Annual Leave Retirement Options Calculator
Analyze the financial trade-offs between taking a lump-sum payment for your annual leave or using it to stay on the payroll longer at the end of your career.
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The Big Question: Take the Payout or "Burn" Your Leave?
When you retire, you get a big check for your unused annual leave. But is there an alternative? Yes, and most feds don't know about it.
With your supervisor's approval, you can schedule and use your remaining annual leave leading up to your official retirement date. This is often called "terminal leave." While you're on leave, you're technically still a federal employee. This means you continue to:
- Earn your full salary and locality pay.
- Receive TSP contributions, including the 5% government match.
- Accrue more sick and annual leave.
This is not an entitlement. According to OPM, an employee has a right to take annual leave, but it is always subject to the right of the supervisor to approve the schedule. This tool helps you see the financial difference so you can have an informed conversation with your supervisor.
Official Source: OPM Fact Sheet on Annual Leave (See "Scheduling of Annual Leave")
The "Lump Sum Tax Shock" Explained
Many retirees are surprised when their lump-sum payout is much smaller than expected. This is due to tax withholding, not necessarily a higher final tax rate.
- According to IRS Publication 15, lump-sum payments are often subject to a flat 22% federal withholding rate, plus FICA (7.65%) and state taxes. This is why the initial check can seem small.
- This calculator shows you both: the estimated take-home from your check (based on withholding) and your final net payout (based on your actual tax liability). The difference between what's withheld and what you actually owe is typically settled when you file your taxes, often resulting in a refund.