The Military Buyback: What Federal Employees Need to Know

About 25% of the federal civilian workforce are veterans. If you’re one of them, you may be sitting on years of additional retirement credit without knowing it. The military service deposit, commonly called the military buyback, is one of the most valuable and most overlooked opportunities available to federal employees who are veterans. And unlike most retirement decisions, this one has a hard deadline.

What the Military Buyback Is

The military buyback program allows FERS employees to make a one-time payment to add active-duty military service time toward their federal retirement calculation. In practical terms, every year of military service you buy back is treated as an additional year of FERS creditable service, which means a larger pension for the rest of your life.

As a general rule, military service is creditable for federal retirement purposes if it was active duty terminated under honorable conditions and performed prior to your separation from civilian service for retirement.

How Much It Costs

For FERS employees, the deposit is 3% of your total military basic pay, base pay only, not BAH, BAS, or special pay. The rate is slightly higher for military service performed in 1999 at 3.25% and in 2000 at 3.4%, but for the vast majority of federal veterans, the rate is a flat 3%. You have roughly three years from your federal hire date to pay interest-free. After that, interest compounds annually at the current Treasury rate — 4.25% in 2026 — until the deposit is paid in full.

The cost is often surprisingly modest relative to the long-term benefit. In one commonly cited example, a federal employee whose military service cost $1,300 to buy back received an extra $3,000 per year in his FERS pension for the rest of his life, and his spouse’s survivor annuity was calculated on the higher amount as well. Four years of military service on a $100,000 High-3 salary translates to $4,000 more per year in pension income for the rest of your retirement. That kind of return is difficult to match anywhere else in retirement planning.

One Important Exception

If you are currently receiving military retired pay, you generally cannot also receive FERS credit for the same period of service unless your retired pay was awarded due to a service-connected disability incurred in combat or under reserve component retirement provisions. In most cases, you would need to waive your military retired pay in order to receive the civilian credit.

The Deadline You Cannot Miss

The deposit must be completed before you retire. There are no exceptions and no extensions. This is the detail that catches too many federal veterans off guard; they intend to make the deposit but put it off, and by the time they are ready to retire, the window has closed permanently.

The process is handled through your agency’s HR office or payroll provider. If your payroll is processed through DFAS, you can initiate the process directly through their website.

If you served in the military and are now working in federal civilian service, this is a conversation worth having well before your retirement date. A Federal Retirement Consultant (FRC®) can help you calculate the cost of the military buyback, estimate the impact on your annuity, and make sure this opportunity is not missed. Schedule your complimentary benefits review today.