Federal retirement vs. military buyback


Q: Sir, I will be retiring from active duty as of 2013 with 30 years of service, at which time I will have 28 years in FERS. I have only bought back about five years of active-duty time. I have not been able to find anyone to assist me with my following questions:
A) What can I do to avoid rolling my military retirement into my FERS retirement?
B) In my situation is there a disadvantage or advantage in making payments for my military service?
C) MRA+10 – would that assist me if I retired before I was 60 years old without the 5 percent penalty?

Thank you so much for your time.

A: If you haven’t completed your deposit, you can stop making payments; then when you retire, the amount you did pay in will be refunded to you with interest, and you would receive no civilian credit for that time. If you complete the payments, you will receive civilian credit for all your period(s) of active duty service in determining your years of service and in your annuity computation. It will have no adverse effect on the pay you receive based on your military service, unless you are receiving military retired pay instead of reserve retired pay. If you are retiring from active duty and receiving military retired pay, you would have to waive that pay to get any civilian credit. If you didn’t, your deposits to the civilian retirement system would be refunded to you with interest. If you are receiving reserve retired pay, you wouldn’t have to waive that pay in order to get credit.
Since you have at least 20 years of creditable FERS service, if you retired at age 60 or later, there wouldn’t be any age penalty. If you retired before age 60 and had fewer than 30 years of creditable service, your annuity would be reduced by 5 percent for every year you were under age 62. Because you have at least 20 years of creditable service, you could retire and postpone the receipt of your annuity to age 60, thereby eliminating the age penalty.

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Reg Jones was head of retirement and insurance policy at the Office of Personnel Management. Email your retirement-related questions to fedexperts@federaltimes.com.

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