Key Takeaways:
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Military service can significantly enhance your civilian retirement benefits. When transitioning to a civilian job, your military time can count toward your public sector retirement.
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Strategic planning during your transition can maximize your retirement savings. Understanding how to integrate military time with civilian retirement plans is key to a secure future.
Ready to Transition? Let’s Talk Retirement
So, you’re getting ready to move on from military life and enter the civilian workforce. While your mind might be on the job search or adjusting to a different work environment, there’s something else you should consider—how your military service can impact your civilian retirement. Trust me, it’s worth your attention.
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Public Sector Jobs: A Veteran’s Best Friend
If you’re transitioning into a public sector job—whether it’s at the federal, state, or local level—then you’re in luck. Public sector jobs come with excellent retirement benefits, and if you know how to work the system, you can use your military time to boost your retirement.
Most public sector employees are part of the Federal Employees Retirement System (FERS) or, in some cases, the older Civil Service Retirement System (CSRS). Both of these systems allow you to apply your military service time to your retirement calculations. This means you can qualify for a pension sooner or increase the amount you’ll receive in retirement.
The Military Buyback Program: How It Works
The Military Buyback Program is your ticket to making those years of service count. This program allows you to “buy” your military time and apply it toward your civilian retirement.
What’s the Process?
In short, you’ll make a one-time payment based on your military earnings. Once that’s done, the years you served in the military will count as if they were years spent working in your civilian job.
Let’s say you served five years in the military and then worked 15 years as a civilian government employee. If you buy back your military time, it gives you 20 years of service credit for retirement. That can mean retiring earlier and with a larger pension.
Timing is Key
While you can buy back your military time at any point in your civilian career, it’s usually best to do it as soon as possible. If you wait, interest can add up, making the process more expensive. Ideally, start the process within the first few years of your civilian career to avoid paying more than you have to.
FERS vs. CSRS: Where Does Your Military Time Fit In?
Let’s break down how your military time can be used in the two main retirement systems: FERS and CSRS.
FERS (Federal Employees Retirement System)
For those in the FERS system, your retirement will come from a mix of a pension, Social Security, and your Thrift Savings Plan (TSP). Your military service can count toward your years of service for your pension, which is a huge advantage.
To buy back your military time under FERS, you’ll pay 3% of your military earnings, plus any interest if you wait too long. Once paid, those military years will count toward both your retirement eligibility and your pension calculation.
CSRS (Civil Service Retirement System)
For those under the CSRS system, you can also buy back your military time, but the process is a little different. You’ll need to pay 7% of your military earnings, and you’ll want to do it early to avoid high interest charges. The upside is that CSRS pensions are typically larger, so it’s still a worthwhile investment.
What About Social Security?
If you’re in the FERS system, your retirement benefits will include Social Security, and the good news is that buying back military time won’t affect your Social Security. You’ll still be able to collect both your pension and Social Security.
For CSRS retirees, things are a little different. Since CSRS employees don’t pay into Social Security, you might be affected by the Windfall Elimination Provision (WEP), which could reduce your Social Security benefits if you qualify. However, most CSRS retirees get a larger pension, which can make up for the reduced Social Security benefits.
MRA+10: Early Retirement for FERS Employees
If you’re a FERS employee, another option to consider is the MRA+10 retirement plan. Under this system, you can retire as soon as you reach your Minimum Retirement Age (MRA)—usually between 55 and 57—even if you don’t have 30 years of service.
However, retiring early means your pension will be reduced by 5% for every year you’re under age 62. But buying back your military time can help you reduce or eliminate that penalty by boosting your years of service.
Steps to Get Started
Ready to start the process? Here’s a quick guide to getting your military service credited toward your retirement.
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Request Your Military Earnings
The first step is to get your military earnings statement, which you can request from the Defense Finance and Accounting Service (DFAS). This will give you the information you need to calculate how much you’ll need to pay. -
Submit Your Buyback Application
Once you have your earnings statement, submit an application to your HR department. They’ll calculate the amount you owe based on your military earnings, plus any interest. -
Make Your Payment
After your application is processed, you can pay your buyback either in a lump sum or through installments. Once you’ve paid, your military service will officially count toward your retirement.
Secure Your Future by Maximizing Military Buyback
In the end, using your military service to enhance your civilian retirement is one of the smartest moves you can make. It can help you retire sooner, with a larger pension, and provide more financial security in the long run.
Don’t wait too long to start the process—get those military years working for you as soon as possible. You’ve earned it.
