Key Takeaways
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Military buybacks allow veterans to credit their military service toward federal civilian retirement, enhancing their benefits and retirement timeline.
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Understanding the buyback process and its requirements can help you maximize your federal retirement benefits efficiently.
What Are Military Buybacks?
If you’ve served in the military and now work in the federal civilian workforce, military buybacks could be a game-changer for your retirement planning. A military buyback, also known as a military service deposit
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Here’s the catch: You must pay a deposit to “buy back” your military service time. While this deposit isn’t free, the long-term benefits often outweigh the upfront costs.
Who Can Benefit From Military Buybacks?
Military buybacks are designed for federal employees who served honorably in the armed forces and transitioned into a civilian role in federal government service.
You’re eligible if:
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Your military service was active-duty and honorable.
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You are covered under FERS or CSRS in your federal civilian job.
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Your military service did not overlap with your civilian employment.
Even if you’re already receiving military retirement pay, you might still qualify—provided you waive your military pension before retirement.
Why Consider a Military Buyback?
1. Boost Your Retirement Annuity
The more years of service you have, the higher your retirement annuity. For FERS employees, the annuity is typically calculated as 1% of your High-3 average salary per year of service (1.1% if you retire at age 62 or older with at least 20 years of service). Buying back military service adds to those years, increasing your overall pension.
2. Retire Sooner
By adding military time to your civilian service, you can meet retirement eligibility requirements faster. For instance, if you served four years in the military and have 16 years of civilian service, a buyback allows you to qualify for retirement after 20 years of combined service.
3. Cost Efficiency
Although there’s an upfront cost to buying back military time, the financial benefits over a lifetime—in the form of a higher annuity—typically outweigh the expense. For most veterans, the deposit is equal to 3% of their basic military pay, plus interest if not paid promptly.
How Does the Process Work?
Step 1: Request Your Military Earnings Statement
Begin by obtaining your Estimated Earnings During Military Service. This document is required to calculate your deposit. You can request it by filling out Form RI 20-97 and sending it to the military branch in which you served.
Step 2: Calculate Your Deposit
Once you receive your earnings statement, your human resources office or the Defense Finance and Accounting Service (DFAS) will calculate how much you owe. Remember, the deposit is generally 3% of your military base pay, but it increases over time if interest is applied.
Step 3: Make the Payment
After the deposit is calculated, you can pay it in a lump sum or installments. Most agencies allow payroll deductions to make this process more manageable.
Step 4: Confirm Your Service Credit
Once you’ve paid the full amount, confirm with your agency’s HR office that your military time has been added to your civilian service record. Keep all payment receipts and documentation for your records.
Timing Is Everything
Interest begins accruing on unpaid deposits after a grace period of two years from the date you were hired into your federal civilian job. The longer you wait, the more you’ll owe in interest. To avoid additional costs, aim to complete your buyback within the first two years of federal employment.
Common Questions About Military Buybacks
Does a Buyback Affect My Military Retirement?
If you’re receiving military retirement pay, you must waive it to apply those years toward your federal retirement. However, this rule does not apply if your military pension is for:
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A combat-related disability.
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Reserve service.
What Happens If I Don’t Buy Back My Time?
If you decide not to buy back your military service, those years won’t count toward your federal retirement eligibility or annuity. While you’ll still receive your military retirement benefits, you’ll miss out on the enhanced civilian pension.
Can I Buy Back Time After I Retire?
No. You must complete the military buyback process before retiring from federal service. Once you’ve retired, it’s too late to make a deposit.
FERS vs. CSRS: What’s the Difference?
Federal Employees Retirement System (FERS)
FERS is the retirement system for most federal employees hired after 1983. It includes three components:
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Basic annuity.
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Social Security benefits.
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Thrift Savings Plan (TSP).
Under FERS, buying back military service increases your basic annuity but doesn’t affect your Social Security or TSP.
Civil Service Retirement System (CSRS)
CSRS is the older system covering federal employees hired before 1984. It offers a more generous pension but doesn’t include Social Security benefits. Military buybacks under CSRS also enhance your annuity but don’t affect other benefits.
The Financial Impact: Is It Worth It?
Let’s break down the numbers. Suppose you’re a FERS employee earning $80,000 annually, and you served four years in the military. By buying back your military time, you add four years to your service:
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Without a buyback: 20 years of civilian service = $16,000 annual pension (1% x $80,000 x 20 years).
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With a buyback: 24 years of total service = $19,200 annual pension (1% x $80,000 x 24 years).
Over 20 years of retirement, that’s an additional $64,000 in pension income—a significant return on your investment.
Tips for a Smooth Buyback Process
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Act Early: The sooner you initiate the buyback process, the less interest you’ll pay. Don’t wait until you’re nearing retirement.
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Stay Organized: Keep all documents, including your military discharge papers (DD-214), pay stubs, and correspondence with HR.
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Consult Experts: If you’re unsure about the process or its benefits, consult your agency’s HR office or a financial advisor specializing in federal retirement.
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Review Your Service Record: Confirm that your military time is accurately credited to avoid any surprises during retirement planning.
Challenges You Might Face
The military buyback process can be complex, with numerous forms, deadlines, and calculations involved. Delays in obtaining your earnings statement or calculating your deposit can slow things down. Staying proactive and seeking guidance when needed can help you navigate these challenges.
Wrapping It All Up: The Value of Military Buybacks
Military buybacks offer veterans a unique opportunity to leverage their service for a more secure and lucrative federal retirement. By understanding the process, acting promptly, and weighing the costs and benefits, you can set yourself up for a financially comfortable future.
Don’t let the paperwork or upfront costs deter you. The long-term advantages—including a higher pension and earlier retirement eligibility—make military buybacks a powerful tool for maximizing your federal benefits.
