Key Takeaways:

• Military buyback programs allow federal employees to increase their pension by purchasing credit for military service.
• Taking advantage of these programs early can result in substantial retirement benefits.

Military Buyback Programs Explained: Here’s How Federal Employees Can Use Them to Boost Their Pensions

• Also Read: Are You Eligible for the Federal Employee Retirement System (FERS)? Find Out Here
• Also Read: Why TSP Withdrawal Options Might Be More Flexible Than You Think for Federal Retirees
• Also Read: The Top Federal Employee Benefits You Should Be Tapping Into Right Now

For federal employees who have served in the military, the military buyback program offers an opportunity to enhance retirement benefits by counting their time in service toward their federal pension. This program allows eligible federal workers to “buy back” their military service time, potentially increasing the value of their federal pension. Understanding how the buyback process works, its benefits, and how to navigate it effectively is essential for federal employees looking to maximize their retirement security.

In this article, we’ll explore the ins and outs of military buyback programs, breaking down the steps federal employees need to take to leverage this program to their advantage.

What Is a Military Buyback Program?

A military buyback program allows federal employees who have served in the military to count their military service time toward their federal civilian retirement. This can lead to a higher annuity payment upon retirement by increasing the total number of years of service. The program applies to federal employees under both the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS).

In essence, buying back military time means that federal employees are making a payment to the federal retirement system, which is based on their prior military earnings. Once the payment is made, their military service years are added to their civilian service time, which boosts the overall pension calculation.

How Does the Buyback Process Work?

The military buyback process involves several steps that federal employees need to complete in order to add their military service time to their federal pension.

1. Obtain Your Earnings Record – The first step is to request your military service earnings record. This document details your military pay and is necessary to calculate how much you’ll need to pay into the federal retirement system. You can request this through your branch of service or by contacting the National Personnel Records Center.

2. Calculate the Buyback Amount – The amount federal employees need to pay to buy back their military time is generally a percentage of their total military earnings. For most FERS employees, the cost is around 3% of their total military earnings, while CSRS employees may pay around 7%. It’s also important to note that interest may accrue on the buyback amount if you wait too long to start the process.

3. Make the Payment – Once the buyback amount is calculated, you can submit a payment to the federal retirement system. Many federal employees choose to make the payment in installments, especially if the buyback amount is substantial. The earlier you make the payment, the less interest you will accrue.

4. Credit Your Service Time – After the payment is made, your military service time is officially credited toward your federal pension. This means that when your retirement annuity is calculated, the additional service years will be factored in, increasing your overall pension payout.

What Are the Benefits of Buying Back Military Time?

For federal employees with military service, the benefits of buying back time are significant, particularly when it comes to enhancing retirement benefits.

• Increased Pension Payments – The primary benefit of buying back military time is the potential for a larger pension. Your federal pension is calculated based on your years of service and your average salary. By adding military service years, you can significantly increase the number of years used in this calculation, which boosts your monthly annuity payments.

• Earlier Retirement Eligibility – Adding military service time can also allow you to reach retirement eligibility sooner. Federal employees under FERS or CSRS must meet certain age and service requirements to qualify for retirement. By buying back military time, you can reach these thresholds earlier, potentially allowing you to retire with full benefits ahead of schedule.

• No Reduction in Military Benefits – Buying back military time does not reduce or affect other military benefits you may be entitled to, such as veterans’ healthcare or benefits through the Department of Veterans Affairs (VA). These benefits remain separate from your federal pension, meaning you can take advantage of both.

Who Is Eligible for the Military Buyback Program?

Not all federal employees are eligible to participate in the military buyback program. To qualify, you must have served in the U.S. military and be a civilian federal employee under FERS or CSRS. Additionally, you cannot already be receiving a military pension based on the same period of service. This means that individuals who retired from the military with a pension are typically not eligible to buy back the same service time.

However, there are some exceptions. If you’re receiving a military pension for a disability or under specific provisions, you may still be eligible to buy back your military time for federal pension purposes. It’s important to check with your human resources office to confirm eligibility based on your specific situation.

When Is the Best Time to Buy Back Military Time?

Timing is crucial when it comes to buying back military time. The earlier you start the process, the better, as waiting too long can result in higher costs due to accrued interest. Interest typically begins accruing two years after you start your federal employment, so starting the buyback process as soon as possible can save you money in the long run.

Additionally, by buying back time early in your federal career, you’ll have a better understanding of how your retirement benefits are shaping up. This can help you plan more effectively for your retirement and ensure that you’re maximizing your pension potential.

What Should Federal Employees Consider Before Buying Back Military Time?

While buying back military time offers significant benefits, it’s important to consider a few key factors before moving forward with the process:

1. Cost vs. Benefit – The cost of buying back military time can vary widely depending on how much you earned during your military service and how much interest has accrued. It’s important to weigh this cost against the potential increase in your pension. In many cases, the long-term benefit of a higher pension far outweighs the upfront cost, but it’s still worth evaluating your individual financial situation.

2. Timing – As mentioned earlier, starting the process early is key to minimizing costs. Federal employees who wait too long may end up paying significantly more due to interest, so it’s generally advisable to begin the process as soon as possible after starting federal employment.

3. Eligibility – Make sure you’re fully eligible to buy back military time before starting the process. If you’re already receiving a military pension, you may not be able to buy back the same service time. Consulting with a benefits specialist or your HR office can help clarify any eligibility concerns.

4. Long-Term Financial Planning – Buying back military time is a long-term investment in your retirement. Make sure it fits into your broader financial plan and that you’re prepared to make the necessary payments to complete the buyback process.

Boosting Your Federal Pension with Military Buyback

The military buyback program is an excellent opportunity for federal employees with prior military service to enhance their federal retirement benefits. By purchasing credit for their military service, employees can increase their pension payments, reach retirement eligibility sooner, and secure a more comfortable retirement. However, understanding the costs, timing, and eligibility requirements is crucial for making the most of this valuable program.

Federal employees who are eligible for the military buyback program should strongly consider taking advantage of it early in their careers to minimize costs and maximize their pension benefits.