Does Military Service Time Count For High 3 In Usps Retirement

Military Buyback for Federal Retirement

Getting ready for federal retirement? Could a war machine buyback towards your federal creditable service make sense for you?

Lots of Federal Employees accept had prior military service. When we talk about buying back military machine time in my federal retirement classes – most federal employees desire to know, "Does information technology make sense for me?"

If you take active honorable military service that isn't already being 'used' towards a military retirement – there is a very good chance that you can 'buy' that fourth dimension dorsum and have it count towards your federal retirement.

If yous do a military buyback – information technology volition increase the number of years in service that are used for your annuity/pension calculation. The more years yous take – the larger your federal pension.

How Much Volition It Toll?

How much y'all will have to pay to buy back your armed forces time depends on these factors…

When was your service?
How much were you paid during your military machine service?
How much interest has accrued on that time?
Are you lot a FERS or a CSRS?

The first stride in a armed forces buyback is to observe out how much you were paid each year of your war machine service.

If you lot have your military pay records – that is the all-time. Notwithstanding, if yous no longer have a re-create of your pay records, you tin submit a copy of your DD-214 and transport a request to your particular co-operative of the war machine's pay center.

Have the amount of military base of operations pay you received during your service, and multiply that amount by a percent: CSRS apply 7%, just FERS apply 3%.

Formula for Military Buyback towards Federal Retirement

Once yous have that number, you lot now need to add interest.

The interest rate is unlike for each year – and of course, the longer you wait to do a armed forces buyback, the more interest you will have to pay on tiptop of your initial percentage of base pay. Information technology is not uncommon for interest to be ii or 3 times the amount of your initial percent of base pay.

BUT – do not despair. Even with tons of interest – you will nevertheless almost e'er get a greater benefit in your pension than what you have to pay to buy back your time with interest.

War machine Buyback: Let's Await at an Example…

Bob served 3 years as an enlisted member of the military: 1973, 1974 and 1975.

Afterward in 1988, Bob began his federal career under FERS. He now has 22 years of service.

Bob wants to know if he should purchase back his armed forces fourth dimension.

First, we demand to total up Bob'south military base pay:

Example of Military Buyback for Federal Retirement

Now for the involvement:

For an easy case, we'll say Bob was hired under FERS on Jan 1, 1988.

Bob'due south 'grace period' on military buyback was from Jan 1, 1988 – Jan 1, 1990. The first date interest will be added to his deposit is a year post-obit the grace menstruum: January 1, 1991. Interest volition continue to accrue until Bob pays the entire deposit due.

For Bob's example, if he were to pay back his deposit now, it would be approximately $one,300 including the interest.

Can You lot Buy Dorsum Time With No Interest?

There is an interest gratis 'grace period' of two years. If your military service was before your federal career, the grace flow generally starts the day you were hired under FERS or CSRS.

Interest is accrued one time a year – and then technically, if you paid the deposit for your military time right before the third anniversary of your federal rent date – y'all tin can probably become by without paying any interest on your time.

Withal nigh of the federal employees I've talked with were not even aware of this grace flow. Or they merely didn't empathise how big a benefit it is to buy back their prior armed services service. And by so, the grace catamenia had long since been over.

"How Much Volition It Touch on My Pension?"

Your Federal Alimony is adamant past your High-3 Salary, your Years in Service and your CSRS or FERS Pension Multiplier.

If y'all buy back your military time – it will increase your Years in Service. And the more Years in Service y'all take, the larger your pension will be.

Let'southward Go Back to Our Example…

Bob is now 57 years onetime and has 22 years of federal service.

Correct now, Bob is planning on working another three years. By so, he'll exist age sixty and he will have 25 years of service. He will exist eligible to leave on an immediate and unreduced pension (since he will be age 60 with 20+ years of service).

For easy numbers, let'due south say Bob'south High-3 Bacon was $100,000.

Past historic period 60, if he doesn't buy back his military time, Bob volition have 25 years of service.

We take $100,000 x 1% x 25 years in service = $25,000 Annual FERS Pension

Even so, with a war machine buyback, Bob could add together an extra three years of service to his calculation:

$100,000 x 1% x 28 years in service = $28,000 Almanac FERS Pension

Past buying dorsum his armed forces time and adding three years to his creditable service, Bob will receive an extra $3,000 a year in his FERS pension, for the residuum of his life.

And if he chooses to leave a survivor annuity to his wife – her survivor annuity will be based on Bob'south college amount.

So in our example, even though his military machine fourth dimension cost him $1,300. Simply it increased Bob's alimony by $3,000 a year, for every year, for the rest of his life.

Yous can detect more specifics in Chapter 23 of OPM's CSRS/FERS Handbook.

"Does it Make Sense for Me?"

Of course, every one's personal situation is different. And how much your military service increases your alimony depends on other factors, like your High-3 Salary.

When considering if a military machine buyback makes sense for you – you should also think about retirement eligibility.

Another benefit to buying back military time is that in improver to the college retirement pension, you may be eligible to retire sooner.

So if you're right on the 'cusp' of beingness eligible to retire – buying back your armed forces time might make you eligible to retire sooner than you lot had thought.

I tin can tell yous that in my years of working with federal employees, I have not yet once seen a situation where it did not make sense for a person to buy dorsum their 'unused' military fourth dimension.

Fifty-fifty so, it is still important to empathize your retirement benefits and run the calculations for your own personal situation.

Are You Thinking About Retirement?

Federal retirement benefits are complex. You've devoted years, probably decades of your life to your federal career. Make sure you lot empathise your federal benefits *before* you lot retire.