Key Takeaways:
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Military service can boost your federal pension: By buying back your military time, you can add those years to your civilian federal retirement, potentially enhancing your pension benefits significantly.
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This process is time-sensitive: You can buy back your military service at any point, but the sooner you act, the less it may cost. Waiting too long could increase your out-of-pocket expenses.
Your Military Years Have More Value Than You Think
If you’re a federal employee with military service under your belt, there’s a little-known strategy that can supercharge your federal pension: buying back your military time. This can give your federal retirement package a serious boost by adding those years of military service to your total years of federal service. The result? A bigger pension when you retire from civilian federal employment.
It’s a perk that’s often overlooked, but it can make a huge difference. And if you’ve served in the military, you’ve earned it. Let’s walk through how it works, why it matters, and what you need to know to take full advantage of this opportunity.
The Magic of the Military Buyback Program
The federal retirement system has a built-in option for former military members to “buy back” their active-duty service time. In short, the time you spent serving your country in uniform can be credited toward your federal civilian retirement. This works under both major retirement systems for federal employees: the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS).
Here’s how it works: if you have military service that’s not already counting toward a military pension, you can pay a sum to the government—referred to as a “deposit”—to have those years added to your civilian service total. This extra time increases your years of service, which directly impacts your retirement benefits by bumping up your pension calculation.
Why Should You Care About Buying Back Military Time?
Every year you work in the federal government builds toward your retirement. So, why not count the years you’ve already worked in the military toward that total? By buying back your military time, you’ll increase the number of years used in the calculation of your pension, which can lead to a more comfortable retirement.
For example, under FERS, your pension is generally calculated as 1% of your high-three average salary for each year of service. So, if you buy back five years of military time, that’s five more years added to the pension formula. If you had a high-three average salary of $100,000, that’s an extra $5,000 annually in your retirement check. Over the course of 20 years in retirement, that could amount to a $100,000 difference!
This buyback opportunity is a hidden gem for federal employees with military backgrounds, and it’s a great way to stretch your retirement dollars.
What Does It Cost to Buy Back Military Time?
The cost to buy back military time isn’t fixed, and it varies based on your military earnings. Generally, the earlier you act, the less expensive it will be. The standard cost is a small percentage of your military base pay, but if you delay, interest starts to accumulate, which can increase the cost of buying back your time substantially.
You can request an estimate of what it will cost to buy back your military time by filling out the appropriate forms with your agency’s human resources office. The sooner you get started, the better, because after two years of civilian federal service, interest on your military buyback starts to accrue.
Timeline: When Should You Buy Back Your Military Time?
Technically, you can buy back your military service at any point during your federal career, even right before you retire. But that’s not always the best financial decision. The ideal time to begin the process is early in your civilian career, preferably within your first two years of federal service, to avoid accumulating interest on the buyback cost.
If you’ve already passed that window, don’t worry! It’s still worth pursuing, but you should be aware that the longer you wait, the more interest you’ll pay. The earlier you act, the more you save.
The Process: How to Buy Back Your Military Service
Buying back your military service is relatively straightforward, but it requires some paperwork and patience. Here’s a general breakdown of the process:
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Get your military earnings records: You’ll need to request a certified record of your military earnings. This document is essential because it’s used to calculate the deposit you’ll need to pay.
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Request an estimate: Once you have your military earnings information, contact your human resources office or your agency’s retirement office to request an estimate of the deposit amount.
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Submit your deposit: After you’ve reviewed the estimate and decided to move forward, you’ll need to submit the necessary forms and make your payment. You can pay the deposit in one lump sum or set up a payment plan.
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Confirm your buyback: Once the payment is complete, make sure the deposit is properly applied to your retirement record. It’s crucial to confirm that your service time has been credited correctly.
What Happens If You Don’t Buy Back Your Military Time?
If you don’t buy back your military time, those years won’t count toward your federal pension. Simple as that. You’ll still receive credit for your civilian federal service, but your pension will be based solely on those years.
Now, if you’re receiving or planning to receive a military retirement, that’s different. You can still receive both pensions, but your military service generally can’t be counted toward your civilian retirement in that case. If your military retirement is based on disability, however, you may still be eligible to buy back your time without affecting your military pension.
Is Buying Back Military Time Worth It?
For most people, the answer is yes. The potential boost to your federal pension is usually well worth the cost of buying back your military service. Over the long term, the increase in your retirement annuity can far outweigh the upfront expense. The earlier you act, the less interest you’ll pay, which makes it an even better deal.
Think of it as an investment in your future. Every additional year you can add to your federal service counts toward a more substantial retirement income. And if you’re looking for ways to maximize your federal benefits, buying back your military time is a strategy that can pay off big-time.
Boost Your Retirement Income with Military Buyback
Your military service has already provided you with invaluable experience, skills, and benefits. Now, by buying back that time, you can leverage those years to enhance your federal pension, ensuring a more comfortable and secure retirement. It’s a benefit that’s easy to overlook but offers real, tangible value.
If you haven’t looked into it yet, now’s the time to consider buying back your military time. The sooner you start, the bigger the payoff in retirement.
