Does Buying Back Military Time Affect Military Retirement?
Yes, buying back military time can significantly affect your military retirement, but not in the direct way many expect. While it doesn’t increase your years of service within the military retirement system, it can allow you to retire earlier and with a higher payout under the civilian retirement system (primarily the Federal Employees Retirement System, or FERS) after completing a civilian career. Essentially, it bridges the gap between military service and civilian federal service, making your military time creditable for federal civilian retirement purposes.
Understanding the Nuances of Military Buyback
Let’s delve deeper into what “buying back” military time actually means and how it impacts your retirement picture. It’s not about adding years to your military record for the purposes of your military pension. Instead, it’s about making your military service count toward your eligibility and calculation of retirement benefits within the federal civilian sector.
The process involves making a deposit to the federal government (specifically, to the TSP – Thrift Savings Plan account) to “buy” credit for your military service. This allows that service to be factored into your total years of service for calculating your FERS pension or, if applicable, under the Civil Service Retirement System (CSRS), the predecessor to FERS.
The critical point to grasp is that this only applies if you subsequently gain federal civilian employment that is covered by FERS or CSRS. If you transition to a private-sector job, buying back military time doesn’t offer any direct financial benefit.
Factors Influencing the Decision to Buy Back
Deciding whether to buy back military time isn’t a one-size-fits-all answer. It depends on several factors, including:
Your Career Goals: Are you planning a long-term career in federal civilian service? If so, buying back is almost certainly advantageous. If you’re unsure or leaning toward private sector employment, the calculus changes.
Length of Military Service: The longer your military service, the larger the potential benefit of buying it back for federal civilian retirement purposes.
Age and Retirement Timeline: Buying back military time can allow you to retire earlier from your federal civilian job. Consider how this aligns with your overall retirement plans.
Financial Situation: The buyback requires a financial outlay. Assess your current and projected financial situation to determine if you can comfortably afford the deposit.
Potential Pension Increases: Calculate the projected increase in your federal civilian pension as a result of buying back your military time. Is the investment worth the return?
Is it Always a Good Idea to Buy Back Military Time?
While generally advantageous for those pursuing a federal civilian career, it’s not always the right choice. Here’s when it might not be the best option:
Short-Term Federal Employment: If you only intend to work for the federal government for a few years, the cost of buying back may outweigh the benefits.
Financial Hardship: If buying back would create a significant financial strain, it might be wiser to forgo it.
Other Retirement Plans: If you have robust retirement savings outside of FERS/CSRS (e.g., strong 401(k) or IRA accounts) and a shorter timeline for your Federal Career, the benefits may be diminished.
Uncertainty About Federal Career: If you are unsure about your long-term commitment to your federal civilian career, consider the decision very carefully.
Frequently Asked Questions (FAQs)
1. How do I calculate the cost of buying back my military time?
The cost is typically a percentage of your military basic pay during your years of service. For FERS, it’s usually 3% of your total military basic pay. For CSRS, the percentage is higher, usually around 7%. You’ll need to obtain your military pay records (typically your W-2 forms or from MyPay) to calculate the exact amount.
2. When is the deadline to buy back my military time?
There is no absolute deadline, but there’s a significant advantage to doing so early in your federal civilian career. If you wait too long, interest will accrue on the amount you owe, significantly increasing the total cost. If you don’t complete the payment by the time you retire, you can have money deducted from your pension check each month after you retire.
3. Where do I make the deposit to buy back my military time?
The deposit is made to your Thrift Savings Plan (TSP) account, specifically into the “buyback” account that is created for the purchase of military time. You’ll need to initiate the process through your federal human resources department. They will provide you with the necessary forms and instructions.
4. What documentation do I need to buy back my military time?
You’ll typically need your DD-214 (Certificate of Release or Discharge from Active Duty) to verify your military service and military pay records (W-2s) to calculate the cost of the deposit.
5. Does buying back military time affect my Social Security benefits?
No, buying back military time does not directly affect your Social Security benefits. Your Social Security benefits are based on your earnings history throughout your working life, including both military and civilian employment.
6. Can I buy back military time if I am already receiving military retirement pay?
Yes, you can. Receiving military retirement pay does not preclude you from buying back your military time for federal civilian retirement purposes.
7. What happens if I leave federal service before retiring?
If you leave federal service before retirement, you have options. You can withdraw the amount you deposited, but be aware that doing so may have tax implications and will negate the benefit of buying back your military time. You may also be able to leave the money in the TSP and potentially roll it over to another retirement account.
8. Does buying back military time count towards my high-3 salary calculation for FERS retirement?
No, buying back time does not affect your High-3 salary calculation. It only increases your total years of service for eligibility and pension calculation purposes.
9. How does buying back military time affect my FERS eligibility?
It allows the years you served in the military to count as federal service. You might be eligible to retire at an earlier age because of the increased years of service calculation under FERS.
10. Can I buy back National Guard or Reserve time?
Generally, active duty service qualifies for buyback. Specific rules apply to National Guard and Reserve service, particularly if it was considered active duty for training purposes. Consult with your federal HR department to determine if your specific service qualifies.
11. If I have both CSRS and FERS service, how does buying back military time work?
The rules for buying back military time differ slightly between CSRS and FERS. Generally, you’ll need to determine which system will provide the greater benefit based on your length of service under each system. Your HR department can advise on this.
12. Are there any resources available to help me decide if buying back military time is right for me?
Yes, the Office of Personnel Management (OPM) provides information and guidance on buying back military time. Your federal human resources department is also a valuable resource. Additionally, consider consulting with a financial advisor who specializes in federal employee benefits.
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