Military buyback pros and cons

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Q. I am a FERS employee, and I’m considering buying back my service time; I retired after 23 years in the Army. I am 49 and have five years of federal time as of 2013. Would it be in my best interests to buy back my military time toward federal retirement, and what would be the effects?

A. Here’s the upside: If you make a deposit to get credit for your active-duty service, you’ll have 28 years of creditable service. If you retire at your minimum retirement age (56), you’ll have 35 years of service and your annuity will be 35 percent of your highest three consecutive years of average basic pay. You’ll also be entitled to the special retirement supplement, which approximates the amount of Social Security benefit you earned during those 12 years while you were a FERS employee.

Here’s the downside. To get credit for those years of active-duty service, you’ll have to waive your military retired pay before you retire.

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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.

59 Comments

  1. Are you saying that there wouldn’t be a military retirement “waive your military” until you retire?

    • Yes. The decision about whether to waive your military retired pay doesn’t have to be made until you are about to retire from your civilian job.

  2. Waive your military retirement means you will not get it anymore (ever). You are substituting a FERS Civil Service retirement for the military. I can tell you that it rarely makes sense to do that, unless you retired from the military as a low level enlisted and then retire from Civil Service as a GS-14 or higher, with a lot of years of service.

      • Reg, are you positive about us keeping our other benefits such as commissary privileges, PX, and Tricare? I’m getting ready to retire from the Post Office and I was medically retired from the Army in 1985 (3 yrs, 8 months,) so I can’t make a bad decision here. Adding that 3 yrs, 8 months to my postal time would be an additional $190 a month in my pension but I don’t want to forfeit my other military benefits.

        • Yes, I am positive. I base my opinion on the words of many others who waived their military retire pay to get credit for that time in their civilian annuity computation.

  3. Being in a federal office with active duty retirees I was not aware that I, a Navy Reservist with 6 years active and 18 years reserve, could use the six years for both retirements. I discovered this by accident. Active duty 1970 to 1976 the reserve to 1995.

    • To learn the amount of the deposit you’d need to make to get credit for your active duty service, fill out a copy of the Application to Make Service Credit Payment (available at https://www.opm.gov/forms/pdf_fill/sf3108.pdf), and send it to the Office of Personnel Management. The address is on the form.

  4. Anthony Robinson on

    Reg, I have retired from the Air Force after 30 years and been in FERS for 7 years, 9 months. Due a sudden illness, I am not eligible to retire early due to 10 year requirement under My current age is 58 years old. I do not want to apply for disability retirement. Is a military time buyback worth it at stage of my life?

    • Only you can answer that question after you do the math. You’ll have to compare what it would cost your to make the deposit and waive your military retired pay with what you’d gain in an immediate FERS annuity.

      • Understanding the waiving of military retired pay at CIV service retirement, will this effect va disability if you were Medically retired via med board at 9 years of active military service?

  5. Are there any services or agencies that will provide a side by side comparison for those of us with a current military retirement to see if it would be beneficial to buyback the military time and apply it to our FERS retirement? I am retired USAF (E6) with 20 years and 5 days in 2005. I was hired back as a GS while on leave prior to retirement. I am eligible to retire MRA+10 at the age of 56yrs 2 mths on 19 Nov 2021 when I will have 16yrs 2.5mths FERS but would lose about 30% of my FERS pension by doing so. Common sense tells me I should just stay in the extra 3yrs 10mths, when I would be 60 and have 20+ yrs towards FERS, but wanting to live life to its fullest and get out while the getting is still good tells me to retire the first day possible. Would I lose any percentage of my FERS retirement at MRA+10 age if I had right at 36 yrs combined service? Since I retired from the USAF as a E6 and will retire from FERS as a GS12 Step 7 – I am wondering if it would behoove me to buy back my military time, lose my current military retirement and add my mil time to my FERS retirement. Decisions decisions decisions. Ugh!

    • I’m not aware of any services or agencies that could help you. If any of our readers are, please let me know and I’ll share that information with the writer.

  6. I’m not aware of a service, either, but really this is a math problem.

    SITUATION A (MILITARY RETIREMENT + FERS RETIREMENT)
    Military Retirement (E6 @ 20 years)
    + FERS (High 3 @ 16 years @ 1% minus 30% age reduction)
    —————————————-
    Total Retirement (not counting social security)

    SITUATION B (ALL FERS)
    FERS (High 3 @ 36 years @ 1%)

    Is SITUATION B higher than SITUATION A?
    – No. Stop – it isn’t worth it.
    – Yes. Well, how much higher? Is it higher enough to justify the deposit you will have to pay?
    For example, if SITUATION B is higher by $3,000/year, and the deposit is $9,000, it might be worth it if (A) you can afford the $9,000 and (B) you will live long enough to collect FERS for at least three years.

