Feds, here’s how to add an extra year of federal retirement service!

2087 hours of accumulated sick leave equals one additional year of service without staying a year longer.

• You can add an extra year to your federal retirement without working longer.

• This can boost your retirement income by thousands.

• You can get there faster by strategically using your sick AND annual leave.

• We can show you how.

In my January Jump article, I promised to return with more real steps that you can take to enhance your retirement outlook. To that end, I'd like to discuss the power of a coordinated leave strategy.

Or how to get an extra year of service to your federal retirement WITHOUT getting one year older or staying one year longer.

We call this the Enriched Leave Strategy (ELS) for career feds. This is a longer read so please stay with me. It will be worth it!

For our purposes, we will discuss sick leave and annual leave. Additionally, we will examine annual leave carryover rules for non-SES federal employees. These strategies will help CSRS and FERS retirees.

Here is a flyover of some of the basics.

Annual leave accumulates at an increasing rate over your federal career, ranging from four hours per pay period in your first three years to when the formula tops out after fifteen years of service at eight hours per PP. Contrastingly, sick leave accumulates at a steady rate of four hours per pay period.

Annual leave allows for a fixed maximum number of hours to " carry over" from one year to the next, while sick leave has no such cap.

For this article, I would like you to think of your annual and sick leave as pools of money.

For this example, we will use a fictitious Sample Fed (SF) with a salary assumption of $80,000. This translates to an hourly rate of approximately $38.46.

So, if SF is a full-time career fed, SF will accumulate annual leave worth $153.84 and sick leave worth $153.84 every pay period. Let's further compound those numbers over the year, leading to an annual and sick leave value of $3,999.84. (Note that this is for the first year of employment only.) I offer this exercise to help bring a tangible economic value to the various types of time off.

Here is another wrinkle: these dollars can increase in value over time.

Let's assume that our Sample Fed (SF) never got a promotion or merit raise over their career. (It is unlikely but go with me on this.) Let's assume that SF received an average pay increase of 2% per year over a 30-year career. This would increase SF's salary to over $144,000 per year. This means that the value of SF annual and sick leave figures would grow to $276.92 per pay and $7,200 per year.

(Remember, this comparison only uses year-one figures, and annual leave accumulation increases with time.)

Saved leave is not static. Its value grows as your career grows! It's real money!!! And the best time to build up to the hours for buyback in retirement is as early as possible in your career. (Save low, sell high)

Now, let's return to the annual leave carryover rules—the maximum unused annual leave to be carried over until retirement is 240 hours. So, if SF has a final year salary of 144,000 and will receive a payment at retirement for the unused annual leave, that payment will be over $16,000.

Next, we turn our focus to sick leave. Accumulating sick leave throughout SF's career does not offer the opportunity for a lump sum payout at retirement. It neither features a maximum nor cap on how many unused hours can be carried over yearly.

Theoretically, SF could accumulate 3,120 hours of unused sick leave over the 30-year career or 1.5 years of additional service for retirement calculation purposes.

To be clear, I am not proposing that consuming zero sick leave is a realistic notion.

I want to stress that an accumulation of unused sick leave can and will boost your pension at retirement.

I do believe that we can be strategic with our sick leave utilization.

I don't know about you, but I recall being healthier when I was younger than today. So, I'm thinking I used less sick leave back then. Feds are in a great position to stockpile sick leave for possible health challenges later. But if you are fortunate not to face those challenges, all is not lost. Sick leave will be added to your service time when calculating your pension. How much of an impact might that be? Let's examine.

For this example, let us assume our SF reached 30 years of service for retirement with 2087 hours of unused sick leave (about 2/3 of the maximum). That's one extra year.

Serve 30 years and receive a pension based on 31 years. What might that mean in dollars? Assuming a high three of $141,000, it will mean an extra $117.50 per month or $1,410 per year. To be clear, this involves nothing more than being attentive to leave and having a strategy for maximizing its impact on your retirement. I meet and serve retiring feds nearly every day; I don't know anyone who would turn down an extra $117 monthly.

Now that we've established the essential information and economic value of the respective leave packages, let's examine strategy.

Have a plan to coordinate your utilization of annual and sick leave to achieve the best possible outcome at retirement.

Fair warning. I'm going to get pretty geeky here. But it will be worth it, I promise.

For now, we will begin with how SF can accumulate annual leave. SF will earn 4 hours of annual leave for every pay period in the first three years. So, the formula is 4X26=104 Hours of annual leave each year. If SF takes 2 one week vacations each year, by the end of three years, SF will have accumulated 72 hours of carryover leave (Remember the maximum limit is 240 hours). In year 3, the SF formula for leave accumulation becomes more generous and will be credited for 6 hours per pay period. Now, the formula is 6x26=156 hours of annual leave for the year. Assuming SF continues to enjoy two one-week vacations per year, now 76 houses will be available each year for carryover (toward the 240 hr. maximum). This means that in just a little over two years (in addition to the initial three years), SF will have reached the 240-hour cap.

YAY. AND?????

SF will have 76 hours of use or lose annual leave each year until the 15th year of employment (yes, I know year five will be less, approximately 60 hours). That use or lose annual leave is available in place of sick leave.

You want me to blow vacay days when I'm sick?

Not blow; strategically utilize. We want to structure our leave use with an eye toward what builds for the future. Use or loss does not, but unused sick leave can. In years 3 through the end of year 14, SF will have 76 hours of annual leave per year to use instead of 76 hours of sick leave.

Now, for the sake of the detail nerds like me, let's finish out SF annual leave choices over the remainder of a 30-year career. Beginning in year 15 (and through year 30), SF will accumulate 8 hours per pay period for a formula of 8x26=208 hours of annual leave. Deducting the 80 hours for SFs 2 weeks of vacation now leaves 128 hours of use or lost leave (Remember that number. It will be important in a minute.) Again, SF can use those hours instead of sick leave.

(This is a Spoiler alert for the next section, where I cover sick leave accumulation. The maximum annual sick leave that can be earned is 104 hours per year.)

So, what would happen if SF chose to strategically compile annual leave to reach the 240-hour maximum as early as possible and then opted to utilize or lose annual leave instead of sick leave?

Let's look at the following assumptions: SF would use two weeks of annual leave each year and save the remainder until 240 hours are reached. Upon reaching the 240-hour maximum for carryover, SF would then utilize any remaining use or lose annual leave instead of sick leave.

SF would accumulate total hours of unused sick leave in the following amounts by period: Years 1 to 3 None (24 hours per year added to rollover annual leave) Years 3 through 4 None (76 hours per year added to rollover annual leave) Year 5 60 hrs.(After two weeks' vacation taken and 16 hours added to rollover) Years 6 through 14 608 hrs. (76 hours per year available after two weeks' vacation taken) Years 15 through 30 1560 hrs. (128 hours per year available after two weeks' vacation taken) For a total of 2228 hours

NOTE: This does not include ANY unused sick leave that SF may not have used in years 1-4. I just wanted to keep this example clean.

Using 2228 hours of annual leave instead of sick leave would mean that at least 2228 hours of unused sick leave would be accumulated and added to SF's retirement calculation.