Veteran Federal Workers, Here’s How You Can Score a Better Retirement by Counting Your Military Service

Lisa Jordan
November 7, 2024

Key Takeaways:

Maximize your federal retirement by using your military service toward your civilian career.
Learn the steps to buy back military time and boost your benefits when you retire.

Maximize Your Federal Retirement: Here’s How to Use Your Military Service

If you’re a federal employee and a veteran, did you know that your military service could significantly enhance your retirement? If you haven’t explored the option of “buying back” your military time, you might be leaving money on the table. It’s a lesser-known way to increase your pension and retire with more financial security

. So, let’s break it down: how can you use your military years to score a better retirement?

What Does Buying Back Military Time Mean?

Let’s start with the basics. “Buying back” military time refers to a process where you can count your active-duty military service towards your federal retirement under the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS). If you spent years in uniform before transitioning to civilian government work, those years don’t have to be wasted when it comes to calculating your retirement benefits.

By paying a portion of your military earnings back into the retirement system, you can include your military service time when calculating your civilian retirement pension. This can make a big difference when you’re ready to retire.

How Much Time Can You Buy Back?

You can buy back any active-duty military time, whether it was three years, ten years, or more. However, the key is that the military time you buy back doesn’t have to overlap with your civilian federal service. Essentially, any time served on active duty that’s separate from your civilian career is eligible.

That said, you need to make this decision before you retire. While you can apply to buy back your time at any point in your federal career, the earlier you do it, the better. Interest accrues over time, so delaying the process could make it more expensive.

The Benefits of Buying Back Military Time

You might be wondering, “What’s in it for me?” Why should you consider buying back your military time? The main reason is simple: more service years equal a higher pension. Under FERS or CSRS, your pension is based on your years of creditable service and your “high-3” average salary (the average of your highest three consecutive years of basic pay). Adding those military years can increase your service time, which in turn bumps up your pension.

Let’s break it down even further:

More Years, Bigger Pension: Every additional year of service increases the amount of your monthly pension. Under FERS, your pension is generally calculated as 1% of your high-3 salary per year of service, or 1.1% if you retire at age 62 or later with 20 years of service.
Earlier Retirement: If you’re getting close to your Minimum Retirement Age (MRA) but feel you need more years to get the pension you want, buying back your military time might allow you to retire sooner. This is particularly helpful if you’re under FERS, which allows you to retire with an immediate, unreduced annuity once you meet the age and service requirements.

How to Start the Process

Now that you’re interested in buying back your military time, what’s the next step? The process is relatively straightforward but involves a few steps.

1. Request Your Estimated Earnings

The first thing you’ll need is your Estimated Earnings During Military Service. You can request this from the Defense Finance and Accounting Service (DFAS) or the appropriate branch of service. This document will detail your military earnings, which will be used to calculate the amount you need to pay to buy back your time.

2. Complete a Deposit Application

Once you have your estimated earnings, you’ll fill out a military deposit application, which you can get from your human resources department or the Office of Personnel Management (OPM) website. This application allows your federal agency to calculate the deposit you’ll need to make to buy back your time.

3. Pay the Deposit

After your agency calculates your deposit, you’ll make a payment, which is typically a percentage of your base military pay during your years of service. Keep in mind that the deposit must be paid in full before you retire.

4. Monitor Your Progress

Once you’ve started the process, don’t forget to check in regularly with your HR office or the agency handling your retirement to ensure everything is on track. It’s also a good idea to keep copies of all paperwork and communications regarding your buyback, just in case you need them later.

Timing Matters: Don’t Wait Too Long!

Here’s a critical point: interest on your deposit begins to accrue after two years of federal service, so it pays to act quickly. The longer you wait, the more interest builds up, which can make buying back your time more costly. If you can complete the process before that two-year mark, you can avoid paying any interest altogether. Even if you’re past the two-year point, it’s still worth it to move forward—just keep in mind that the longer you wait, the more you’ll pay in interest.

What If You Don’t Buy Back Your Time?

If you decide not to buy back your military time, that service will still count toward Social Security, but it won’t be included in your federal retirement calculation. In other words, while you’ll still receive credit for those years under Social Security, your federal pension will be smaller. For many federal employees, the additional pension from buying back military time is well worth the cost.

Also, if you plan to receive military retirement pay, know that it’s not usually possible to “double dip.” You’ll need to waive your military retirement in favor of a civilian pension if you want to include your military service time. That’s something to keep in mind as you weigh your options.

Is Buying Back Military Time Right for You?

Whether or not you should buy back your military time depends on your unique situation. If you’re early in your federal career, it might be a no-brainer to go ahead and buy back your time to boost your future pension. But if you’re further along, and especially if you’re nearing retirement, you’ll want to weigh the costs and benefits.

Either way, it’s a good idea to consult with your agency’s human resources office or a retirement specialist who can help you run the numbers and decide what’s best for your financial future.

Boost Your Future by Making the Right Choice Now

Buying back your military time is an investment in your future, and it’s an option that every veteran federal worker should consider. By adding those extra years to your retirement calculation, you can boost your pension and potentially retire earlier. Don’t wait too long—get started on the process now to avoid paying extra in interest later.