Your active duty military service with an honorable discharge may help you:
- GET MORE money each month for life; and
- REDUCE the number of years you have to work FERS to be eligible for retirement.
How to Use Military Service to Increase Your FERS Pension
There’s a provision in FERS that allows you to make a deposit, or “buy back”, your active duty military service—and that time will count as creditable service for FERS retirement. Creditable service is important because it’s used to figure out when you can retire with a FERS pension AND how much your monthly pension will be!
Military service with a deposit counts as though you worked under FERS during that time—years, months and days are added to your creditable service. This can really add up to a tidy sum in retirement! In the example below, the retiree would get an extra $72,000 over the course of 30 years!
What’s the Deposit Cost?
Your FERS military service deposit is calculated based on 3% of your basic pay you earned while in the military plus interest. However, if you pay your deposit within the first three years as a FERS employee, you will not owe any interest on the deposit amount. If you’re past the three-year employee mark, it’s a good idea to get started right away because interest on the deposit is continuing to build each day you delay it!
So, How Much More Do I Get In Retirement?
Basically, for each year of military service you “buy back,” your pension will increase by 1% of your highest average earnings under FERS—and even more if you are at least 62 with 20 years of service at retirement (1.1%). This can really add up over the years in retirement!
Who Is Eligible To Make A Deposit?
Current FERS employees who have active-duty military service with honorable discharge—including reservists with active duty periods.
Caution If You’re An Active Duty Retiree
If you receive or will receive an active duty military pension, then it’s NOT generally advantageous to make a deposit. This is because you must waive your military pension at the time of FERS retirement if you make a military service deposit.
Reservist retirements are NOT affected by this rule. You can read the full details from OPM Section 22A4.1-1
How Do You Make A Deposit?
This is a two-step process. First, you’ll need to gather earnings documentation from each branch of service (Step 1). Next, you’ll submit the earnings documentation to your human resource office to calculate the deposit amount.
Complete a separate Estimated Earning During Military Service Request Form (RI 20-97) for each branch of service. Attach your DD214 (or equivalent) and send to appropriate military finance center.
To obtain a copy of your DD214, complete a Request Pertaining to Military Records (SF180) and submit request to:
National Personnel Records Center
Military Personnel Records
1 Archives Drive
St. Louis, Missouri 63138
Upon receipt of your estimated military earnings from the Military Finance Center, complete Application to Make Service Credit Payment (SF 3108). Return all documentation to your human resource office. They can assist you with any questions.
Your human resource office will calculate the cost of the deposit. You will receive a Military Service Deposit Estimate. You can then decide if you want to make the deposit with a one-time lump sum payment, or have automatic deductions from your pay each pay period. You are not required to make any deposit, it’s your choice.
Keeping All Documentation
If you decide to “buy back” your military service for FERS, it’s vital that you KEEP all documentation! You’ll receive a final receipt once you have completed all payments. This is your proof that you have made the deposit. Keep it in a safe place!!
“Buying back” your active duty military service can be advantageous because those years, months and days of service are added to your FERS service. This can help you get more money each month in retirement and may reduce the number of years you must work under FERS to be eligible for retirement.
Kelly Monroe is the creator and chief illustrator of the FERS Blueprint Online Retirement School. She’s a licensed financial planner and has consulted with over 2,300 Federal employees to help them clarify their retirement planning. Contact Kelly at [email protected] Be sure to get your free benefit guide, How To Get More FERS Retirement Income With Military Deposit to help plan your retirement.