Key Takeaways
- TriCARE Buyback programs can significantly enhance the benefits for military veterans transitioning to federal civilian jobs, allowing them to count military service towards their federal retirement.
- Understanding how military benefits like TriCARE integrate with federal retirement systems such as FERS can open up valuable opportunities to boost your retirement income and healthcare coverage.
Military Benefits and Federal Retirement: Here’s How TriCARE Buyback Could Change Your Plans
- Also Read: FEHB and Medicare Coordination Tips That Could Save Federal Retirees Serious Money
- Also Read: Why Civilian Military Employees Are Starting to Rethink Traditional Retirement Planning
- Also Read: Social Security Strategies Federal Employees Can Use to Make Retirement a Lot Smoother
What Is TriCARE Buyback and Why It Matters
The TriCARE Buyback option allows military veterans who become federal employees to “buy back” their years of military service so that those years count toward their federal retirement under FERS. This can significantly increase your pension benefits by allowing you to add your military service time to your civilian service years.
For instance, if you served 10 years in the military and then transition into a federal civilian job, buying back your military service could add those 10 years to your federal service time. This means you could potentially retire earlier or receive a higher pension payout. However, the buyback process isn’t automatic—it requires a financial investment upfront, and the cost depends on your base pay during your military service. While this can be a considerable expense, the long-term retirement benefits often outweigh the initial cost.
How TriCARE Fits Into Your Healthcare in Retirement
Military retirees who are eligible for TriCARE have a unique advantage when it comes to healthcare coverage. TriCARE can serve as a key component of your retirement healthcare, especially when integrated with the Federal Employees Health Benefits (FEHB) program.
For many veterans, TriCARE covers much of their healthcare costs, but when you transition into a federal job, you become eligible for FEHB as well. At that point, you need to decide how to coordinate these two healthcare programs for maximum benefit. One option is to use TriCARE as your primary insurance and FEHB as secondary coverage, which can help lower your out-of-pocket costs by covering services that TriCARE may not fully cover.
The real advantage comes when you retire. Retired federal employees often rely on FEHB as their primary healthcare coverage, but military veterans have the option to keep using TriCARE, which can be a more cost-effective solution. By combining TriCARE with FEHB, you can ensure comprehensive coverage that meets all your healthcare needs in retirement while keeping costs manageable.
Navigating the FERS Retirement System with Military Service
If you’re a military veteran working under the Federal Employees Retirement System (FERS), your military service can play a crucial role in boosting your retirement benefits. FERS is a three-part system that includes a civil service pension, Social Security, and the Thrift Savings Plan (TSP). By buying back your military service, you can add your years of military service to your federal civilian service, increasing your overall pension.
The formula for calculating your FERS pension is based on your years of service, your “high-3” salary (the average of your highest three consecutive years of basic pay), and a multiplier. For most employees, this multiplier is 1%, but it increases to 1.1% if you retire after age 62 with at least 20 years of service. Buying back your military service adds those years to your total service, allowing you to reach this 20-year threshold sooner, which can substantially increase your pension.
However, it’s important to note that while buying back your military service enhances your FERS pension, it may affect your eligibility for other benefits, like military retirement pay. If you’re receiving military retirement pay, you may need to waive it in order to buy back your military service for FERS. This is a decision that should be carefully considered based on your individual financial situation.
Weighing the Cost of Military Service Buyback
One of the key questions veterans face when considering the TriCARE Buyback is whether the cost is worth the added retirement benefits. The cost of buying back your military service is based on a percentage of your base pay during your years of military service, plus interest if you delay the buyback for too long after joining the federal workforce.
While the upfront cost may seem daunting, it’s important to consider the long-term financial benefits. Buying back your military service can increase your pension, allowing for a more secure retirement. Additionally, it may enable you to retire earlier, giving you more years to enjoy your retirement. In many cases, the pension increase far outweighs the initial cost of the buyback, making it a worthwhile investment for those planning for a long retirement.
Combining TriCARE, FEHB, and Medicare
When it comes to retirement healthcare, veterans have a variety of options. Many choose to rely solely on TriCARE, but others may find that combining TriCARE, the Federal Employees Health Benefits (FEHB) program, and Medicare offers the most comprehensive coverage.
Once you turn 65, you’re eligible for Medicare, and at that point, TriCARE for Life kicks in as your Medicare supplement. By coordinating these three programs—Medicare, TriCARE, and FEHB—you can minimize out-of-pocket healthcare costs in retirement. Medicare will serve as your primary insurance, with TriCARE or FEHB picking up the remainder.
Choosing whether to enroll in FEHB in retirement or rely solely on TriCARE and Medicare depends on your individual healthcare needs and financial situation. Some retirees find that TriCARE and Medicare are sufficient, allowing them to save on FEHB premiums, while others prefer the additional coverage FEHB provides.
Boosting Retirement Income with the Thrift Savings Plan (TSP)
In addition to your FERS pension and Social Security, the Thrift Savings Plan (TSP) is a key component of retirement planning for federal employees. The TSP operates like a 401(k) and provides a tax-advantaged way to save for retirement. For veterans who buy back their military service, those additional years of service also increase the time you have to contribute to your TSP, giving you more time to grow your retirement savings.
The TSP offers several investment options, including stocks, bonds, and government securities, allowing you to tailor your investment strategy to your risk tolerance and retirement goals. As you approach retirement, it’s important to adjust your TSP contributions and investments to ensure that your savings will last throughout your retirement years.
Creating a Strong Retirement Plan with Military Buyback
For veterans transitioning to a federal civilian career, the TriCARE Buyback option presents a valuable opportunity to enhance your retirement benefits. By buying back your military service, you can increase your FERS pension, retire earlier, and enjoy a more secure retirement. In addition, integrating TriCARE with your FEHB and Medicare benefits can help you optimize your healthcare coverage in retirement, ensuring that you’re covered no matter what the future holds.
