How long is the interest-free grace period?

Approximately 3 years from your first day of FERS-covered civilian employment. The law provides a 2-year statutory grace period (5 CFR 842.307), and because interest compounds annually, no actual charge hits until the end of the year following the 2-year mark. OPM's own example: hired March 1, 1988 — no interest if paid by February 28, 1991.

How does military buyback increase my FERS pension?

Each year of bought-back military service adds one year of creditable service to your FERS pension formula: Years of Service × Multiplier × High-3 Salary. Using the 1.0% multiplier, one additional year on a $100,000 high-3 = $1,000/year more pension for life. Four years = $4,000/year. The multiplier rises to 1.1% if you retire at age 62+ with 20+ total years of creditable service.

What is the break-even period for military buyback?

Break-even = deposit amount ÷ annual pension increase. Most veterans recoup their deposit in 1–3 years of retirement. Example: $3,600 deposit ÷ $4,000/year gain = less than 1 year. Even with interest, the math typically favors buying back unless you are very close to retirement and owe many years of interest.

What military pay counts toward the deposit calculation?

Only military basic pay — the base salary printed on your LES. Not included: Basic Allowance for Housing (BAH), Basic Allowance for Subsistence (BAS), combat-zone tax exclusion pay, hostile fire pay, family separation allowance, or any other allowances. DFAS certifies your exact earnings when you submit form RI 20-97.

Can I do the military buyback if I receive a military retirement pension?

Yes, but you must waive your military retirement pay to receive FERS credit for the same years. You cannot collect both a military longevity pension and FERS annuity credit for the same period of service. 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 also exempt. VA disability compensation is separate and unaffected.

Does National Guard or Reserve time qualify for buyback?

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

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

No. The deposit must be paid in full before you submit your retirement application. Once you separate for retirement, it is too late — there are no exceptions. The process takes 3–9 months minimum (DFAS earnings estimate alone takes 2–6 months), so start well before your planned retirement date.

What is the 2026 interest rate for military buyback deposits?

The 2026 interest rate is 4.25%, set annually by OPM based on U.S. Treasury rates (OPM Benefits Administration Letter 26-301). Recent rates: 2024 = 3.75%, 2025 = 4.375%, 2026 = 4.25%. Interest compounds annually on any unpaid balance after the grace period.

Does CSRS military buyback work differently?

Yes. CSRS employees pay 7% of military basic pay (not 3%). Additionally, CSRS employees with post-1956 military service face the "Catch 62" provision: if they do not pay the deposit and become eligible for Social Security at age 62, their CSRS annuity is reduced to remove the military service credit. FERS employees are not subject to Catch 62. This calculator covers FERS only.

Calculator

Military Buyback Calculator

Estimate your FERS military service deposit cost, the annual pension increase it buys, and how many years until you break even.

Reviewed by Jonathan D., 20-year federal employee · Formulas verified against OPM.gov · Updated June 2026

Your military service details

Total military basic pay earned

Base pay only — excludes BAH, BAS, combat pay, and allowances. Estimate across all years served.

Years of military service

Active-duty years to buy back (Title 10). Decimals allowed for partial years (e.g. 3.5).

High-3 average salary

Your highest 36-month average federal basic pay. Use the High-3 Calculator if unsure.

FERS pension multiplier

Use 1.1% if you retire at age 62+ with 20+ total years of creditable service; otherwise 1.0%.

Are you within the interest-free period?

You have roughly 3 years from your first FERS-covered civilian hire date to pay the deposit interest-free. After that, interest compounds annually at the OPM Treasury rate.

Your buyback estimateInterest-free — within grace period

$3,600

Deposit cost

3% of military basic pay

$4,000

Annual pension increase

Every year, for life

< 1 yr

Break-even

To recoup the deposit

$100,000

Gain over 25 yrs

Nominal, pre-COLA

$3,600 base deposit (3%)

4 yrs creditable years added

Break-even verdict

At your current numbers, you recoup the full deposit in < 1 yr of retirement pension. That is well under one year — buyback almost always pays at this ratio.

Cost of waiting (4.25% OPM rate)

You are still within the interest-free window — paying now costs nothing extra. If you wait past your interest-free deadline, the deposit grows as shown below.

Assessments

Deposit grows to

Added cost

+1 assessment

$3,753

+$153

+3 assessments

$4,079

+$479

+5 assessments

$4,433

+$833

Each “assessment” = one annual interest posting on your personal interest-accrual date, not a calendar year from today. Estimates assume the 2026 OPM rate (4.25%) remains constant; actual rates are set annually. Source: OPM BAL 26-301; 5 CFR 842.307.

