Military Buyback Programs—Why They’re the Secret to Increasing Your Federal Pension

Key Takeaways

1. A military buyback can significantly increase your federal pension if you served in the military before your civilian career.
2. The process may take time, but it’s worth it as it enhances your retirement benefits by crediting your military service years.

What is a Military Buyback Program?

If you’ve served in the U.S. military and now work in the federal government, you may be able to increase your federal pension through what’s called a military buyback

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Many people overlook this option, but trust me, it can be a game-changer. The military buyback program essentially “buys back” your military time, so it counts toward your years of federal service—giving your pension a nice boost.

Why Should You Consider Buying Back Your Military Time?

Now, you might be thinking, “Is it worth it?” Let’s break it down. Federal pensions under FERS (Federal Employees Retirement System) are calculated based on your years of service and your highest average salary. By adding military time to your federal service time, you’re increasing the number of years on which your pension is calculated.

Think about it: If you served four years in the military and then started a civilian federal career, those four years could be credited toward your civilian pension. That can translate into a higher monthly pension check for the rest of your life. Imagine what an extra few hundred dollars per month could do for your retirement!

How Does the Military Buyback Work?

The process is relatively straightforward but requires some attention to detail. Here’s how it works:

1. Eligibility Check: First, you need to verify that you’re eligible. This usually means you served on active duty and were later employed by the federal government. Reservists, don’t worry—you may qualify too if you had any periods of active duty service.

2. Calculate the Cost: Next, the government will calculate how much it will cost you to buy back your time. This is typically a small percentage of your military base pay during your service years. Keep in mind, the longer you wait to initiate the process, the more interest accumulates on this amount. So, it’s usually better to start early—ideally within your first three years of federal employment.

3. Submit Forms: After figuring out the cost, you’ll need to submit the appropriate forms (such as SF-3108 for FERS employees). This paperwork is crucial, so be sure to double-check everything before submission. You’ll also need your DD-214, the official document that verifies your military service.

4. Paying for the Buyback: Once your paperwork is approved, you’ll be told how much you owe. You can usually pay this amount in installments, which makes it easier on your budget. Once it’s paid off, your military service time will be credited toward your federal pension.

When Should You Start the Buyback Process?

Timing is key. Many federal employees make the mistake of waiting until they’re close to retirement to start the military buyback process. This can be costly because interest on the buyback amount accrues over time. If you begin the process within the first three years of your federal employment, you can avoid paying any interest. After that, interest starts to accumulate, making the buyback more expensive.

In 2024, we’re well into a time when federal employees should be proactive about their financial futures. If you haven’t started the buyback process yet, now is the time to seriously consider it.

How Much Can a Military Buyback Increase Your Pension?

The exact amount your pension will increase depends on several factors, such as how many years of military service you’re buying back and your federal salary. The general formula for calculating your pension under FERS is:

1% of your High-3 average salary × years of service.

Let’s say your High-3 average salary (your highest salary over three consecutive years) is $80,000. If you buy back four years of military service, that’s an additional 4% of $80,000 added to your annual pension. That’s $3,200 more per year—or about $266 more per month. Not bad, right?

Can You Buy Back All Military Time?

Not all military service is eligible for buyback. For example, if you’re already receiving a military pension, things can get a little complicated. You may have to waive your military pension to credit those years toward your federal pension, which may or may not be worth it depending on your situation. It’s always a good idea to consult with a benefits specialist before making any decisions.

Is a Military Buyback Right for You?

While the military buyback program is a fantastic opportunity for many federal employees, it’s not for everyone. If you’re already receiving a military pension, especially one that comes with other perks like healthcare, you’ll need to carefully weigh the pros and cons of waiving that pension. The decision can be tricky, so make sure to gather all the facts and even consider consulting a financial planner who specializes in federal benefits.

For those who aren’t receiving a military pension, the buyback is almost always a no-brainer. It’s a relatively low-cost way to significantly increase your federal retirement benefits.

Common Misconceptions About the Buyback Process

Let’s address some myths that might be holding you back from starting the buyback process:

1. “It’s too expensive.” While the upfront cost might seem high, you’re essentially investing in your future. Plus, the payment options are usually flexible, allowing you to spread out the cost.

2. “It’s complicated.” Yes, there are forms and calculations involved, but the process is much more straightforward than most people think. Plus, your human resources department is there to guide you.

3. “I missed the deadline.” It’s never too late to start, although the sooner, the better to avoid paying extra in interest.

Why You Should Act Now

By 2024, federal workers are increasingly aware of the benefits of planning ahead for retirement. A military buyback is one of the smartest ways to maximize your pension, but it’s not automatic—you have to take action. The longer you wait, the more you may end up paying in interest.

Don’t put off the process. If you’re eligible for the buyback program, now is the time to start. Contact your HR department, request your military records, and get the ball rolling. Your future self will thank you.

Take Control of Your Federal Pension

A military buyback can be your ticket to a more comfortable and financially secure retirement. It’s a secret that many federal employees overlook, but now that you’re in the know, you can make the most of your military and civilian service. It may require some paperwork and patience, but in the end, the reward—a higher pension—can be well worth the effort.