Key Takeaways
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Buying back military service time can significantly increase your civilian retirement annuity—but only under certain financial and career circumstances.
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If you’re close to retirement or already drawing a pension, it’s essential to evaluate whether the buyback cost will yield enough of a benefit to justify the investment.
Understanding Military Service Buyback
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The military service buyback process allows you to make a payment to cover the retirement contributions you would have made during your military service. Once completed, that military time counts as creditable service when calculating your retirement benefits.
The Basics of Military Time Credit
Here’s what you need to know before considering a buyback:
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Eligibility: Only active-duty military time can be bought back. National Guard or Reserve duty may qualify only if performed under federal orders.
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Deadline: For the best financial outcome, you must complete your buyback within 3 years of your civilian hire date to avoid interest charges. After 3 years, interest begins accruing annually.
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Payment Amount: The buyback cost is typically 3% of your basic military pay for the years you’re buying back (for FERS), plus any accrued interest if applicable.
Why Some Employees Choose Not to Buy Back Time
In theory, buying back time increases your annuity and allows you to retire earlier. But there are scenarios where it might not be worth it:
1. You’re Already Receiving Military Retirement Pay
If you’re receiving military retirement pay, you can’t use that same service time toward your civilian annuity unless you waive the military retirement. For many, giving up military retirement pay to boost a civilian pension isn’t a good trade-off.
2. You’re Late in Your Career and Interest Has Accrued
Missing the 3-year interest-free window can significantly raise the cost. By the time interest compounds over a decade or more, the buyback amount can become prohibitively high—potentially outweighing the annuity increase.
3. You’re Close to Minimum Retirement Age (MRA) With Little Civilian Time
If you’re just meeting the MRA with minimal years of civilian service, the added military time may not qualify you for full retirement benefits or the FERS supplement. In that case, the benefit of a buyback becomes limited.
4. You Don’t Plan to Stay Long Enough in Civilian Service
Buying back military time won’t help you unless you eventually qualify for a FERS or CSRS annuity. If you leave before vesting (generally 5 years for FERS), your military time is irrelevant to retirement.
When Buying Back Time Makes Strong Financial Sense
For many, buying back time can be a smart investment—if certain conditions apply:
1. You’re Still Early in Your Civilian Career
If you’re within your first three years of federal service, you can avoid interest and complete the buyback at minimal cost. This is the best-case scenario and can yield substantial long-term benefits.
2. You’re Not Drawing Military Retirement
If you served in the military but didn’t retire, buying back time allows you to leverage that service without giving anything up. You keep your military experience and get credit toward your civilian retirement.
3. You Need the Time to Qualify for Retirement
If buying back military time helps you reach eligibility thresholds—for example, 20 years for LEOs (Law Enforcement Officers) or firefighters—it can provide access to earlier retirement and the Special Retirement Supplement.
4. You Want to Increase Your Monthly Pension
Every year of creditable service adds to your annuity. Under FERS, each year equals about 1% of your high-3 average salary. Buying back four years could mean a 4% increase in your annual pension for life.
5. You Intend to Leave a Spousal Benefit
If you’re planning to provide a survivor annuity to your spouse, every added year of service increases the base annuity, which also enhances the spousal benefit. This can be a strong motivator for many married retirees.
Calculating the Break-Even Point
A simple way to decide whether a buyback is worth it is to calculate how long it will take for the increased annuity to repay your buyback cost. Here’s how:
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Step 1: Estimate your buyback cost (3% of military pay x years of service, plus any interest).
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Step 2: Estimate the annual increase in your pension (1% of high-3 salary x years of military time).
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Step 3: Divide the cost by the annual benefit increase to determine how many years it takes to break even.
If the break-even point is within 5–10 years after retirement, most find it a reasonable investment.
Impact on Other Benefits
Keep in mind that buying back military time affects only your civilian retirement. It does not:
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Restore or impact military healthcare benefits like TRICARE.
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Change your eligibility for the VA or other military-related programs.
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Guarantee eligibility for early retirement unless combined with qualifying civilian service.
Also, your FERS or CSRS annuity is subject to taxation, and the buyback payment is made with after-tax dollars. So consider the tax implications in your calculations.
What to Do Before You Commit
If you’re seriously considering a buyback, take these steps before making a payment:
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Request a Military Earnings Statement from your branch of service to estimate the buyback cost.
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Speak with HR or a retirement specialist to understand how the service time would affect your retirement date and annuity.
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Run pension calculations with and without the buyback to see the difference in long-term value.
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Review your retirement timeline, especially if you’re planning to retire soon or qualify for an enhanced retirement like LEO.
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Factor in inflation and life expectancy. An extra 4–6% on your pension might sound small, but over a 20- to 30-year retirement, it adds up.
Timing Still Matters in 2025
As of 2025, the rules and calculations for military buybacks haven’t changed significantly. However, inflation and increased interest accruals can make delaying more costly than before. With interest compounding annually after your 3-year civilian service anniversary, each year of delay raises your total buyback amount.
Also, if you’re considering retirement soon, submitting the buyback paperwork now is essential. Processing can take several months, and delaying could affect your final pension calculation.
Alternatives to Consider
If the buyback doesn’t make sense for you, there are still options to strengthen your retirement:
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Thrift Savings Plan (TSP): Continue or increase your TSP contributions for additional retirement savings.
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Social Security: Your military time (post-1956) likely qualifies you for Social Security credit. Be sure to confirm your SSA earnings record.
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Deferred Retirement: If you’re leaving government early, defer your pension rather than cashing out your FERS contributions.
Each of these options can complement your civilian pension without requiring a buyback.
Is It Worth It? Only Under the Right Conditions
In the end, buying back military service time can provide real value—but not always. If you’re early in your career, not receiving military retirement, and aiming for a full-length civilian career, it’s often a solid financial move. On the other hand, if you’re late in your career or would need to waive military retirement, the benefit may not outweigh the cost.
Take time to run the numbers, weigh your long-term goals, and consult with someone who understands the nuances of government retirement.
Evaluate Before You Invest in Service Time
Your decision to buy back military service time shouldn’t be rushed. The wrong move could cost you thousands, while the right one could secure a stronger retirement. Get in touch with a licensed agent listed on this website to review your options and make a plan that aligns with your long-term financial future.
