Real Question from a Federal Employee
What is the maximum amount of unused annual leave that I may be paid for when I retire? – Wayne
As retirement gets closer, many federal employees start to wonder about their unused leave. One of the most common questions we hear is:
“Is there a limit on how much annual leave I can be paid for when I retire?”
It’s a great question, because the rules for annual leave and sick leave work differently, and understanding both can make a significant impact on your retirement planning.
Annual Leave Payout
There isn’t a hard dollar cap on how much you can be paid for unused annual leave at retirement. Instead, the rules come down to how much leave you’re allowed to carry forward each year:
- Most employees can carry forward 240 hours of annual leave into the next year.
- Additionally, you can accrue up to a full year’s worth of leave.
- When you retire, all of your unused annual leave is cashed out in a lump sum payment.
In rare situations, employees who weren’t able to use their leave due to mission-critical responsibilities may be allowed to carry over more. If that applies to you, those hours can also be included in your payout.
Sick Leave at Retirement
Sick leave follows different rules:
- There’s no cap on sick leave — you can keep building it up.
- But unlike annual leave, you won’t be paid out for unused sick leave.
- Instead, those hours increase your pension calculation.
Here’s how it works: sick leave hours are converted using the 2,087-hour chart into years, months, and days of service. That extra time is added to your pension formula.
Example:
If you retire with 30 years of service and have 1 year and 2 months of unused sick leave, your eligibility is still based on 30 years, but your pension computation will be based on 31 years and 2 months. That extra time permanently increases the pension you receive.
Conclusion
- Annual Leave: No dollar limit, but the carry-forward rule applies. Paid out in a lump sum.
- Sick Leave: No limit, not cashed out, but it increases your pension.
By understanding how these two types of leave work at retirement, you can make better choices now to maximize both your retirement payout and your lifetime pension benefits.
ABOUT THE AUTHOR
Micah Shilanski, CFP®, is a distinguished financial planner known for his deep commitment to providing exceptional advisory services to his clients. As the founder of Plan Your Federal Retirement, Micah has dedicated his career to helping federal employees understand and optimize their benefits to ensure a secure and prosperous retirement. His expertise is widely recognized in the industry, making him a sought-after speaker and educator on financial planning and retirement strategies.
Micah’s approach is client-centered, focusing on creating personalized strategies that address each individual’s unique needs. His work emphasizes the importance of comprehensive planning, incorporating aspects of tax strategy, investment management, and risk assessment to guide clients toward achieving their financial goals.Micah Shilanski 00:02
Have you ever wondered what the maximum sick leave is you can carry into retirement? Well, if you have and stay tuned for this FERS federal fact check. Hi, I’m Micah Shianski, with Plan Your Federal Retirement. Today, we have a great question from Wayne. And he says, what is the maximum amount of unused annual leave that it may be a paid for when I retire. Wayne, that is an absolutely fantastic question. I want to answer that in two parts. While you did say annual leave, I want to talk about the other leave that you have as well, which is sick leave, which is a secondary question I got as well. So as we’re talking about this, the amount of leave that you have that can be paid. There’s no quote, unquote cap that you have of so many, so much dollars that can be paid. But there is an annual amount, a cap of how much you can carry forward. As you know, you can only carry forward those 240 hours of annual leave into the next year. Then you could build up an entire year’s worth of leave, and you can get that cash out and paid again. There’s not that dollar cap that’s there. Now some people in a very unique situation are unable to use their leave because of their positions, and that can also be banked and cashed out as a lump sum as well. It’s a very rare situation. If you fall into that, that’s going to be there. But let’s talk about your sick leave. What happens with that? Great news is there’s no cap on your sick leave either. However much sick leave you have can continue to grow and build for you, but remember, you’re not cashed out on sick leave. That translates into increasing the amount of your pension into retirement. We take your sick leave however many hours you have, you put it into this 20-87 chart. It’s going to tell you the years, months and days that you have for sick leave purposes, and that’s going to be added to your pension calculation. So for example, if I had one year and two months of sick leave and I had 30 years of service, the 30 years of service makes it eligible for me to retire with 30 years of eligibility boots on the ground time, the one year and two months of sick leave adds to my pension. So my pension computation will be based on 31 years and two months, and that’s how they would compute my pension for retirement. If you have great questions about your benefits, like these, to make sure you’re getting the most out of them, then make sure you submit them at plan-your-federal-retirement.com. Give us a share. We’re transforming the world to federal employees, getting you more information about your benefits, and we cannot do that without your help. Until the next time, happy planning.