How To Pay Back Military Service Time

With more than than 30% of all federal employees having some sort of military time, knowing if you should buy back your service fourth dimension is more than important than always. And I have seen how this one decision can make a dramatic difference in when and how federal employees can retire.

But just like many topics in the federal government, at that place are a lot of things to recall almost when looking at buying this time back.

Hither are links to the main sections of this guide and then feel free to bound to the expanse that yous demand.

What is Buying Back Military Time?

Benefits of Buying Dorsum Military Time

How Much Does it Price to Buy Dorsum Military Fourth dimension?

How to Buy Back Time Without Involvement?

Pros and Cons of Ownership Back Armed forces Time

Should You Buy Dorsum Your Military machine Fourth dimension if Yous Have a War machine Retirement?

How to Purchase Dorsum Your Military Time?

Common Questions

Can I Buy Back Military Time After Retirement?

Does Bought Back Armed forces Time Count for The FERS Supplement?

Tin I Buy Back My Reserve or National Baby-sit Fourth dimension ?

Can I Buy Back My Academy Time?

What is Buying Dorsum Military Fourth dimension?

Buying back military time (or making a military service deposit every bit some call it) is basically paying a certain amount of coin to add together the time you had in the military to your federal service.

Ownership dorsum your fourth dimension oftentimes makes the most sense when you are not already receiving a military retirement/pension. If you are receiving a military retirement then you volition want to check out the "Should You lot Buy Dorsum Your Military Time if You Have a Armed forces Retirement?" section below.

Benefits of Buying Back Armed services Fourth dimension

And every bit many of y'all know, having more years of creditable service has two main perks.

More years of civilian service can:

Permit y'all to retire before
Increase your FERS pension

Retire Earlier

Buying dorsum military fourth dimension can often make you eligible to retire earlier because the eligibility rules are based on your historic period and years of service.

Under FERS, y'all have to encounter one of the following to authorize for an firsthand/unreduced retirement:

-Your MRA (minimum retirement age) with at least 30 years of service.

-Age 60 with at least 20 years of service.

-Age 62 with at least five years of service.

As an instance, let'south say yous are 57 (your minimum retirement age) and you have 20 years of civilian service. But you lot also accept 10 years of war machine service which you lot bought back.

This will bring your total creditable service fourth dimension to 30 years which would brand you eligible to retire at 57 instead of waiting until age 60.

Increased Pension

Buying back military machine will bear on your pension because your pension is also based on your years of service.

Hither is the formula for calculating your FERS pension:

Years of Creditable Service x High-3 Bacon x Multiplier

Note: Equally a traditional FERS (not special provisions), your multiplier will e'er 1% unless you are at least age 62 when you retire with at least xx years of service at which indicate your multiplier volition be one.ane%

For case, let'southward say you have 20 years of service, a high-3 of $100,000, and a multiplier of 1%. Your annual gross alimony would exist calculated as follows:

20 10 $100,000 10 1% = $20,000 Gross Annual Alimony

To find out what this will exist on a monthly basis, yous volition have to divide it by 12.

$twenty,000 / 12 = $1,666.66 Gross Monthly Pension

Only as y'all might accept noticed, I said "gross" monthly pension. There are a number of things that will come up out of your pension earlier you'll actually receive it and exist able to spend it.

This article will go deeper into how this works.

Only permit'southward also say that y'all again accept 10 years of war machine service that you were able to buy back. This would increment your creditable service to 30 years and your new pension calculation would be every bit follows:

30 x $100,000 x 1% = $thirty,000 Gross Annual Alimony

So in this case, your gross pension would be $ten,000 more every single twelvemonth in retirement just because you bought dorsum your war machine time. It tin can make a huge divergence!

How Much Does information technology Toll to Purchase Dorsum Military Time?

But but like well-nigh good things in life, in that location is a toll. And the cost will be based on your military base pay and when you served. The chart below shows the pct of your basic pay that you'd have to pay to buy back your fourth dimension during different years.

Source: https://www.opm.gov/retirement-services/fers-information/service-credit/#military

For most years, it will be 3% for FERS employees.

Hither is the formula to summate your armed services eolith (aka, what it costs to buy back your armed services time).

military time buy back formula

Full Armed forces Bones Pay x 3%* = Toll to Purchase Back Time (earlier interest)

*This will be college than 3% for time betwixt 1999-2000. See chart above.

Then basically you lot need to add upwards every year's basic pay and multiply that by 3%.

Here'south an case.

Permit's say y'all had six years of service back in the early 90's and had the post-obit bones pay during those years:

1990: $13,000

1991: $14,000

1992: $16,000

1993: $xviii,000

1994: $20,000

1995: $21,000

Total Basic Pay: $102,000

Note: Your Basic pay does not include allowances, flight pay, combat pay, etc.

This means that it would cost the following to buy dorsum these 6 years before we think nigh involvement:

$102,000 x iii% = $3,060 (before interest)

But Wait, There's More!

But we are not out of the wood notwithstanding. Nearly federal employees will also have to pay involvement on their deposit as well. The interest rate is different every twelvemonth but as you tin can imagine, the longer you wait to purchase dorsum your military time, the more it is going to cost you lot.

Here is a chart showing the interest rate from previous years.

Source: https://www.opm.gov/forms/pdf_fill/opm1514.pdf

Simply with electric current interest rates being much lower than they were in the past, the variable involvement charge per unit for military deposits have been much lower in recent years. In 2021, it is 1.375%.

Then basically, for every year (after the grace menstruation which we'll discuss below) that you lot work at your civilian job, the corporeality that y'all would owe, if yous choose to buy back your military machine time, would increment per the corporeality of interest due that year.

