How Civilian Employees Can Turn Military Time Into a Bigger FERS Pension

Jeff Boettcher
November 14, 2025

Key Takeaways

Buying back your military service can significantly increase your FERS pension, but only if you complete the process before retiring.
Understanding the buyback process, costs, and timelines is critical to making a smart financial decision that benefits you long-term.

Why Military Service Counts Toward Your FERS Pension

If you served in the military before becoming a civilian employee, you have a valuable opportunity to increase your FERS pension. The Federal Employees Retirement System (FERS) allows you to “buy back” your military time and add those years to your civilian service credit. This means a larger pension check when you retire.

The government values your military service but requires you to formally complete a deposit process to credit that time toward retirement. Without doing so, you could miss out on thousands of dollars in additional lifetime pension payments.

How the Military Buyback Program Works

Military buyback is a voluntary program. You pay a deposit equal to a small percentage of your military earnings, plus interest, to count that service toward your FERS retirement calculation.

Deposit Amount: Typically, 3% of your total military basic pay earned while on active duty.
Interest: Interest accrues if you delay making the payment beyond your first three years of civilian service.

Once you complete the deposit, those military years are added to your length of civilian service, boosting your pension formula significantly.

Steps You Must Follow to Buy Back Your Military Time

Successfully buying back your military time requires following a series of formal steps. Missing even one part could delay or derail the process.

Request Your Earnings: Obtain your certified military earnings using the RI 20-97 form sent to your military finance center.
Calculate Your Deposit: Your HR office or agency benefits specialist can help estimate the total deposit required, including any accrued interest.
Submit a Buyback Application: File the SF 3108 (Application to Make Service Credit Payment) along with your earnings statement.
Make the Payment: Pay your deposit in a lump sum or through payroll deductions if your agency allows.
Receive Your Paid-in-Full Letter: Once your deposit is paid, you receive official confirmation that your military time counts toward your FERS pension.

Timelines That Matter in 2025

Timelines can make or break your ability to maximize the value of your military buyback.

First Three Years: You have three years from your civilian hire date to pay the deposit without owing any interest.
After Three Years: Interest is compounded annually and can significantly raise the buyback cost.
Before Retirement: You must complete the buyback before your separation date to receive credit toward your annuity calculation.

Because it is now 2025, if you were hired in 2022, your interest-free window may already be closed. It’s essential to check your specific dates immediately.

How Military Buyback Impacts Your FERS Pension Calculation

FERS uses a straightforward formula based on your years of creditable service and your high-3 salary average:

When you buy back your military service, you add those years to your total “Years of Service.”

Without Buyback: Only your civilian years count.
With Buyback: Your military years are added, creating a larger multiplier and a bigger final pension.

For example, someone with 25 years of civilian service and 5 years of military service could retire with a pension based on 30 years of service if the military buyback is completed.

Costs You Should Expect in 2025

Although you cannot buy back time for free, the cost is often far lower than the lifetime value it adds to your pension.

Deposit: 3% of your total military base pay.
Interest: If applicable, the 2025 interest rate set for civilian deposits is around 2.75% annually, but check with your HR office for exact figures.

The earlier you complete the deposit, the less you pay in interest.

What Happens If You Do Not Buy Back Your Military Time

If you skip the buyback, your military service generally will not count toward your FERS annuity calculation. This means:

Lower lifetime pension payments.
Potentially delayed eligibility for retirement if you fall short of service requirements.

Military retirees who already draw military retirement pay (except for certain types like reserve retirement) usually cannot double-dip and must waive their military pension to receive credit under FERS.

Special Considerations for Reservists and National Guard Members

If you served in the Reserves or National Guard, the rules are slightly different.

Only periods of active duty (not training) typically qualify.
You can usually buy back active duty periods without affecting reserve retirement benefits.

Review your specific military records carefully to understand which periods qualify for buyback.

Why 2025 Is the Right Time to Act

Waiting longer to buy back your military time only increases the interest you owe. Since it is already 2025, any military service not paid for by now could cost significantly more if you delay further.

Interest accrues annually on the unpaid balance.
Agency processing delays are common, making early action even more important.
Higher future salary increases the amount you’ll owe in later years.

Frequently Asked Questions About Military Buyback

Can you buy back military time after retiring?

No. You must complete the military buyback before your official separation date from civilian service.

Does buying back military time affect VA disability payments?

No. VA disability compensation is separate and unaffected by military buyback decisions.

How do I verify my buyback is complete?

You should receive an official paid-in-full letter from your agency’s benefits office confirming your military service deposit.

Strategies to Handle the Military Buyback Cost

If you are concerned about the out-of-pocket expense, consider these options:

Payroll Deductions: Some agencies allow automatic deductions over time.
Lump-Sum Payment: Use savings or tax refunds to pay it off at once and avoid future interest.
Financial Planning: Factor the buyback cost into your retirement savings plan as an investment in your future income.

Hidden Benefits of Buying Back Military Time

Aside from the obvious pension boost, completing your military buyback offers other important benefits:

Earlier Retirement Eligibility: Your military time can help you meet the minimum service requirements sooner.
Faster Accrual of Sick and Annual Leave: In some cases, seniority based on total service time affects leave accrual rates.
Higher Thrift Savings Plan (TSP) Contributions: A longer federal career may also help you contribute more to your retirement savings.

Common Mistakes to Avoid in 2025

Waiting Too Long: Procrastinating leads to higher interest charges and missed deadlines.
Assuming It Happens Automatically: No credit is given unless you complete the application and payment.
Misunderstanding Retired Military Rules: If you are receiving military retired pay, you must understand how waiving that pay affects your FERS benefits.

Moving Forward with Confidence

Turning your military time into a bigger FERS pension can create lasting financial security for you and your family. But it requires careful planning, prompt action, and attention to detail.

If you are unsure how to proceed, it is highly recommended that you speak with a licensed professional listed on this website. They can help you evaluate your specific situation, calculate costs, and guide you through the process step-by-step to make the most of your hard-earned military service.

Jeff Boettcher

For over 20 years, Jeff Boettcher has helped his clients grow and protect their retirement savings. "each time I work with my clients, I'm building their future, and there are few things that are more important to a family than a stable financial foundation."

Jeff is known for his ability to make the complex simple while helping navigate his clients through the challenges of making the right investment decisions. When asked what he is most passionate about professionally, his answer was true to character, "Helping my clients – I love being able to solve their problems. People are rightfully concerned about their retirement income, when they can retire, how to maximize their financial safety and future income." Jeff started Bedrock Investment Advisors for clients who value a close working relationship with their advisors.

A Michigan native, Jeff grew up playing sports throughout high school and into college. While Jeff is still an 'aging' athlete, Jeff will take more swings on the golf course than miles running these days. He creates family time, often with weekly excursions to play golf, a hobby he shares with his three young children.

Disclosure: Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice has been filed, or is excluded from notice filing requirements. This information is not a complete analysis of the topic(s) discussed, is general in nature, and is not personalized investment advice. Nothing in this article is intended to be investment advice. There are risks involved with investing which may include (but are not limited to) market fluctuations and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making any investment decision. You should consult a professional tax or investment advisor regarding tax and investment implications before taking any investment actions or implementing any investment strategies.