25-Year payback timelinenominal · undiscounted · pre-COLA

Deposit cost (separate from timeline)$3,600one-time payment · not in the bar

Cumulative gain, year 25$100,000annuity gain over 25 yrs

Net at year 25+$96,400gain minus deposit cost

Annual gain$4,000per year, for life

All figures nominal, undiscounted, and pre-COLA. The timeline does not account for time value of money or future COLA adjustments. Deposit cost ($3,600.00) is displayed separately and is not part of the cumulative gain bars. Break-even is computed as: deposit ÷ annual pension gain (per OPM 5 CFR 842.307).

Deposit = Military Basic Pay × 3% · Annual gain = Years × Multiplier × High-3. Estimates only — your actual deposit is computed by your payroll office from official DFAS earnings (Form RI 20-97). Find your High-3.

Military buyback lets FERS employees pay a deposit, 3% of their total military basic pay, and count active-duty years toward their federal pension. Every bought-back year adds roughly 1% of your High-3 salary to your annual annuity for life, and the deposit usually breaks even within the first two years of retirement income.

How the FERS military buyback works

By paying a deposit of 3% of your military basic pay, OPM adds your active-duty years to your FERS creditable service — raising your pension and helping you reach retirement-eligibility thresholds sooner.

Deposit = Total Military Basic Pay × 3%
Annual Increase = Military Years × Multiplier × High-3
Break-Even = Deposit Cost ÷ Annual Pension Increase

Those military years also count toward the MRA+30, age 60+20, and age 62+5 eligibility thresholds — so buyback can let you retire earlier, not just richer. The 3% rate has applied to all service from January 1, 2001 forward (1999: 3.25%, 2000: 3.4%).

Example buyback scenarios

These examples use a $100,000 High-3 and the 1.0% multiplier. Run your own numbers in the calculator above.

Example military buyback scenarios at a $100,000 high-3 and 1.0% multiplier
Profile	Total basic pay	3% deposit	Annual gain	Break-even
E-4, 4 years (2018–2022)	$120,000	$3,600	$4,000/yr	< 1 yr
E-5, 6 years (2016–2022)	$155,000	$4,650	$6,000/yr	< 1 yr
O-3, 4 years (2019–2023)	$220,000	$6,600	$4,000/yr	1.7 yrs
E-6, 8 years (1996–2004)	$160,000	$4,800	$8,000/yr	< 1 yr

High-3 assumed at $100,000, 1.0% multiplier throughout. Actual results depend on your specific military basic pay records, certified by DFAS.

The interest-free grace period

You have roughly 3 years from your first day of FERS-covered civilian employment to pay the deposit without any interest. Here is how that works.

Year 0–2

Statutory 2-year grace period. No interest accrues at all.

Year 2–3

Interest technically starts accruing but, because it compounds annually, no actual charge hits until the end of year 3.

Year 3+

First interest charge applies. Each January 1 thereafter, interest compounds at the OPM Treasury rate (4.25% for 2026 per OPM BAL 26-301).

OPM example (5 CFR 842.307): an employee first covered by FERS on March 1, 1988 owed no interest if the deposit was paid by February 28, 1991 — exactly 3 years.

CSRS employees: different rules apply

This calculator covers FERS only. CSRS employees pay 7% of military basic pay, and face the “Catch-62” penalty: if you have post-1956 military service and do not pay the deposit, your CSRS annuity is recomputed at age 62 to remove the military credit — roughly a 2% annuity reduction per year of unbought military service. The Social Security Fairness Act (signed January 2025) repealed WEP and GPO but did not change the Catch-62 rule.

Related tools & guides

FERS Retirement Calculator

Model your total pension with the bought-back military years included — see the exact dollar impact.

Open

High-3 Salary Calculator

Calculate the High-3 average that drives your pension increase in this calculator.

Open

TSP Growth Calculator

Project your TSP alongside your pension for a complete retirement income picture.

Open

Military Buyback 2026: Is It Worth It?

The complete guide — deadlines, paperwork, waivers, and when buyback does not pay off.

Read

2027 Military Retiree COLA Tracker

The 2027 retired-pay COLA formula with live CPI-W math — and how a second federal career changes your COLA picture.

Read

Frequently asked questions

For FERS employees, the deposit is 3% of your total military basic pay. Basic pay only — BAH, BAS, combat pay, and special allowances are excluded. For example, four years of service with $120,000 in total base pay = $3,600 deposit. If you are past the roughly 3-year interest-free window, interest at 4.25% (2026 OPM rate) compounds annually on the unpaid balance.

Sources

OPM FERS Service Credit (deposit rate: 3% of military basic pay, 2001–present)
5 CFR 842.307 (interest-free grace period, annual compounding rule, OPM example)
OPM Benefits Administration Letter 26-301 (2026 interest rate: 4.25%)
5 USC 8415 (FERS annuity formula: years × 1.0% or 1.1% × high-3)