Military retirement buyback

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Q. I have 20 years of military service and receive military retirement. I’ve been in FERS for 10 years. I’ve always been told that buying back military retirement wasn’t a good idea. What steps do I need to obtain all the facts necessary to find out if it would benefit me?

A. If you made the deposit, you’d automatically have your years of service increased by 10 years and used in the computation of your annuity. To find out what you’d owe, complete OPM form RI 20-97, Estimated Earnings During Military Service, and mail it, along with a copy of your DD 214, to the military finance center for your branch of service. When you receive that estimate, take it to your payroll office, along with copies of your DD 214 and a Standard Form 3108, Application to Make Deposit or Redeposit, and ask for an estimate of the amount you’d owe, plus accrued interest. Once you have that information, you can decide if the benefit is worth the cost. (The OPM and Standard forms are available for download at http://www.opm.gov, click on Forms.) Note: When you retire from your civilian job, you’d have to waive your military retired pay. Doing so will have no affect on your other military benefits. 

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About Author

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

4 Comments

  1. I did this, but please.understand its a personal financial decision. Major factors at play are how much is your military retired pay, what GS grade will you retire at, and what yoyr High Three pay will be.

    For me I was E7 with 20 and $1,800 military retirement. I made it to GS14 and had DC local High three. It cost me $17K to pay military time, but retired GS14 with 38 years versus 18. My FERS retirement now is $700 more a month versus Gs14 18 years + $1800 military retirement. I will recoup that $17K in less than three years so it was a no brainer.

    I now its a bit complicated, but you have to run your own numbers to decide

    • Yes, it is a personal matter. And you seem to have done a good job of reviewing the pluses and minuses and coming up with the right answer. Congratulations.

    • Sherry Christeson on

      Hello, I am reaching this point in my career. I retired from the Military as an E-8 and am reaching that tipping point where my high 3 will benefit me to combine.

      What I am wondering is when you made your deposit for buy back, did it automatically change your SCD and increase your leave accrual?

  2. As a general rule of thumb, buying back time for active duty retirees is not beneficial unless the following general circumstances exist. If you had a 20 year retirement and retired as an E6 in your respective service and then somehow landed a job that gave you an upward progression path to a GS-15 or SES position, then it might be a beneficial move. The reason for this is the relative cost of buying back military time that was spent being paid as an E1-E6 is relatively small compared to how those years get multiplied through a FERS retirement using a much higher pay grade/pay. The bottom line is as Reg says, you have to run the numbers to know for your exact circumstance. There is only one exception to this rule. For those that retired from active duty as service academy graduates (USMA, USNA, USAFA, etc) it always pays to buy back that time since it costs you hardly anything and those four years were never used to computer military retired pay.

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