If the retirement age is 65, would the Foreign Service hire someone over 55 knowing that they will only have 10-year return on their investment?

Yes. The Department of State encourages all interested candidates who meet the age qualifications to apply. The only requirement is employees must have entered an orientation class before their 60th birthday. Qualifying, preference-eligible veterans may be appointed from the rank-ordered Hiring Register at any time before they turn 65.