Key Takeaways
- Your military service can greatly enhance your federal benefits package, including pension and health coverage options.
- Understanding how to maximize these benefits now can help you secure a more comfortable and financially stable retirement.
How Military Service Enhances Your Federal Benefits
- Also Read: Federal Workers, Here’s How to Manage Your TSP for a More Comfortable Retirement
- Also Read: Ready to Retire? Here’s the Best Retirement Advice for Federal Employees in 2024
- Also Read: TSP Withdrawals: Why Federal Retirees Are Rethinking How to Stretch Their Savings the Smart Way
Understanding Military Service Credit
One of the most powerful benefits of having served in the military is the ability to count your years of service towards your federal civilian retirement. This is known as military service credit. When you’re a federal employee, you can add your military service years to your federal service years for calculating your retirement pension under the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS).
The process isn’t automatic, though. You’ll need to buy back your military service time, which means you pay a percentage of your military basic pay to credit those years. The general rule of thumb is that the earlier you do this, the better. The interest that accrues on the amount you owe can increase the cost over time.
How Much Time Can I Buy Back?
In most cases, you can buy back up to 20 years of active-duty military service. If you served in the military for any length of time before starting your federal career, this can be a game-changer for your retirement. Imagine retiring earlier or with a bigger pension because you added those military years to your federal service record.
This isn’t just for those who served full-time. Even if you were in the reserves or served part-time, you may still be eligible to purchase service credit for the time you were on active duty. There’s a lot to gain from taking action on this sooner rather than later.
How Does Military Service Affect My Pension?
Once your military service is credited toward your federal civilian retirement, your pension amount will be calculated based on your total years of service—military and federal combined. For example, if you worked in the federal government for 25 years and bought back five years of military service, you would be credited for 30 years when your pension is calculated. That’s a substantial increase in your benefits!
If you’re eligible for both a military pension and a federal civilian pension, the great news is that you can typically collect both. However, if you do not buy back your military service time, those years won’t count towards your federal pension—meaning you’d miss out on maximizing your overall retirement benefits.
Combining Your Health Benefits
One of the other major perks of military service is the access to TRICARE, the health insurance program for military personnel and retirees. When you transition to a federal civilian job, you may wonder how TRICARE fits with the Federal Employees Health Benefits (FEHB) Program.
The good news is, you can coordinate between the two programs. If you’re retired from the military and have TRICARE, it works as secondary insurance to your FEHB plan once you retire from federal service. Essentially, TRICARE can help cover costs that FEHB doesn’t fully cover, like co-pays and deductibles. This can provide you with robust coverage and save you significant out-of-pocket expenses, especially when it comes to healthcare in retirement.
Can I Have Both TRICARE and FEHB?
Yes, you can. But, here’s the kicker: You’ll need to be enrolled in both TRICARE and FEHB before you retire from your federal civilian position to continue enjoying both benefits. If you don’t have FEHB when you retire, you won’t be able to enroll later, so make sure you’ve planned accordingly.
By maintaining both types of coverage, you’re essentially getting the best of both worlds when it comes to health insurance. TRICARE will often be your primary coverage for many medical services, while FEHB fills in the gaps. It’s a smart strategy to ensure you have comprehensive healthcare in retirement without worrying about major expenses.
Veterans’ Preference for Federal Jobs
Your military service doesn’t just help you in retirement—it can also give you a leg up when applying for federal civilian jobs. Veterans’ preference is a program that gives qualified veterans priority in hiring for many federal jobs. This means that if you’ve served honorably, you’ll have an advantage over non-veteran applicants, especially when it comes to competitive positions.
In some cases, this could mean the difference between getting the job or not, or moving up the ranks more quickly. So, whether you’re just starting a federal civilian career or looking to advance, your military service can boost your job prospects and earning potential in a meaningful way.
Don’t Forget the Thrift Savings Plan (TSP)
Both military and federal civilian employees have access to the Thrift Savings Plan (TSP), a retirement savings plan similar to a 401(k). What many people don’t realize is that you can combine your TSP accounts from both military service and federal civilian employment.
The TSP offers several advantages, including low fees and a variety of investment options that can help you build your retirement nest egg. By contributing to the TSP during both your military and federal civilian careers, you can create a powerful retirement savings strategy that maximizes your potential returns.
If you didn’t contribute much to your TSP during your military service, don’t worry! You can still roll over funds from other retirement accounts or make catch-up contributions to boost your balance before you retire.
What Happens to My Social Security?
If you’re eligible for Social Security benefits in addition to your military and federal pensions, congratulations—you’re in line for a triple benefit. The years you worked in both military and federal civilian positions count toward your Social Security credits.
It’s important to note that your military pay is subject to Social Security taxes, so your military service years are included when the Social Security Administration calculates your benefit amount. In some cases, you might even receive a higher Social Security benefit because of your military service.
Time to Maximize Your Benefits
With everything your military service brings to the table, it’s essential to stay proactive about your benefits. Whether it’s buying back military service time, coordinating health coverage, or taking advantage of veterans’ preference, the choices you make now can have a huge impact on your retirement.
Don’t wait until it’s too late—start planning today, and take full advantage of all the opportunities available to you. It’s time to make sure both your military and federal careers work together to provide you with the most secure and rewarding future possible.
Maximize Both Worlds: Military and Federal Benefits
As a former service member, your military service has already earned you valuable benefits. But by understanding how these benefits interact with your federal civilian job, you can ensure a more comfortable retirement and a healthier financial future.
Explore your options, take action early, and ensure that you are set up for success in retirement—whether that’s through your military service credit, health benefits, or retirement savings plans. The earlier you start, the more you’ll benefit.