    I recommend you get the deposit amount figured out first. That might take a few months. Then, you have to decide if you will pay the deposit lump sum or by payroll deduction.

  7. As a municipal police officer, I am attempting to buy five years of military time. Will I be asked to forfeit my military retirement pay as well? I’m not due to collect it until age 60, and am having a difficult time trying to find the right computation to find out how much I can expect to pay.

  8. While I haven’t yet “done the math” (via the form or attempting to ask the local SME in HRO), from all I read (here and elsewhere) it sounds to me like my CON list would be bigger than my PRO list (for a 55-year-old, retired-after-20-years-in-the-Navy and now a 12-step-10 Fed for the last 2.5 of 11 years in December. Is it that easy or is there more number-crunching than that?

    • Go ahead and check with your local SME in HRO. If your CON list still comes out bigger than your PRO list, it’s unlikely that there would be other factors that would sway your decision.

  9. I retired from the Navy in 2001 as an E7 with 21 years. I am currently a GS-14 step 3 about 3 years away from retirement. I paid the military deposit and bought back the 21 years. My new Service Date is 5/15/81 Instead of 7/15/2002. So instead of having my Navy retirement for 21 years as an E7 and a 20 years FERS as a GS-14, it made sense for me. The difference in my retirement pay is about 8K per year higher with FERS. It will be much higher if I stick it out until I’m 62. I’ll have the deposit paid back in 2.5 years.

    • Thanks for sharing your analysis with us. In order to make things work out the way you’ve planned, don’t forget to waive your military retired pay when you get ready to retire from your civilian job.

  10. I retired from active duty AF in 1989 with 4.5 years then joined the DC Air National Guard for 13 years with a little reserves (MIA). I RETIRED in 2007. I got a letter stating that I will recieve military retirement at 60. I brought back the 4.5 active duty. In 2023 I will have a total of 30 years in the post office. My question is did I lose my retirement with the military for the buy back of the 4.5 years active duty.

    • Making a deposit to get credit for you period of active duty service will have no affect on your entitlement to reserve retired pay.

  11. I work under the fers program and ready to retire I reached my 20 yrs and I don’t want to give up my reserve pay. I put down on my application I don’t want a waiver. How do I get a refund from my time I bought back ?

    • If you are receiving reserve retired pay, it wouldn’t make any sense to ask for a refund. Leaving your money in the fund will increase the amount of your civilian annuity and won’t have any affect on your reserve retired pay.

  12. for what its worth, i bought back my 4 years of Navy service (1986-1990) and did so with installment plan…just finished paying it off a year ago (paid $125 per payday for about a year)…cost me right at $3100…would have been around $1200 had i bought it within the first 3 years of postal employment…im now 56 with 30+ total years of FERS service and I highly recommend buying it back!

    • Thanks for sharing your experience with us. Making a deposit to get credit for active duty service can really pay off, especially if its make during the initial 3-year window before interest starts to accumulate.

      • Reg, hi and thanks for the information. I bought back 20 years (USA Army). I’ve been 10 years in the federal service, hoping to retire in 5 years (total of years would be 35 years). I was able to compare the difference between buying back the time or just getting both. The difference is approximately $800 / month. That said, I will recover my investment of buying back in 20 months, and start getting ROI. The entity that helped making the comparison was “myfedbenefitshelp.com”

  13. What if scenario: I have 2 years working for the VA and I bought back 9 years of active duty time, I am 58 years old. What if I get RIF (reduction in force) at year 3 working for the VA. Will I still get the 12 years of federal retirement when I turn 62 and do I lose my buyback?

    • No, you won’t. You have to have 5 years of actual service to be vested in the retirement system. If you are separated from the service, your only option – if you don’t plan to return to work for the federal government – is to ask for a refund of your contributions to the retirement system and the deposit you made.

  14. Scenario: 24 Years in the Marine Corps E-9. 16 years federal employee GS 14. Planning to retire soon. How does the buy back option affect VA benefits?

  15. Hello sir,
    OK, here is my situation. I was in the Army from 1979 to 1988. I was honorably discharged. Last January I took a job with the VA as a counselor (GS 11). I went ahead and signed up for the buy back program. I am going to be 60 in January and I really do not want to work past 62. that means I will only have a total of 3 years working with the VA. If I am understanding correctly, the buy back program will do nothing for me unless I stay at least five years at the federal level. The other possible myth I was curious about is, once you have paid back your time, how does that affect the amount of paid time off you get on a yearly basis?
    Thank you very much for taking the time to answer my questions.

