Key Takeaways
- Combining military and civilian retirement benefits offers the opportunity for increased pension and earlier retirement.
- The military buyback program is essential for federal employees looking to leverage their prior military service toward a more secure and lucrative civilian retirement.
How Civilian and Military Benefits Can Work Together
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The buyback option allows you to take the years you spent in military service and apply them to your federal civilian retirement. This strategy gives you the chance to retire earlier and receive a larger pension, combining the best of your military and federal civilian careers.
The Basics of Military Buyback: What It Is and Why It Matters
The military buyback program is a game-changer for many federal employees with prior military service. Here’s how it works: You pay a deposit based on a percentage of your military base pay, and in return, the government credits your military service toward your civilian retirement. This means you’re essentially buying additional years of service, which translates into a larger pension and earlier eligibility for retirement.
For most FERS employees, the deposit is 3% of their military base pay during their years of service. By adding military time to your federal service, you’re not only increasing your retirement annuity but also moving closer to eligibility for retirement.
One of the biggest advantages of this program is that the cost is often recouped within a few years of retirement. Let’s say you served four years in the military and had an average base pay of $60,000. By paying 3% of that, you’d owe around $1,800. In exchange, those four years of service are added to your civilian retirement calculation, potentially increasing your pension by thousands of dollars over time.
The Financial Benefits: Why Buying Back Military Time Is Worth It
Why should you consider buying back your military time? First, it can make you eligible for retirement years earlier than if you were relying solely on your civilian service. For example, if you need 30 years of federal service to retire, but you’ve already completed four years of military service, buying back those years allows you to retire after 26 years of civilian work. That’s four extra years of retirement you’ll enjoy, simply by leveraging the time you already spent serving.
Second, it directly increases your retirement income. The pension you receive from FERS is based on your number of creditable years of service and your high-three salary (the average of your highest three years of salary). By adding military time to your total years of service, you increase the pension multiplier, meaning a larger retirement check each month for the rest of your life.
Timing Is Everything: Start Early for Maximum Savings
Timing is crucial when it comes to the military buyback program. You have a three-year grace period after starting your federal civilian job, during which you can pay the buyback amount without any interest. After that, interest starts to accrue, and the cost of buying back your time increases year after year. So the sooner you act, the better.
If you wait too long, the interest can add up significantly, making the buyback more expensive. The good news is that even if you miss the interest-free window, it’s still often worth it to buy back your military time, as the increase in your pension will likely outweigh the cost.
For most employees, the buyback process can take three to six months, so it’s important to plan ahead. Starting early ensures that your paperwork is completed on time and that you don’t face any delays as you approach retirement.
Deciding If Buyback Is Right for You
While buying back military time is a smart move for many, it’s not the right choice for everyone. If you’re already receiving a military pension, you’ll have to give it up if you choose to buy back your time for FERS. This can be a tough decision, especially if your military pension is substantial or if it includes other perks like healthcare through Tricare.
It’s important to weigh the pros and cons. In some cases, federal civilian employees with a higher civilian grade may find that buying back military time makes financial sense, even if it means giving up their military pension. For example, if your civilian job pays significantly more than your military rank, the increase in your FERS pension could offset the loss of your military pension.
How to Buy Back Your Military Time
The process of buying back military time involves several steps, but with careful planning, it’s relatively straightforward:
- Request your military earnings: The first step is to complete form RI 20-97 to get a record of your military base pay during your service years.
- Submit your earnings to your HR office: Your federal agency will use this information to calculate how much you need to pay to buy back your time.
- Make the payment: You can pay the buyback amount as a lump sum or set up a payroll deduction plan to pay it off over time. Just remember, you must complete the buyback before you retire, or your service won’t count toward your retirement.
Starting the process early is key to avoiding interest charges and ensuring your military service is credited toward your retirement as soon as possible.
Additional Military Benefits You’ll Keep
One of the best parts about buying back your military time is that it doesn’t affect most of your other military-related benefits. Even if you buy back your military service for FERS, you’ll still have access to perks like:
- VA Disability: If you’re receiving disability compensation from the VA, this benefit will remain intact.
- Tricare: You’ll still be eligible for Tricare healthcare coverage in retirement, even if you buy back your military time.
- Base Privileges: Access to military bases, commissaries, and other facilities remains unaffected by the buyback process.
This means you can enjoy the best of both worlds—civilian paychecks and military perks—without sacrificing access to key benefits.
Bringing It All Together: The Perfect Blend for Retirement
By combining the perks of military service with the benefits of federal civilian employment, you can create a retirement plan that is both flexible and secure. The military buyback program is a key tool in achieving this balance, offering the opportunity to retire earlier and with a larger pension.
If you’re nearing retirement, don’t overlook the powerful impact that buying back your military time can have on your overall financial picture. It’s a decision that can set you up for long-term success, giving you the retirement you’ve worked so hard to earn.
How This Strategy Builds a Stronger Future
Blending military perks with civilian benefits allows you to craft a retirement plan that reflects the dedication you’ve shown in both arenas. Whether it’s boosting your pension, retiring earlier, or simply securing more benefits, leveraging both systems sets you up for a more comfortable and secure retirement.
