Military Service Deposit: Is Buying Back Your Time Worth It?
If you served on active duty before your federal civilian career, you may be able to "buy back" that time by paying a military deposit — adding those years to your creditable service and permanently increasing your pension. Whether it pays off depends on the cost, the deadline, and your career length.
- A military deposit lets active-duty time count toward your civilian pension.
- For FERS, the deposit is generally 3% of your military basic pay, plus interest.
- There is an interest-free grace period — paying early avoids added cost.
- The deposit must be completed before you retire.
Why buy back military time?
Your FERS pension is High-3 × years of service × multiplier. Buying back military service increases the "years of service" factor, which raises your annuity for the rest of your life. For a long federal career, even a few added years can be worth tens of thousands of dollars over retirement. Bought-back time can also help you reach eligibility milestones sooner.
How the deposit is calculated
For FERS employees, the deposit is generally 3% of the basic pay you earned during your military service (CSRS uses 7%). Note this is your military basic pay from years ago — not your current civilian salary — so the base amount is often modest. Interest is then added, which is why timing matters so much.
The deadline that cannot be missed
The military deposit must be paid in full before you retire — there is no option to pay it from your annuity afterward. Because the paperwork (estimating your military earnings, getting the official calculation, and arranging payroll deductions) can take months, financial planners generally recommend starting the process years before your planned retirement date.
When the buy-back pays off
- It usually pays off for employees with a long remaining federal career, because the higher annuity is collected for many years.
- It is especially valuable if the bought-back years also unlock earlier eligibility or the 1.1% multiplier.
- It is less compelling if you are very close to retirement with little time for the higher pension to recoup the cost — run the breakeven.
A quick way to judge value: divide the deposit cost by the annual pension increase it buys. The result is roughly how many years of retirement it takes to break even. Most federal retirees live well beyond a typical breakeven of just a few years.
Estimate your deposit and the resulting pension bump with the military deposit calculator and the FERS calculator.
Do I have to buy back military time?
For post-1956 military service under FERS, the time generally only counts toward your civilian annuity if you make the deposit. Without it, the service usually does not increase your pension.
What if I already receive military retired pay?
Special rules apply if you are receiving military retired pay; you typically must waive it to have the service credited, with exceptions for reserve/disability retirements. Get an official determination before deciding.
Can I pay the deposit after I retire?
No. The deposit must be completed before your retirement is finalized.
Authoritative reference: OPM — creditable military service. This site is not affiliated with the U.S. government.