    • You are correct. You need to have 5 years of actual FERS service to be eligible for an annuity. Unless your agency has made an error, you have already received credit for your active duty service in determining the amount of annual leave you earn each year.

  16. If I buy back my time of 21 years service to go towards my civ ret and change my mind lets say 3 months after i pay the deposit. Can or will i get the full amount of my deposit back from the buy back.

  17. I retired as an E8 after 21 years active duty in 1995. I entered civil service in 2009 as a GS11 and I’m planning on retiring in 2021 as a GS12 Step 8. Based upon my calculations it would not be cost effective.

    Combine Military and Receive Separate Military
    Civilian Career Retirement and FERS

    Military Retirement $0.00 $26,604.00

    FERS Retirement
    (High Three = $91,727.00) $33,297.00 $11,007.24
    (High-3 x 1.1% x 33 yrs.) (High-3 x 1% x 12 yrs.)

    Total retirement $33,297.00 $37,611.24

    Military Deposit $9,851.23 $0.00

    • Congratulations on having done your homework. You’ve set a good example for others who are considering whether to waive their military retired pay and make a deposit to get credit for their active duty service in their civilian annuity. Sometimes it’s a cost effective decision; other times it isn’t.

    • If there is a court order that entitles your ex-spouse to any portion of your military retirement benefit, you’ll be barred from making a deposit to get credit for your active duty service in your civilian annuity.

  18. Hi I was a USDA employee in 1990 when my National Guard unit was activated by a presidential call up. I was LWOP for less than 6 months, then came right back to my USDA job. Is that time creditable, or do I have to make a deposit? And if I do have to make a deposit, am I able to deposit by the alternate method where I only deposit the amount of my retirement contributions since I was reemployed with my agency? Thanks.

    • Since you didn’t say if you are covered by CSR or FERS, I’ll provide the answers for each retirement system.

      If you are covered by CSRS (or CSRS Offset), and were first employed on or after October 1, 1982, you’ll only get retirement credit for that period of active duty service if you make a deposit for that time, including accrued interest. The amount of the deposit is 7 percent of your basic military pay (not allowances or differentials). If you were first employed before October 1, 1982, you can either make the deposit, plus accrued interest, or receive service credit for that time but have your annuity actuarially recomputed to eliminate that period of service.

      If you are covered by FERS, you can only receive credit for that time if you make a deposit. That deposit equals 3 percent of your basic military pay (not allowances or differentials), plus accrued interest.

  19. I did 17 years and 9 months with the Marine Corps and currently have 11 years with DCMA as a NH-03. I received medical severance when I got out. I am paying that severance back out of my VA Disability monthly. That severance wont affect me from buying my time back correct? Also if I wait longer to buy back my time, will it cost me more? or has the 11 years I waited already cost me more than if I would have bought it back when I first started?

    • The longer you wait to make a deposit, the more you’ll owe. That’s because interest is added annually. Assuming that you entered government service in 2010, the amount you initially owed would have been increased by the following amounts:
      2011 2.75%
      2012 2.25%
      2013 1.625%
      2014 1.625%
      2015 2.0%
      2016 2.0%
      2017 1.875%
      2018 2.125%
      2019 2.75%
      2020 2.25%
      2021 1.375%
      Although these individual increases are small, they really add up over time. To find out what you would owe today, you’ll need to complete OPM Form RI-20-97, Estimated Earnings During Military Service, and mail it to your military finance center with a copy of your DD Form 214, Report of Transfer or Discharge. When that estimate is returned to you, take it, a copy of your DD 214, and a Standard Form 3108 to your local payroll office and request an estimate of the amount you would owe. Once you know that and have determined what the difference would be in your annuity when you retire, you’ll have a better idea of whether or not to make that deposit. (You can download copies of RI-20-97 and SF 3108 by going to http://www.opm.gov and clicking on Forms.)

  20. Great Q&A! I believe I’m the “lower enlisted” retiree situation you mentioned in the introduction.
    2018, Retired after 20 yrs active duty. …as an E-5.
    (Higher Tenure got me because I switched services and started from E-1 twice.)
    Moving on, I am now a GS-12+ in Law Enforcement. With 2 years into FERS.

    I’ve tried many “calc methods”, but find contradicting info on MRA and the special % for LEO retirement.
    Buy-back is 1%, and use 1.7% for all my FERS LEO time?

    • You’ll need to have 20 years of actual LEO employment to qualify for the enhanced 1.7 percent multiplier when you retire. Active duty service for which you make a deposit will be calculated using the standard 1 percent multiplier.

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