Key Takeaways:
- Your military service can boost your retirement benefits, but you must claim it to see the impact.
- Understanding how to convert your military time into retirement credits is crucial to maximizing your federal retirement dollars.
Retirement with Military Service
If you’ve served in the military, you’re already familiar with the sacrifices and dedication required. What you might not be as familiar with is how your military service can directly increase your federal retirement benefits
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How Military Service Helps Increase Retirement
For those of us who transitioned from the military into public sector jobs, there’s good news—your military service can be counted toward your civil service retirement. In fact, your military time can be added to your civilian service time under the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS), significantly boosting your retirement annuity. However, claiming these extra years isn’t automatic, and the process can be a bit confusing.
By “buying back” your military service, you can add years to your retirement calculation, potentially increasing your monthly pension check. The earlier you start the process, the better, as delays can increase the cost of buying back your service time. In 2024, it’s crucial to lock in the process before interest and fees increase.
What Is the Process of “Buying Back” Military Time?
Let’s tackle the big question: How exactly do you “buy back” your military time? When you hear the term, it might sound like you have to pay a lot of money upfront, but the process is actually manageable for most.
The military service deposit is a percentage of your military basic pay, and this deposit must be made to your retirement system. The good news is that for most people, the cost of buying back their military service is relatively low compared to the retirement benefits they’ll receive over the years. And if you pay the deposit within three years of joining the federal workforce, you avoid interest charges altogether.
To get started, you’ll need to gather your DD-214 (your Certificate of Release or Discharge from Active Duty), which is critical for documenting your service. You then calculate how much you owe and make your deposit, which goes toward increasing your years of service for retirement purposes.
What Happens If You Don’t Buy Back Your Time?
So, what if you don’t buy back your military time? If you choose not to go through this process, your military service won’t count toward your civilian retirement unless you’re already receiving military retirement pay, which in some cases, can be a separate benefit. However, for many, the military pension alone may not fully cover their post-retirement lifestyle, especially when combined with rising living costs.
It’s important to recognize that not buying back your time means you’re leaving money on the table. When you calculate the potential increase in your retirement annuity by including your military service, the decision to buy back the time becomes a no-brainer for most. It’s a straightforward way to boost your long-term financial security.
How Much Time Can You Add to Your Retirement?
The amount of time you can add to your federal retirement from military service depends on how long you served in the military and how much of that time is eligible for buyback. The rule is that active-duty military service counts toward your retirement, but reserve time doesn’t qualify unless you were called to active duty.
For example, if you served four years in the military and buy back all four years, those four years get tacked onto your civilian service time when calculating your FERS or CSRS retirement. So, if you worked for 25 years in the federal government and bought back four years of military service, your retirement would be calculated as if you had worked 29 years.
Is It Worth Buying Back Military Time?
This is a question many of us ask, and the answer is a resounding yes for most. Why? Because of the exponential growth in your retirement payout. The more years of service you have, the higher your pension will be. And the cost of buying back your military service, while it might feel like a small hit in the short term, pays off big time over the long haul.
Plus, remember that the earlier you start this process, the less interest you’ll need to pay. Waiting years to make your military service deposit can add significant interest charges, making the process more expensive the longer you delay.
What If I’m Already Receiving Military Retirement Pay?
If you’re already receiving military retirement pay, things can get a little tricky. You’ll need to waive your military retirement pay if you want your military service to count toward your civilian pension. This is a big decision and one that requires careful consideration because it’s not a decision that can be reversed. Some may prefer to keep their military pension separate, while others opt to combine the benefits for a larger overall annuity.
In 2024, it’s more important than ever to assess your financial future. With inflation and rising costs of living, combining your military and civilian service time can be a key factor in securing the retirement you’ve worked so hard for.
Deadlines and Timelines: Don’t Delay Your Claim
The process of buying back your military time takes some time—this isn’t something you want to leave until the last minute. In fact, the sooner you start, the better. As of 2024, interest charges on military buyback deposits can significantly increase the longer you wait, so you’ll want to make sure you’re within the three-year window to avoid these extra costs.
Final Thoughts on Boosting Your Retirement with Military Time
Claiming your military service time isn’t just about getting the retirement benefits you deserve—it’s about ensuring your hard-earned years of service count toward your financial security. The process might seem a little daunting at first, but with the right information and a proactive approach, it’s completely doable.
Take control of your retirement today. Review your military records, calculate the deposit required to buy back your time, and make sure you’re maximizing your retirement benefits.
