit you deserve.
Schedule Your Complimentary Retirement Session Today
We’ll help you break it all down, step by step — including your pension estimate, TSP strategy, life insurance, and more.
Book at: https://retire.independencebenefits.com/consultation
Or call us at 256-443-9964
