Military Buyback for Federal Employees: Is It Worth It in 2026?

Last Updated: February 11, 2026 Reading Time: 12 min

If you served in the military before becoming a federal civilian, you can buy back that time and add it to your FERS pension. The cost is 3% of your old military base pay. The return is an extra 1% of your high-3 salary per year of service, paid every year for the rest of your retirement.

A four-year veteran typically pays $2,400 to $4,800 and gains $4,000 per year on a $100K high-3 salary. That's a break-even of less than one year. Over a 25-year retirement, it turns into $100,000+ from one paperwork exercise.

Most veterans who know about the buyback do it. The ones who don't often find out too late.

Key Takeaways

• FERS military buyback deposit is 3% of your military basic pay (not BAH, BAS, or special pay)
• You have roughly three years from your federal hire date to pay interest-free. After that, interest compounds at 4.25% annually (2026 rate)
• The deposit must be completed before you retire. There are no exceptions and no extensions
• A typical four-year veteran breaks even within one to three years of retirement, then collects extra pension income for life
• Military time also counts toward retirement eligibility thresholds like MRA+30

What the Military Buyback Actually Does

When you buy back military time, OPM adds those active-duty years to your FERS creditable service. This affects your retirement in two ways.

First, your pension gets bigger. The FERS pension formula is: Years of Service x 1% x High-3 Average Salary. Every military year you buy back adds another 1% of your high-3. Four years of military service on a $100,000 high-3 salary means $4,000 more per year in pension income.

Second, you hit eligibility thresholds sooner. Military time counts toward MRA+30, age 60+20, and age 62+5 retirement eligibility. A four-year veteran with 26 years of civilian service reaches MRA+30 instead of waiting until age 60+20. That could mean retiring two to five years earlier.

What It Costs (2026 Rates)

For FERS employees, the deposit is 3% of your military basic pay during your service period. Basic pay means base salary only. BAH, BAS, combat pay, and special duty pay are not included.

Example	Total Base Pay	3% Deposit
E-4, 4 years (2018-2022)	~$120,000	$3,600
E-5, 6 years (2016-2022)	~$155,000	$4,650
O-3, 4 years (2019-2023)	~$220,000	$6,600

CSRS employees pay 7% instead of 3%. The same E-4 would owe $8,400 under CSRS.

The deposit rate has stayed at 3% for FERS since 2001. There were brief increases to 3.25% (1999) and 3.4% (2000), but those only apply if your military service fell within those specific calendar years.

The Interest-Free Window

This is the part most people miss or get wrong.

You have approximately three years from your first day of FERS-covered federal employment to pay the deposit interest-free. Here is why it works out to three years instead of the two years you might read elsewhere:

1. The law gives you a two-year grace period from your FERS hire date
2. Interest begins accruing on the second anniversary
3. But interest compounds annually, so no actual charge hits until the end of the year following the two-year mark

OPM's own example in 5 CFR 842.307 confirms this: an employee hired March 1, 1988 owed no interest if the deposit was paid by February 28, 1991.

What Happens If You Wait

After the grace period, interest at 4.25% (2026 rate per OPM BAL 26-301) compounds annually on the unpaid balance.

Deposit Amount	After 5 Years Interest	After 10 Years Interest
$3,600	~$4,400	~$5,400
$4,650	~$5,700	~$7,000
$6,600	~$8,100	~$9,900

Even at $5,400 after ten years of interest, a four-year veteran still breaks even in under two years of retirement. Waiting costs you money, but it doesn't kill the deal.

The Break-Even Math

The numbers make the case better than any explanation.

Four-Year Veteran (E-4/E-5 Range)

• Total military base pay: ~$120,000
• Buyback cost: $120,000 x 3% = $3,600
• High-3 salary at retirement: $100,000
• Additional annual pension: 4 x 1% x $100,000 = $4,000/year
• Break-even: Less than 1 year of retirement
• Over 25 years: $100,000+ in additional pension (before COLA)

Six-Year Veteran (Haws Federal Advisors Example)

• Total military base pay: $102,000
• Buyback cost: $102,000 x 3% = $3,060
• High-3 salary at retirement: $110,000
• Additional annual pension: 6 x 1% x $110,000 = $6,600/year
• Break-even: About 6 months of retirement
• Over 30 years: $198,000 in additional pension (before COLA)

If you retire at 62 or later with 20+ years of service, the multiplier bumps to 1.1%. That four-year veteran would get $4,400 per year instead of $4,000.

Use the FERS Retirement Calculator to plug in your own numbers. Enter your total service years with and without military time to see the exact dollar difference.

What Service Qualifies (And What Doesn't)

Not all military time counts. This trips up National Guard and Reserve members especially.

Service Type	Qualifies?	Notes
Active duty (Army, Navy, Air Force, Marines, Coast Guard, Space Force)	Yes	Honorable discharge required (DD-214)
Active duty for training (Title 10)	Yes	Title 10 orders count as active duty
Reserve/Guard mobilized under Title 10	Yes	Deployments, federal activations
Reserve/Guard under Title 32 (state orders)	No	State-controlled duty does not qualify
Service academy time	Yes	Can be bought back separately

The discharge matters. You need an honorable discharge. General under honorable conditions may also qualify, but dishonorable or bad conduct discharges do not.

Military Retirees: The Waiver Trap

If you receive a military retirement pension from active-duty longevity (20+ years), you must waive your military retirement pay to use those years for FERS credit. You cannot collect both. Do the math carefully here: a 20-year military pension is roughly 50% of base pay, and the FERS pension gain from those same years won't come close to replacing it.

