Can You Double Dip? Military Retirement and Federal Retirement Explained
Yes, it is possible to receive both military retirement pay and a federal civilian retirement annuity, but understanding the intricacies of how these benefits interact is crucial. The ability to “double dip,” as it’s often called, depends on several factors, primarily the timing of your service, the type of military retirement you receive, and whether you’re eligible for Social Security benefits. This article breaks down the complexities, offering insights from someone who’s navigated these waters for years.
Understanding the Landscape: Military Retirement
Military retirement is earned through active duty service, generally requiring at least 20 years for a full retirement. However, some individuals retire earlier due to medical reasons or as part of a voluntary separation incentive (VSI).
Types of Military Retirement
Understanding the type of retirement you receive is critical. The primary types include:
Regular Retirement (20+ Years): This is the most common form, granting a lifetime pension based on years of service and final pay.
Medical Retirement: Granted due to service-connected disabilities that prevent continued active duty, irrespective of years of service.
Reserve Retirement (Gray Area): Typically involves serving in the National Guard or Reserves, accruing points towards retirement, which begins at age 60 (or earlier under certain conditions).
Delving into Federal Retirement
Federal retirement is primarily governed by two systems: the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS). The system you fall under depends on when you began federal service.
CSRS vs. FERS: A Quick Comparison
CSRS: For employees hired before January 1, 1984. CSRS is a defined benefit plan funded by employee contributions and government funds.
FERS: For employees hired on or after January 1, 1984. FERS is a three-tiered system including a defined benefit annuity, Social Security, and the Thrift Savings Plan (TSP).
The Overlap: Navigating the Dual System
The crucial question is how these systems interact. The key lies in understanding that the government generally aims to avoid “double dipping” without acknowledging prior military service. However, there are paths to receiving both retirements.
Buying Back Military Time
A common strategy is to “buy back” military time into your federal retirement system. This means making a financial contribution to your federal retirement fund in exchange for crediting your military service towards your federal retirement annuity. Here’s how it works:
Eligibility: You must be employed in a federal position covered by CSRS or FERS.
Application: Apply to your employing agency’s Human Resources department to calculate the cost of buying back your military time. This typically involves a percentage of your military pay.
Payment: Make payments (either lump sum or installments) to your federal retirement fund.
Credit: Once the payment is complete, your military service will be credited towards your federal retirement calculation.
The Catch: Avoiding Double Dipping
Crucially, if you are already receiving military retirement pay (other than disability), buying back your military time usually requires waiving your military retirement pay for the period that is credited towards your federal retirement. This is because the government doesn’t want to pay you twice for the same period of service. However, there are exceptions:
- Disability Retirement: If your military retirement is based on a disability incurred in the line of duty, you can typically buy back your military time without waiving your military retirement pay.
- Reserve Retirement: Receiving reserve retirement (Gray Area) before your military retirement allows you to defer your federal retirement until 60 or later.
Social Security Considerations
Social Security adds another layer of complexity. Both military service and federal employment contribute to your Social Security earnings record. Receiving both military and federal retirement benefits generally does not affect your Social Security eligibility, provided you meet the necessary requirements (earning enough work credits).
Strategic Planning: Maximizing Your Benefits
Navigating military and federal retirement requires careful planning and understanding the specific rules and regulations. Consulting with a financial advisor specializing in military and federal benefits is highly recommended.
Frequently Asked Questions (FAQs)
Here are some frequently asked questions that offer more detailed answers:
1. What exactly does “buying back” military time mean?
“Buying back” military time is the process of making a financial contribution to your federal retirement system (CSRS or FERS) to receive credit for your active duty military service towards your federal retirement annuity. This increases your years of service used to calculate your federal retirement.
2. If I buy back my military time, do I have to give up my military retirement pay?
Generally, yes. If you are receiving regular military retirement pay (i.e., not disability-based), you will typically be required to waive your military retirement pay for the period credited towards your federal retirement. The idea is to prevent “double dipping” for the same years of service.
3. Are there any exceptions where I don’t have to waive my military retirement pay when buying back time?
Yes, the main exception is if your military retirement is based on a service-connected disability. In this case, you may be able to buy back your military time without waiving your military retirement pay. Each case should be evaluated by your federal HR department.
4. How is the cost of buying back military time calculated?
The cost is typically a percentage of your military basic pay earned during the period you want to credit towards your federal retirement. This percentage varies depending on whether you are under CSRS or FERS. It’s crucial to get an official estimate from your federal HR department.
5. I’m in the Reserves/National Guard. How does my Reserve retirement affect my federal retirement?
If you’re receiving Reserve or National Guard retirement pay (often called “Gray Area” retirement), you can usually defer the start of your federal retirement annuity until a later date (e.g., age 60) to avoid any offset or reduction. This strategy allows you to receive both retirements concurrently.
6. Does receiving both military and federal retirement affect my Social Security benefits?
Generally, no. Military service and federal employment both contribute to your Social Security earnings record. As long as you meet the eligibility requirements (earning enough work credits), receiving both retirements should not directly affect your Social Security benefits.
7. Can I buy back my military time if I’m already retired from federal service?
No, you generally cannot buy back military time after you have retired from federal service. The opportunity to buy back military time must be taken while you are an active federal employee.
8. What happens if I don’t buy back my military time?
If you don’t buy back your military time, your federal retirement annuity will be calculated based solely on your years of federal civilian service. You will still receive your military retirement pay (assuming you are eligible), but your military service will not contribute to your federal retirement.
9. How do I apply to buy back my military time?
Contact your employing federal agency’s Human Resources (HR) department. They will provide you with the necessary forms and information to start the process. You’ll typically need to provide documentation of your military service, such as your DD-214.
10. Is it always financially beneficial to buy back my military time?
Not necessarily. It depends on several factors, including your age, years of federal service, the cost of buying back the time, and your individual financial situation. Carefully evaluate the costs and benefits before making a decision, and consider consulting with a financial advisor.
11. Can I use my Thrift Savings Plan (TSP) to buy back military time?
You cannot directly use your Thrift Savings Plan (TSP) to buy back military time. However, you may be able to take a loan from your TSP or withdraw funds (subject to tax penalties, if applicable) to finance the buyback.
12. Where can I find more detailed information about military and federal retirement benefits?
You can find detailed information on the Office of Personnel Management (OPM) website (www.opm.gov) for federal retirement benefits and the Defense Finance and Accounting Service (DFAS) website (www.dfas.mil) for military retirement benefits. Additionally, consult with a qualified financial advisor specializing in military and federal retirement.
Leave a Reply