Key Takeaways
- Military service can be credited towards your federal retirement, potentially enhancing your benefits.
- You’ll need to take steps like making a deposit and knowing important timelines to maximize your retirement benefits.
Getting the Most from Your Military Service in Federal Retirement
If you’ve served in the military and are now a federal employee, congratulations—you’re eligible for some great retirement benefits. But, to truly maximize your retirement package, there are specific steps you need to take to get credit for your military service. You might be wondering: What exactly does this mean? And how do I go about it? Let’s walk through it together in plain language, step-by-step, so you can make the most of your hard-earned service time.
What’s the Deal with Military Buyback?
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The term “military buyback” may sound a bit odd, but it’s one of the most important things you need to know about. Essentially, a military buyback allows you to “buy” credit for your active-duty military service, so it counts towards your civilian federal retirement.
Here’s the deal: When you serve in the military, that time doesn’t automatically count towards your civilian retirement under the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS). Instead, you need to make a deposit into your retirement account. This deposit is based on a percentage of your military earnings during active duty.
Why bother, you ask? Well, every year you can add to your civilian service count is a step closer to a more secure retirement. And if you buy back that time, it’s like getting extra years of federal work without having to serve them again!
Timelines Are Crucial – Act Early
Timing is everything, and this is no exception. If you’re considering the military buyback, don’t wait until you’re near retirement. The best time to start this process is early in your federal career. Here’s why:
- Interest accumulates: If you make your deposit within three years of your federal employment starting, you won’t owe any interest on the amount you need to deposit. After that window closes, interest begins to pile up, and trust me, it can add a significant amount to what you’ll need to pay.
- Longer processing time: Like most things in the federal system, processing these requests can take a while. Starting early ensures you have plenty of time to handle paperwork and avoid last-minute stress.
So, if you’re still in the early stages of your federal career, now is the perfect time to jump on this opportunity!
Calculating Your Military Deposit
Now that we’ve established the “why” and “when,” let’s get into the “how.” Calculating your military deposit can seem a bit complicated, but it’s definitely doable.
Here’s what you need to know: Your deposit is based on a percentage of your basic military pay. For most people, this percentage is 3% for FERS and 7% for CSRS. You’ll also have to consider any interest that’s accrued if you didn’t make the deposit within the initial three-year window.
To calculate your exact deposit, you’ll need to pull up your military earnings records. You can get these from the Defense Finance and Accounting Service (DFAS) or the National Personnel Records Center (NPRC). Once you have that information, you can either estimate the deposit on your own using an online calculator or ask your Human Resources office for help.
Submitting Your Deposit – What to Expect
So, you’ve calculated your deposit, and now it’s time to actually make it. What can you expect from the process?
First, you’ll need to submit the paperwork—Form SF-2803 for CSRS employees or SF-3108 for FERS employees—along with your military records to your federal agency’s human resources office. They’ll review your documents and send them to the Office of Personnel Management (OPM) for final approval.
Once your deposit is processed and you’ve made the payment, your military service will be credited toward your civilian retirement. This could mean a larger annuity payout or reaching retirement eligibility sooner.
Keep in mind that this process can take several months (or more), depending on how quickly your agency and OPM handle the paperwork. Be patient, but proactive. Follow up regularly to ensure everything is moving along smoothly.
How It Impacts Your Retirement Benefits
The whole point of this process is to boost your retirement benefits. But how exactly does buying back your military service impact your final annuity?
Under FERS, your annuity is based on the number of years of creditable service and your high-3 salary (the average of your highest three consecutive years of earnings). Every additional year of service, including your bought-back military years, increases the percentage of your salary you’ll receive in retirement.
For example, under FERS, you receive 1% of your high-3 salary for each year of service (or 1.1% if you retire at age 62 with at least 20 years of service). So, adding a few years of military service can significantly increase your pension over time.
In the CSRS system, the calculation is slightly different, but the concept is the same: more years of service equals a larger annuity.
Keep in Mind: Disability and Reserve Pay Exceptions
One important thing to note: If you’re receiving military retirement pay, there are certain situations where you won’t be eligible to buy back your military service. This usually applies if you’re receiving military retirement pay for disability or reserve service.
However, if you’re receiving reserve pay for non-active duty time, you can generally still make the military deposit. It’s always a good idea to talk with your HR office or financial advisor to see if this applies to you.
Reap the Benefits of Your Military Service
At the end of the day, you’ve earned your military service time and it deserves to be counted in your federal retirement. By taking the necessary steps to buy back that service time, you’re setting yourself up for a more comfortable retirement and making the most of your federal career.
Don’t wait too long to start this process—remember that three-year window for avoiding interest! And if you’ve already passed that point, don’t worry. It’s still worth buying back your time even if you have to pay a little extra interest.
The process might seem overwhelming at first, but with a little patience and persistence, you’ll be well on your way to getting the retirement you deserve.
A Rewarding Federal Retirement Starts with Early Planning
Your federal retirement is one of the most valuable benefits you’ll receive as a public servant. By making sure your military service is credited toward that retirement, you can maximize your years of service and ensure you’re rewarded for all the hard work you’ve put in over the years. Whether you’re early in your federal career or nearing retirement, it’s never too late to take action and improve your future.
