Your Military Service Still Pays Dividends—If You Buy It Back the Right Way

Site Admin
May 27, 2025

Key Takeaways

Buying back your military service time can significantly boost your retirement annuity under FERS or CSRS, but the benefits depend heavily on timing, accuracy, and your current federal status.
Interest begins to accrue after your third year of civilian service, making early action critical to avoid overpaying for the same benefit.

What It Means to Buy Back Military Time

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If you served in the U.S. Armed Forces and are now employed in a civilian position within the government, you may be eligible to credit your military time toward your federal retirement. This process, known as “military service buyback,” allows you to increase your years of creditable service, which directly affects the calculation of your retirement annuity.

The process is entirely optional, but for most government employees, buying back military service can be a financially smart move—especially if done early in your civilian career.

Eligibility Requirements

You must meet these conditions to be eligible:

Your military service must have been active duty, not reserve duty or National Guard duty unless it was under federal orders.
You must have received an honorable or general discharge.
You must not be receiving (or planning to receive) military retirement pay, unless it’s based on a disability incurred in combat or caused by an instrumentality of war.

How It Works: The Buyback Process

Step 1: Get Your Military Records

Request your DD-214 and military earnings history. You’ll need this documentation to calculate your deposit amount. The Defense Finance and Accounting Service (DFAS) can provide your military earnings statement.

Step 2: Estimate Your Buyback Cost

The deposit is calculated as:

FERS employees: 3% of your basic military pay.
CSRS employees: 7% of your basic military pay.

These percentages are applied to the total basic pay you received during your military service—not allowances or bonuses.

Step 3: Submit Your Application

You will submit your completed forms to your agency’s HR or benefits office. They will process your request and forward it to OPM. Once OPM confirms your deposit amount, they’ll provide instructions for payment.

Step 4: Make the Payment

You can pay in a lump sum or in installments through payroll deduction. The longer you wait, the more interest accrues—starting after your third year of federal civilian service.

Why Timing Matters in 2025

If you’re reading this now, in 2025, and you haven’t bought back your military time yet, it’s worth calculating how long you’ve been a federal civilian employee.

Interest starts after your third year of federal service and compounds annually.
Every year you delay after that means a higher total cost.

For example, someone who joined the civilian workforce in 2022 would start accruing interest in 2025 if they haven’t completed their deposit. This added cost can be hundreds or even thousands of dollars depending on how much military time is being credited.

How It Affects Your Retirement

Buying back your military time adds directly to your years of creditable service. This impacts both:

Your eligibility to retire: For example, hitting the 20-year mark sooner.
Your annuity calculation: Your pension is calculated using your years of creditable service and your high-3 average salary.

Every additional year you credit boosts your annuity by:

1% of your high-3 salary for FERS employees (or 1.1% if retiring at age 62 with 20+ years).
2% per year for CSRS employees.

Example (Generalized):

If your high-3 average is $80,000 and you buy back 3 years:

Under FERS, your annuity could increase by approximately $2,400 per year (3% of $80,000).
Over 20 years of retirement, that could mean nearly $50,000 in additional income.

Common Mistakes to Avoid

Waiting Too Long

As interest compounds annually, waiting even one extra year can significantly raise your total deposit.

Misunderstanding the Pay Used for Calculation

Many employees assume their current civilian salary is used to compute the deposit, but it’s actually based on your military base pay—which is usually much lower.

Overlooking the Impact on Eligibility

Some employees focus solely on the pension increase and forget how military buyback can also make them eligible for earlier retirement. This is especially relevant if you’re close to qualifying under MRA+10 or Special Provisions.

Not Verifying the Service Credit

Even after payment, you must ensure your agency and OPM properly credit the time. It must be officially added to your SF-50 and included in your retirement estimate.

What Happens If You Don’t Buy It Back?

If you choose not to buy back your military time, here’s what happens:

The service is not counted toward your creditable years for annuity purposes.
You may still be eligible for veterans’ preference in hiring or reductions in force.
Your Social Security benefits are not affected, and you can still collect those separately.

However, your FERS or CSRS pension will only be based on your civilian years unless the buyback is completed.

Impact on Social Security and Other Benefits

Under FERS

Your retirement is composed of three parts:

FERS basic annuity
Social Security
Thrift Savings Plan (TSP)

Buying back military time affects only the FERS basic annuity. It does not reduce or change your Social Security entitlement in any way. You’re not double-dipping—you’re simply optimizing your total benefits.

Under CSRS

Since CSRS does not include Social Security, your military time could help increase your annuity more significantly—but make sure you’re not also receiving military retirement unless exempted.

Should You Buy It Back?

In most cases, yes—but it depends on your career plans and when you served.

You Should Strongly Consider Buying Back If:

You’re early in your civilian career (within your first 3 years).
You served several years on active duty.
You want to retire as soon as possible and maximize your annuity.

You Might Delay or Skip Buyback If:

You’re already receiving military retirement (non-exempt).
You’re nearing retirement and the cost to buy back is very high due to interest.
You’re uncertain about continuing federal employment.

What to Do in 2025 If You’re Still Unsure

It’s never too late to calculate your numbers and speak with a retirement specialist. You can still initiate a deposit even after interest has begun. However, you’ll want to compare the lifetime increase in your annuity versus the upfront cost.

Also, if you plan to retire in the next few years, now is the time to review:

Your SF-50 personnel file
Your military service records
Retirement estimates from your agency

One Move Can Add Thousands to Your Future Retirement Pay

Military service buyback is one of the most underutilized tools for increasing federal retirement benefits. And in 2025, with rising interest rates and increased attention on cost efficiency in retirement planning, it’s more important than ever to evaluate this option early.

This is not a decision to make in isolation. Talk to your HR office, gather your records, and if you’re still uncertain, get in touch with a licensed professional listed on this website to walk through your options.