Need Money? Save Your Sick Leave

As promised, here’s the third in my series of  columns on saving money and maximizing your retirement within the federal pay and benefits structure. This week, I’ll focus on sick leave -- with a bonus tip at the end related to pay raises.

First, it’s important to remember that in the federal government, sick leave not only provides protection of income during routine illnesses, but also serves as a form of short-term disability insurance. You earn six months of paid sick leave for every 10 years of federal service. That can be very important if you get sick or hurt and can’t work.

Your chances of being disabled at some time during your career are probably higher than you think. According to the Social Security Administration, studies show that a 20-year-old worker has a 30 percent chance of becoming disabled before reaching retirement age. Of course, the odds that any individual will be disabled before retirement depends on many factors, including age, general health and occupation.

Balance in the Bank

Federal employees are not compensated for their unused sick leave. But when you retire, the balance of your sick leave is converted to months and days of service and added to the length of service used to compute your retirement benefits. (Under the Federal Employees Retirement System, only half the sick leave balance will be credited for employees who retire before Jan. 1, 2014.)

Also, remember the cost you’re avoiding by accumulating sick leave. A disability insurance policy for an employee earning $60,000 a year is about $40 a month. Many insurance companies won’t sell disability insurance to federal employees since they already have coverage for short-term disabilities (through sick leave) and long-term disabilities (through federal disability retirement programs).

For more information on federal sick leave benefits, see the OPM website.

A Word on Pay

Finally, here’s a tip about a sore subject federal employees these days: pay raises. When I started writing this column in 2006, feds had just been granted annual increases ranging from 2.83 percent to 3.95 percent. Ahh, the good old days!

Although employees haven’t received a congressionally approved pay raise since 2010, many of them have received or are due a step increase or a promotion. A step increase provides approximately a 2.5 percent increase over your previous salary. There’s a 77 percent difference between steps 1 and 10 of a particular pay grade. Promotions can provide even bigger boosts in salary.

One thing to do when you get any increase in compensation is to simultaneously increase your retirement savings -- if you’re not already contributing the maximum. Or you might want to use the extra money to pay down high-interest debt, build up your emergency fund, boost your insurance coverage -- and, oh yeah, to have a little fun. You’ve earned it!