The Military Service Buyback: Is It Worth It for FERS Employees?

If you served on active duty before entering federal civilian service, you may be able to count that military time toward your FERS retirement. It's called a military service deposit — commonly referred to as a military buyback — and it can meaningfully increase your FERS annuity. But it costs money, the deadline matters, and the math isn't always straightforward. Here's how it works and how to decide if it's right for you.

What the Buyback Actually Does

Under FERS, your pension is calculated as a percentage of your high-3 average salary multiplied by your years of creditable service. Each year of service adds 1% to that multiplier (1.1% if you retire at 62+ with 20+ years). Buying back your military time adds those years to your creditable service total, increasing your pension for the rest of your life.

For a federal employee with a $95,000 high-3 average who has 22 years of civilian service and 4 years of military service, the difference between counting and not counting that military time is roughly $3,800 per year in additional pension income — every year for life.

What It Costs

The deposit equals 3% of your military basic pay for each year of service, plus interest that accrues if you delay payment. The interest rate on military deposits is set annually by OPM — it has historically been around 2–4%, but it compounds and grows the longer you wait.

If you served four years as an E-4/E-5 in the mid-2000s, your base pay during that period was roughly $20,000–$26,000 per year. Your deposit would be approximately 3% of that total — around $2,400 to $3,100 before interest. If you delay a decade before making the deposit, interest could push that to $3,500–$4,500 depending on the rate and timing.

The deposit is paid to OPM, not your agency, and can be paid in installments.

The Break-Even Calculation

The break-even point is the number of years in retirement you need to live to recover the deposit through increased pension income. If your deposit costs $3,800 and your increased annual pension is $3,800, you break even in year one and profit every year after. More realistic math: a $5,500 deposit yielding $3,200/year in additional pension income breaks even in under two years of retirement.

Military buybacks have among the best ROIs of any financial decision available to federal employees. Very few purchases return guaranteed, inflation-adjusted, lifetime income at that cost.

The Critical Rule About Military Retirement Pay

If you are receiving military retirement pay (you served 20+ years and are collecting a pension), you cannot count those same years toward your FERS pension unless you waive your military retirement for the overlapping period. This is a significant decision and rarely makes financial sense unless your FERS pension would substantially exceed your military retirement pay.

Veterans who served less than 20 years — and therefore receive no military retirement pay — face no such conflict. Their buyback is straightforward.

The Deadline That Matters

There is no hard deadline for making a military deposit, but the interest clock starts running at your hire date as a federal employee. The longer you wait, the more the deposit costs. If you're a newer federal employee who served, making the deposit early significantly reduces the cost.

More importantly: you cannot receive FERS credit for your military service if you haven't made the deposit before you separate from federal service. If you retire without making the deposit, that window closes permanently.

How to Start the Process

Request an estimate from your agency's HR office. They'll calculate your deposit amount based on your military service record and current interest accrued. You'll need a copy of your DD-214 to initiate the process. Once you receive the estimate, you can pay in a lump sum or set up installment payments through payroll deduction.

Not sure how much your military years would add to your FERS pension? Our FERS annuity estimator lets you input your high-3 salary, years of service with and without military time, and see the dollar difference.