And while the interest calculation can get a little hairy, the most important thing is that yous buy back your fourth dimension every bit soon as possible then equally to not accumulate more interest.

How to Purchase Back Time Without Interest?

The government offers a grace menses of 2 years from the day you started your noncombatant job to pay dorsum your time without interest accruing. But because interest doesn't starting time to accrue for a year after the grace menstruum, in practice you actually take a 3 twelvemonth grace period.

In a nutshell, if you lot pay your eolith within three years of starting your civilian career y'all won't owe any interest.

But don't worry if you are already passed the grace menses. It ofttimes however makes a ton of sense to buy back your time even if you lot are paying a agglomeration of involvement.

Pros and Cons of Ownership Back Military Fourth dimension

When thinking about buying back your military, it simply comes down to if the price of making the deposit is worth the benefits you receive.

Let'south go through an example to show y'all what I mean.

Let'southward say yous are under the FERS system, have 24 years of service, and a high-3 of $110,000, then your pension calculation would await similar this (assuming you were under age 62 at retirement time or else your multiplier would exist 1.1%) :

$110,000 ten 24 x one% = $26,400 or $two,200 Per Calendar month

When you lot buy back military time, that time is added back into your years of creditable service and thereby increasing your monthly pension. Using the same example as above, let's say y'all accept 6 years of armed forces time that you decided to purchase dorsum which would then be added into your years of service. Your new pension calculation would expect like this:

$110,000 x xxx x 1% = $33,000 or $2,750 Per Month

That is an actress $550/calendar month or $half dozen,600 per yr, but the true difference is apparent when we look at the modify over an entire retirement. Bold yous are retired for 30 years, that 1 decision to buy back your armed forces time will put an extra $198,000 in your pocket.

The Cost

To get an idea of what it might toll to buy back these half dozen years, let's assume the following military basic pay:

1990: $13,000

1991: $14,000

1992: $16,000

1993: $xviii,000

1994: $20,000

1995: $21,000

Total Basic Pay: $102,000

$102,000 10 3% = $iii,060 Deposit Owed (before interest)

To keep our numbers elementary, let's now assume the interest rate was six% for the by 21 years.

Note: Involvement has but accrued for the last 21 years of the 24 yr civilian career because the first 3 were in the grace period.

This means the total armed forces deposit that would be due with interest is about $10,400.

So in this example, information technology would price you $x,400 to buy back our military time which and so allows you to increase your pension past $6,600 per twelvemonth for the rest of your life. Yous would earn your eolith back with 2 years of retirement! That is a swell investment.

And on meridian of all of that, buying back your military would bump up your creditable service (in our instance) to 30 years which would allow y'all to retire at your MRA (minimum retirement age) instead of waiting until age 60.

Does It Always Make Sense to Buy Back Your Armed services Time?

The short answer is 'most likely'. In my experience, I have never seen a example where it hasn't made a ton of sense to buy back military time.

Notation: The one exception to this is when someone is already cartoon armed services retirement. I address this state of affairs in the next section.

But with that being said, you always desire to run your own numbers to get an idea of what makes sense for you.

Should You Buy Back Your War machine Time if You Take a Military Retirement?

If you are drawing a armed services retirement/pension you are immune to buy back your military time but if you exercise then you volition need to waive your military retirement once you retire from federal service.

For example, let's say you did xx years in the Army and are currently getting a monthly war machine retirement check. Yous now have 10 years of civilian service and are thinking about buying back your armed forces fourth dimension. If you decide to buy it back then you will have to brand a deposit for that fourth dimension also as waive our military retirement once you lot exit federal service.

The net effect is that your noncombatant retirement volition be much bigger but you accept to give up your armed services retirement.

Then is it worth it?

Sometimes, but in my experience it isn't nigh of the time.

One large reason that it ofttimes pays to continue your military retirement is that the COLA's or cost of living adjustments are more than generous (most of the time) for your military retirement than your civilian retirement.

This means that a armed services retirement volition abound faster over time than your FERS pension.

But like ever, you volition want to run your own numbers to see if this makes sense for you.

How to Buy Back Your Military Fourth dimension?

A great place to starting time when thinking about ownership back your military machine time is to talk to your HR about the procedure. They can often point you in the right management.

But here is a summary of what the procedure might like.

The showtime pace is generally to fill out Grade RI xx-97 which you will send to the advisable military branch. This is done to get an official record of your armed services time and earnings.
That official record is used by your Hour to give an estimate of what information technology will cost to buy back your time.
Your HR volition send your application and other documents to your payroll part which will confirm the corporeality owed. They will then work with you to decide how you'd like to pay the deposit.
You tin pay the deposit in a lump sum or over time via payroll deductions.

But again, the procedure may look a bit different for y'all depending on your agency and what documentation you have of your military service.

Common Questions

Can I Buy Back Military Time Afterwards Retirement?

No, you can non buy back military machine time later on you retire. It has to be done while you are a federal employee.

Does Bought Dorsum Military Fourth dimension Count for The FERS Supplement?

No, in about cases bought dorsum war machine time volition not count when computing your FERS Supplement.

Tin I Buy Back My Reserve or National Guard Fourth dimension?

Y'all are able to buy back any agile duty reserve or national guard time to count towards your civilian retirement. And different a armed forces buy back, yous are able to buy back active duty reserve or guard time without giving up your reserve or baby-sit retirements.

Can I Purchase Back My Armed forces University Time?

Yes, you certainly can. And this time is oft incredibly cheap to buy back considering you are not paid much at all while at one of the military academies.