Two exceptions:

• Reserve/Guard retirees under Chapter 1223, Title 10 can buy back active-duty time without waiving their reserve retirement
• Combat-related disability retirees are exempt from the waiver requirement

VA disability compensation is completely separate. You can receive VA disability and FERS pension without any conflict.

Step-by-Step: How to Complete the Buyback

The paperwork isn't complicated, but DFAS is slow. Start early.

Step 1: Get Your DD-214

You need a DD-214 (Certificate of Release or Discharge) for each period of active-duty service. If you don't have yours, request it from the National Personnel Records Center or submit an SF-180.

Step 2: Request Your Military Earnings Estimate

Complete form RI 20-97 (Estimated Earnings During Military Service). Attach your DD-214 and any records showing your rank, promotions, and time in grade. Mail it to DFAS. This is the bottleneck. DFAS takes two to six months to turn this around, so if you're already a year into your federal career, don't put this off.

DFAS contact: 1-800-729-3277

Step 3: File the Application

For FERS, complete SF-3108 (Application to Make Service Credit Payment), pages 1 and 5. For CSRS, use SF-2803. Attach the DFAS earnings estimate and your DD-214.

Step 4: Submit to Your Agency HR

Your HR or Benefits office calculates the exact deposit amount, including any interest owed, and provides payment options.

Step 5: Pay the Deposit

You have several options:

• Lump sum (recommended if within the interest-free window)
• Payroll deduction (minimum $25 per pay period, but interest keeps accruing on unpaid balance)
• Check or money order
• Pay.gov (available for agencies serviced by DFAS payroll)

Step 6: Verify Completion

Keep all receipts and confirm with HR that the deposit is recorded as paid in full. This becomes part of your permanent retirement record.

Realistic Timeline

Step	Duration
DD-214 request (if needed)	2-12 weeks
DFAS earnings estimate	2-6 months
HR deposit calculation	2-4 weeks
Payment	Immediate to years
Total start to finish	3-9 months minimum

The CSRS "Catch 62" Trap

This section is for the roughly 44,000 remaining CSRS employees. FERS employees can skip it.

If you have post-1956 military service, are eligible for Social Security at age 62, and did not pay the military deposit, your CSRS annuity gets automatically recomputed at age 62 to delete the military service credit. That means losing approximately 2% of your annuity for each year of unpaid military service.

Four years of military service = roughly an 8% pension cut at 62.

The Social Security Fairness Act (signed January 5, 2025) repealed WEP and GPO, so CSRS employees with outside Social Security credits now get their full benefit. But that did not change the Catch 62 provision. CSRS employees with military service should pay the deposit regardless. Read more in our FERS vs CSRS comparison.

Tax Treatment and TSP Impact

These come up constantly on r/fednews and r/govfire, so let's clear them up.

Taxes: The buyback deposit is not tax-deductible in the year you pay it. However, the amount becomes part of your cost basis in the retirement plan. A small portion of each pension payment in retirement will be tax-free because you already paid tax on that money.

TSP: The buyback has zero effect on your Thrift Savings Plan. It doesn't count against your TSP contribution limit, doesn't reduce your agency match, and has nothing to do with TSP. The deposit goes to OPM for pension credit. TSP is a separate account entirely.

Run Your Numbers

Plug your years of service (with military time included) into the free FERS Retirement Calculator. Run it once without military years, then again with them added. The difference is your annual payoff from the buyback.

Two other tools worth checking: the High-3 Salary Calculator to nail down your high-3 average, and the FERS Retirement Guide for the full picture on pension eligibility and formulas.

Frequently Asked Questions

How much does it cost to buy back military time for FERS retirement?

For FERS employees, the deposit is 3% of your total military basic pay (base pay only, not BAH or BAS). A four-year veteran who earned $120,000 in base pay would owe $3,600. If you are past the approximately three-year interest-free window, interest at 4.25% (2026 rate) compounds annually on the unpaid balance.

How long do I have to buy back military time without paying interest?

You have approximately three years from your first day of FERS-covered civilian employment. The law provides a two-year grace period, and because interest compounds annually, the first actual charge does not apply until the end of the third year. After that, interest accrues at 4.25% for 2026.

Can I buy back my military time after I retire from federal service?

No. The deposit must be completed in full before you separate from federal service for retirement. Once you submit your retirement application, it is too late. There is no exception. Start the process early because it can take six to nine months from paperwork to final payment.

Does National Guard or Reserve time qualify for military buyback?

Only active-duty service under Title 10 orders qualifies. Title 32 (state-controlled) National Guard service generally does not qualify. If you were mobilized under Title 10 for deployments or federal duty, those periods count. Check your DD-214 or NGB-22 for the order type.

If I receive a military retirement pension, can I still do the buyback?

Yes, but you must waive your military retirement pay to use those years for FERS credit. You cannot collect both a military pension and FERS credit for the same service years. Reserve and Guard retirees under Chapter 1223, Title 10 can buy back active-duty time without waiving their reserve retirement. Combat-related disability retirees are also exempt from the waiver.

Related Resources

• FERS Retirement Calculator: Model your pension with and without military years
• Military Buyback Complete Guide: Full reference page with deposit rates, forms, and edge cases
• High-3 Salary Calculator: Calculate the high-3 average used in the pension formula
• FERS Retirement Guide: Comprehensive FERS eligibility, formulas, and planning
• FERS vs CSRS Comparison 2026: Side-by-side retirement system comparison

Sources: OPM FERS Service Credit, 5 CFR 842.307, OPM BAL 26-301, DFAS Military Service Deposits, OPM SF-3108 Form