Key Takeaways
-
Buying back military time can significantly increase your retirement annuity under FERS or CSRS, but only if you understand the upfront costs and future limitations.
-
The longer you delay your military deposit, the more you pay, and missing key deadlines can cost you thousands of dollars in lost benefits.
Understanding the Value of Buying Back Military Time
- Also Read: 4 Reasons Why Medicare Could Be a Smarter Choice Than FEHB for Some Federal Retirees
- Also Read: Leaving Your TSP Alone Can Be Risky—Especially If You’re Already Retired
- Also Read: FERS Pension Gone? Here’s What Really Happens If You Resign Tomorrow
Buying back your military time means you pay a specific deposit, allowing those years to count toward your civilian annuity. The decision sounds simple, but there are important trade-offs that demand your attention before you commit.
What Military Time Buyback Actually Costs You
The cost of buying back your military service is based on a percentage of your military base pay earned during your active-duty service, plus accrued interest if you delay payment.
-
For FERS employees, the deposit equals 3% of your military base pay.
-
For CSRS employees, it is 7% of your military base pay.
Interest starts accruing after two years of civilian service, and the longer you wait, the higher your payment becomes. In 2025, interest rates are modest compared to a few years ago, but delaying even five years can increase your total owed by thousands of dollars.
If you separate without completing the deposit, you lose the credit for that service entirely.
Timeline for Making Your Deposit
The best time to pay your military deposit is within your first two years of civilian employment. Here’s why:
-
First 24 Months: No interest charges.
-
After 24 Months: Annual interest begins accruing based on Treasury rates.
You can still complete the buyback after two years, but the financial burden grows. Some employees try to “time” their payments based on expected rate changes, but generally, earlier is better.
In 2025, federal agencies offer online platforms to request military service credit estimates, which helps you plan your payment schedule more easily than in the past.
How Buying Back Time Affects Your Retirement Eligibility
Adding military time boosts your years of creditable service. This directly impacts:
-
Eligibility for retirement: You may reach Minimum Retirement Age (MRA) + required service sooner.
-
Calculation of annuity: More years mean a higher percentage of your “High-3” salary average.
For example, if you served four years in the military and buy that time back, you could retire four years earlier or increase your monthly benefit substantially.
However, be aware that buying back military time does not eliminate Minimum Retirement Age requirements under FERS. It only adds to service years, not age.
Trade-Offs You Must Consider
While buying back military time sounds like a guaranteed win, it comes with specific trade-offs you must carefully weigh:
1. Impact on Military Retired Pay
If you are receiving military retired pay, you usually must waive it to receive credit for your military service in your civilian annuity. Exceptions are rare and mainly apply to:
-
Military disability retirement.
-
Reserve retired pay based on non-regular (Reserve/National Guard) service.
Waiving military retirement pay is a significant decision. It can affect lifelong healthcare, survivor benefits, and access to military facilities.
2. Healthcare Coverage Considerations
Buying back your military time does not grant you access to military health coverage like TRICARE after retirement. You must rely on your civilian retirement healthcare benefits, such as FEHB, if you are eligible.
If you waive your military retired pay, you may lose TRICARE benefits entirely unless you qualify separately based on reserve service or VA coverage.
3. Financial Trade-Off Over Time
While the deposit often seems like a good investment, you must consider:
-
The upfront cost: Thousands of dollars today.
-
The breakeven point: How many years it will take in retirement to “recoup” your investment.
Generally, it takes about three to five years of retirement to recover the cost of the deposit through higher annuity payments. If your health status or other factors suggest a shorter retirement horizon, this may affect your decision.
Common Pitfalls That Still Catch Employees Off Guard
Even in 2025, many public sector employees make costly mistakes when buying back military time. Some common pitfalls include:
-
Waiting too long to complete the deposit and paying unnecessary interest.
-
Incorrectly assuming you can use GI Bill benefits or VA disability benefits to pay the deposit (you cannot).
-
Failing to account for lost TRICARE eligibility after waiving military retired pay.
-
Misunderstanding service credit rules for part-time or reserve service.
Careful review of your specific service record and a consultation with your HR office remain critical steps before making final decisions.
Special Considerations for CSRS vs. FERS Employees
CSRS and FERS employees face slightly different rules regarding military buyback:
-
CSRS employees: If you were first employed before October 1, 1982, you may have partial credit without full deposit—but your annuity could be reduced at age 62 if you do not complete the deposit and qualify for Social Security.
-
FERS employees: Full deposit is mandatory for any military service to count toward retirement eligibility or annuity calculation.
In 2025, CSRS employees represent a very small share of the workforce, but if you are among them, double-check how your service credit is applied.
Important Deadlines You Cannot Afford to Miss
Besides the two-year interest-free window, be aware of these deadlines:
-
At retirement application: If your deposit is not fully paid by retirement, your military time is not credited.
-
If switching retirement systems (e.g., CSRS to FERS): You must complete a new calculation for deposit requirements.
-
Final HR processing: It often takes several months for deposits to be fully processed, so start well before your planned retirement date.
In 2025, agencies still advise beginning the military buyback process at least one year before retirement to ensure completion.
Steps to Start Your Military Service Buyback in 2025
If you are considering a military buyback today, here’s how to begin:
-
Step 1: Request your estimated earnings from your military branch.
-
Step 2: Submit your earnings request and service documentation (DD-214) to your agency’s HR office.
-
Step 3: Receive a military deposit estimate from HR.
-
Step 4: Decide whether to pay in lump sum or installments (if permitted).
-
Step 5: Complete full payment before retirement to ensure credit.
Automated tools available through federal HR systems now allow you to track your deposit progress in real time.
How Military Buyback Fits Into Broader Retirement Planning
Buying back military time is only one piece of your overall retirement strategy. You should also consider:
-
Timing of Social Security benefits.
-
Thrift Savings Plan (TSP) balances and withdrawal strategies.
-
Survivor benefit elections.
-
Healthcare coverage coordination between FEHB and Medicare.
Ignoring these other elements can undercut the benefits of your military time buyback, especially if you retire earlier than planned.
Making the Most of Your Military Service in Retirement
Military service represents sacrifice and commitment. Buying back your service time can honor that investment by enhancing your retirement security. However, it requires careful planning, early action, and a full understanding of the trade-offs.
To get the most value from your military service buyback, consider speaking with a licensed professional listed on this website who specializes in public sector retirements. Professional guidance can help ensure your military and civilian service combine in a way that protects your future.
