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From Boots to Business Suits: How Veterans Can Turn Military Service into Big Civilian Retirement Wins

Katherine Summers
December 13, 2024

Key Takeaways:

Your military service can fast-track your path to a strong civilian retirement by taking advantage of special benefits and retirement strategies available to veterans.
Integrating your military time into your civilian career through programs like military buyback and federal pension plans can mean thousands more in your retirement nest egg.

Leveraging Military Time for Civilian Retirement Success

Hey, fellow public servants! If you’re a veteran now working in the civilian public sector, you’re sitting on a potential retirement goldmine, and you may not even realize it. Those years of service in uniform can actually translate into big wins when it comes to your civilian retirement. But here’s the thing—if you don’t know how to integrate that military service with your current job benefits, you could be leaving a lot of money on the table. Let’s talk about how you can make your military background work for you, ensuring that when it’s time to hang up your business suit, your retirement is as rewarding as possible.

Buy Back Your Military Time and Boost Your Retirement

One of the biggest advantages veterans have when working in the public sector is the ability to “buy back” their military time. What does that mean? Well, the military buyback program allows you to count your years of military service toward your civilian retirement under FERS (Federal Employees Retirement System) or CSRS (Civil Service Retirement System).

Why is this so important? The more years you can count toward your civilian retirement, the larger your pension will be when you retire. In most cases, every year of service adds about 1% of your final salary to your pension under FERS. If you served in the military for four years and buy back that time, you’re adding an extra 4% to your pension for life. And trust me, those percentages can add up quickly over a 20- or 30-year retirement.

You’ll need to pay a small percentage of your military earnings to buy back those years, but the investment is almost always worth it. Typically, it takes about three years to fully pay for the buyback. Once completed, those military years are officially credited to your retirement calculation, making the whole process a retirement game changer.

Take Advantage of Early Retirement Opportunities

Another benefit of combining your military service with your civilian career is the ability to retire early while still receiving full benefits. Many veterans qualify for federal positions that have early retirement options, particularly if you’re in law enforcement, firefighting, or similar roles. These jobs often allow you to retire after just 20 years of service.

So, imagine this: if you’ve already spent 10 years in the military, you only need another 10 in a qualifying civilian role to retire with a full pension. Not a bad deal, right? It’s all about leveraging your past service to fast-track your way to retirement. The best part? You don’t even have to leave the workforce completely—you could retire from one career and start a whole new one while receiving a steady pension check.

Don’t Forget About the FERS Special Retirement Supplement

If you’re a FERS employee (which the vast majority of federal employees are), there’s another benefit veterans should keep in mind—the FERS Special Retirement Supplement. This supplement is paid to federal employees who retire before age 62 and bridges the gap until you qualify for Social Security.

Here’s why it’s especially useful for veterans: If you combine your military service with your civilian time, you could reach the years of service required to retire early under FERS, then get the supplement to hold you over until Social Security kicks in. Basically, it’s like a mini Social Security benefit that you receive in addition to your federal pension, giving you an extra financial cushion during those early retirement years.

Maximize Your Thrift Savings Plan (TSP)

While your pension is a big part of your retirement, don’t forget about the Thrift Savings Plan (TSP). The TSP is similar to a 401(k) in the private sector, and it’s a powerful tool for veterans looking to boost their retirement savings.

As a public sector employee, you’re automatically enrolled in the TSP, and the government even matches a percentage of your contributions. For 2024, you can contribute up to $23,000 annually, and if you’re 50 or older, you can make an additional $7,500 in catch-up contributions.

Veterans often have an advantage when it comes to saving for retirement because of their disciplined financial habits and experience managing resources under pressure. Maxing out your TSP contributions can set you up for a financially secure retirement, especially when paired with your pension and Social Security benefits.

Planning for Healthcare in Retirement

As much as we’d all like to focus solely on saving money for retirement, healthcare is one of the most significant expenses retirees face. The good news for veterans working in the public sector is that you have access to some great healthcare options.

If you’re eligible for federal employee health benefits (FEHB), you can carry that insurance into retirement, which can be a massive cost-saver. Once you turn 65, many veterans choose to enroll in Medicare and keep their FEHB plan as secondary insurance. This combo gives you comprehensive coverage and can significantly reduce out-of-pocket expenses. Veterans may also qualify for healthcare through the VA, adding another layer of coverage.

Planning for healthcare in retirement might not be the most exciting part of your retirement strategy, but it’s crucial. By ensuring you have strong coverage through FEHB, Medicare, or VA healthcare, you’ll protect yourself from high medical costs, giving you peace of mind in your retirement years.

What About Social Security?

One of the perks of the FERS system is that you’re also covered by Social Security. When you’re thinking about your retirement income, don’t forget to factor in this additional stream. If you’ve spent 20 or 30 years working in the federal sector after your military service, those Social Security checks can be a nice supplement to your pension and TSP withdrawals.

For veterans covered by CSRS, it’s a different story. The Windfall Elimination Provision (WEP) can reduce your Social Security benefits, but even then, you’re likely to still receive some portion of it. It’s essential to plan ahead and understand how WEP might affect your total retirement income.

Wrapping Up: A Strong Retirement is in Your Hands

The combination of military and civilian public service offers veterans a unique opportunity to build a robust retirement. With the right strategies—like buying back your military time, maximizing your TSP, and planning for healthcare—you can set yourself up for a financially secure and enjoyable retirement.

The key is to start early, make informed decisions, and take full advantage of all the benefits available to you as a veteran and public servant. So, whether you’re still working or already planning your exit, know that your hard work has put you on the path to a retirement that rewards both your time in uniform and your civilian contributions.