Key Takeaways
- Federal employees can increase their pension by adding military service to their civilian time, boosting their retirement benefits.
- The process, known as “military buyback,” allows military years to count towards your federal service years for retirement eligibility and annuity computation.
What Is Military Buyback?
If you’re a federal employee with military service, you can “buy back” your military time and apply it to your civilian retirement under the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS)
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Why does this matter? Well, the more years you have, the larger your pension will be! It’s a big opportunity to enhance your retirement, especially if you served in the military before joining the federal workforce. This option exists to acknowledge your time served while ensuring you don’t miss out on retirement benefits because of your military career.
How Does the Buyback Process Work?
Step 1: Determine Your Eligibility
The first thing to do is figure out if you’re eligible. Generally, most types of active-duty military service are eligible, whether you were in the Army, Navy, Air Force, Marines, or Coast Guard. This includes active-duty time for training, and in some cases, National Guard service can also count, but there are specific criteria for that.
If you’re retired from the military or receiving military pensions, it’s important to note that things get a bit trickier. You can still buy back your time, but you might have to waive your military retirement to add that time to your federal civilian retirement. It’s definitely a decision that requires some careful thought.
Step 2: Request Your Estimated Earnings
To buy back your military time, you need to figure out how much you’ll have to pay. The amount is based on your military earnings and a percentage of your salary. You’ll need to request your military earnings statement from the appropriate branch of the military you served with.
Step 3: Calculate Your Buyback Cost
Once you have your estimated earnings, you can calculate the cost of buying back your military service. For FERS employees, the buyback amount is typically 3% of your military base pay. If you’re under CSRS, it’s 7%. Additionally, if you’ve been working in federal service for a while, you might have to pay interest on this amount if you don’t complete the buyback process within the first three years of federal service.
Step 4: Submit Your Buyback Application
After gathering all the necessary information, you’ll submit the buyback paperwork to your agency’s HR department. The process takes time, so it’s important to be patient and follow up with HR if needed.
Once approved, you’ll make the payments either in full or through payroll deductions. Remember, you don’t have to pay all at once, but if you can, that might be easier than spreading it out over time.
Step 5: Enjoy the Benefits
Once your military time is added to your federal service record, you’ll be able to retire with a bigger pension. Depending on how much military service you have, this could make a significant difference. For example, someone who buys back five years of military time would increase their pension by 5% of their high-3 salary under FERS. That could translate into thousands of dollars more in your retirement check each year!
Why Should You Consider Buying Back Your Military Time?
Now that we’ve covered the basics of how to buy back military time, let’s talk about why you should consider doing it. There are several compelling reasons to go through this process.
Increase Your Pension
The main reason most people pursue the buyback option is the boost it can give their pension. Under FERS, your pension is calculated as 1% of your high-3 salary multiplied by your years of service. So, by adding military time to your federal years, you’re essentially increasing the number of years used in that calculation, which directly increases your annuity.
Retire Sooner
Adding military time can also help you reach the required years of service for retirement eligibility sooner. Under FERS, you generally need 30 years of service to retire with an unreduced pension at your minimum retirement age (MRA), which ranges from 55 to 57, depending on when you were born. But if you add military time, you could hit that 30-year mark earlier and retire sooner!
Preserve Your Military Benefits
Buying back military time doesn’t affect your access to most military benefits like TRICARE, VA benefits, or any other entitlements you’ve earned. You’ll still enjoy the benefits that come with being a veteran, while also getting credit for those years in your civilian retirement.
What About Interest?
As I mentioned earlier, you’ll want to buy back your time within three years of joining the federal workforce to avoid interest. If you wait too long, you’ll still be able to buy back the time, but you’ll have to pay interest on the amount. This can add up over the years, so if you’re thinking about doing it, it’s better to start sooner rather than later!
For those who have been in federal service for a while and haven’t done the buyback yet, don’t worry—it’s still worth considering. Just be prepared for the additional cost of interest.
Can I Buy Back Time If I’m Already Retired?
Unfortunately, no. The military buyback process must be completed before you retire from federal service. Once you’re retired, it’s too late to add those years to your pension calculation. That’s why it’s critical to think about this early, ideally within your first few years of federal employment, to avoid missing out.
Common Questions About Military Buyback
How long does the buyback process take?
The whole process can take anywhere from a few months to a year, depending on how quickly you can gather the necessary documentation and how fast your agency processes the application.
Can I still qualify for Social Security?
Yes! Buying back military time doesn’t affect your Social Security benefits. If you’ve worked long enough to qualify for Social Security, you’ll receive those benefits in addition to your FERS or CSRS pension.
Will I lose my military pension?
This is a crucial question if you’re already receiving a military pension. If you want to add military time to your federal civilian service, you’ll generally have to waive your military retirement pay. This is a major decision, and you should weigh the pros and cons carefully. Keep in mind, this only applies to those receiving military pensions. Veterans who aren’t receiving military retirement pay can buy back their time without any issues.
Wrapping It All Up: Why Buying Back Military Time Is Worth It
Adding your military time to your federal service record through the buyback process can be a great way to enhance your pension and even retire sooner. While the process takes some effort, the long-term benefits are well worth it. You’ll enjoy a larger annuity, have the potential to retire earlier, and still keep most of your military benefits.
If you’re eligible, start the process early to avoid paying unnecessary interest, and take advantage of the boost this can give your retirement.
