For many federal employees, prior military service plays an essential role in shaping their federal career and retirement benefits. The Military Buyback program—also known as Military Service Credit—is a powerful opportunity to convert military time into creditable federal service. Understanding how this process works and whether it’s worth the investment can help you make informed decisions that maximize your federal retirement income.
What Is Military Buyback?
Military Buyback allows federal employees covered under the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS) to “buy back” their active-duty military service. By making a one-time payment (a deposit) to the Office of Personnel Management (OPM), eligible employees can add their active-duty military time toward their years of federal service for retirement computation purposes.
Essentially, this means your military time counts the same as civilian service when determining your retirement eligibility and annuity amount. For example, if you served four years in the military before joining federal service, buying back those years could allow you to retire four years earlier—or increase your retirement annuity by four additional years of service credit.
Why Military Buyback Matters
Many employees overlook how impactful this credit can be on their future retirement income. Since FERS annuities are based on your “high-three” average salary multiplied by your years of creditable service, every year of credit increases your benefit. Even a few additional years can lead to thousands of dollars more each year in retirement income.
The U.S. Office of Personnel Management notes that military service generally counts toward civil service benefits only if you make the required deposit. Without the deposit, those years will not increase your retirement calculation under FERS or CSRS.
How the Military Buyback Process Works
The Military Buyback process involves several steps. While it can seem complex, careful guidance and accurate calculations can streamline it considerably.
- Request Your Earnings: Start by obtaining a certified estimate of your military earnings from your branch of service (usually through the Defense Finance and Accounting Service).
- Calculate Your Deposit: For FERS employees, the buyback typically equals 3% of your total military base pay during your active-duty period. CSRS employees owe 7% of pay. Interest may accrue if you delay payment, so early action can save you money.
- Submit the Deposit: Once your agency calculates the amount, you can make partial payments or a lump sum through your payroll office. The sooner you complete the buyback, the less you’ll pay in interest.
Our retirement specialists at United Benefits can help you estimate your buyback costs, analyze potential retirement savings, and guide you through the OPM process.
Is Buying Back Your Military Time Worth It?
In most cases, the answer is yes—but the value depends on several factors. Consider these key points before deciding:
1. Earlier Retirement Eligibility
For employees looking to retire under age or service thresholds, buying back military time can help you reach retirement eligibility sooner. For example, a federal worker with 16 years of service and four years of active-duty military time could become eligible for retirement benefits at 20 total years of creditable service instead of waiting four more years.
2. Increased Annuity Payments
Because your annual pension is based on your total years of creditable service multiplied by 1% (or 1.1% if you retire at age 62 or older with at least 20 years of service) of your “high-three” salary average, those additional years directly enhance your pension. A four-year credit could result in a lifetime benefit increase worth tens of thousands of dollars over your retirement.
3. Cost Versus Benefit
The cost to buy back military time—including any accrued interest—varies based on how long you’ve been a federal employee and when you make your deposit. An early buyback saves more money and ensures your time counts immediately.
For employees who leave government service before qualifying for retirement, the buyback deposit can be refunded. This flexibility makes the investment a relatively low-risk opportunity for most individuals.
Important Things to Consider
Dual Compensation Rules
If you receive or will receive military retired pay, you may need to waive it to include your military service in your federal retirement calculation. However, exceptions exist—such as for those receiving military retired pay for disability incurred in combat or under specific National Guard provisions. Always verify how dual crediting rules apply to your situation before proceeding with a buyback.
Interest Accrual
Interest on unpaid deposits begins accruing two years after your entry into a covered federal position. The rate changes annually, as set by the U.S. Treasury. Even modest interest can add up, so taking action early in your career can save a significant amount.
Impact on TSP and Social Security
Buying back military time primarily affects your federal pension, but it doesn’t directly increase your Thrift Savings Plan (TSP) account or Social Security benefit. However, the boost in pension income may allow more flexibility when planning withdrawals or coordinating benefits.
Real-World Example
Consider a FERS employee who served five years in the U.S. Army and has 25 years of civilian federal service. If this employee buys back their military time, their total service becomes 30 years. Assuming a high-three salary average of $90,000, the annuity without buyback would be:
25 years × 1% × $90,000 = $22,500 per year
With the buyback, it becomes:
30 years × 1% × $90,000 = $27,000 per year
That’s an increase of $4,500 per year for life. Depending on how much the buyback costs and when you retire, this could mean recovering your investment within just a few years—and continuing to benefit from the extra income throughout retirement.
Expert Guidance Can Make the Difference
Evaluating the long-term financial impact of Military Service Credit requires careful analysis of your pay history, expected salary growth, and potential interest charges. Our team at United Benefits specializes in retirement planning for federal employees. We help you calculate your buyback costs and project the lifetime benefit difference so you can make a decision with full confidence.
Our advisors are dedicated to helping federal employees understand every aspect of their retirement options—from maximizing FERS and CSRS benefits to optimizing TSP contributions. We can also analyze how your military service fits into your overall strategy to ensure that you don’t leave money on the table.
Take the Next Step Toward a Stronger Retirement
Buying back your military service time is one of the most effective ways to strengthen your federal retirement. By acting early, you can minimize costs and maximize your long-term benefit potential. If you have questions about how Military Buyback applies to your individual circumstances, contact the experts at United Benefits today.
Contact United Benefits:
Phone: 866-558-2121
Address: 3295 County Road 47, Florence, AL 35630
Website: https://unitedbenefits.com/
Ready to take the next step? Visit our Retirement Solutions page to explore how our team can help you optimize your federal benefits and ensure your years of service—both military and civilian—count toward your secure retirement future.