Unused sick leave could be your secret weapon for an easier transition into retirement.
Depending on your employer’s rules, it might boost your pension, bolster your wallet or ease you into part-time work. Around 77% of workers have access to paid sick leave, according to the Bureau of Labor Statistics. Paid vacations are available to 79% of workers, while 81% have access to paid holidays.
If you are lucky enough to have paid sick leave, you may be able to accumulate it depending on your employer’s policies. For example, some companies — especially in the public sector — allow you to bank your sick leave rather than following a “use it or lose it” policy each year.
If that’s the case, when you eventually leave your job, you may be for a payout for your unused sick leave or receive credit for it when your pension is calculated.
For some workers, taking a payout or increasing a pension benefit makes good sense. For others, using accumulated sick leave to ease the transition into retirement may be more appealing. If you’ve banked a substantial balance, you might consider asking your boss if you can use some of it each week to shift into part-time work.
This approach allows you to gradually wind down your workload, tie up loose ends and ease into retirement while adjusting to a slower pace of life. However, not all employers allow this, and it may not be the best option for everyone. Here’s what you need to know.
As a general rule, sick leave is meant to be used when you’re sick. Unless your company offers a blanket Paid Time Off (PTO) policy — allowing you to use your time off for any reason — you typically can’t use sick leave for vacation or retirement planning. Doing so would be considered a misuse of benefits.
If you’re working toward a specific number of service years to qualify for a pension, unpaid sick leave generally cannot be counted as extra service time. For example, if you need 30 years of service to qualify for full retirement but have 29.5 years and six months of unused sick leave, that leave won’t count toward your required service time.
However, if you have medical appointments — such as a knee or hip replacement — you might consider using your sick leave while still covered by your employer’s health insurance. This can make good sense, allowing you to preserve your early retirement days for other priorities.
It’s important to understand your company’s rules before taking extended sick leave, as misusing it could jeopardize your employment or create issues as you approach retirement. If you’re interested in part-time work as a bridge to retirement, your employer may be open to the idea — but sick leave typically won’t be the tool to make it happen unless your company is willing to bend the rules.
A better strategy is to save up PTO or vacation time, if available, and use it to reduce your work schedule. By timing vacations around weekends and holidays, you can stretch your time off and create a gradual transition into retirement.
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If you’re not quite ready to stop working, there are lots of ways to ease into retirement without relying on sick leave — and lots of ways to support yourself financially during this period.
One option is claiming Social Security while working part-time, allowing you to supplement your income while reducing your work hours. However, if you haven’t yet reached full retirement age (FRA), earning too much could temporarily reduce your Social Security benefits. These benefits will be recalculated at FRA to account for any deductions.
You might also consider consulting work or a low-stress side gig to earn extra income during your transition. Various apps and platforms make it easy to find flexible opportunities, from dog walking to rideshare driving, depending on what might be a good fit for you.
Regardless of your approach, ensure you have enough money in your retirement accounts to cover about 40% of your pre-retirement income, as Social Security typically covers the other 40%.
Creating a detailed budget and wisely earmarking every dollar will help ensure that your retirement income stretches far enough. By planning strategically, you can transition smoothly into retirement while maintaining financial stability — without relying solely on sick leave.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
