FERS Military Buyback: Should You Buy Back Your Military Service?

If you served in the military before becoming a federal civilian, you may be able to count those years toward your FERS pension — for a deposit of 3% of your military basic pay. For most veterans without a military pension, the math is overwhelmingly favorable. Here's exactly how it works.

What is FERS military service credit?

FERS military service credit — commonly called a "military buyback" — lets you pay a deposit to OPM so that your active-duty military service counts as creditable service in your FERS retirement computation. The deposit is 3% of your military basic pay (not BAH, BAS, or special pay) for service performed after December 31, 1956.¹

Once the deposit is paid in full, your military years count toward:

• Annuity computation: added to your civilian years when calculating 1% × high-3 × total service
• Retirement eligibility: may let you hit 30 years at MRA, 20 years at age 60, or 5 years at age 62 sooner than civilian years alone allow

If you do not make the deposit, military service counts toward neither. (This is different from CSRS, where partial credit applied without a deposit.)

Who qualifies?

• Active-duty military service in any branch of the U.S. Armed Forces (Army, Navy, Air Force, Marine Corps, Coast Guard, Space Force)
• Discharged under honorable conditions (honorable or general discharge; other-than-honorable disqualifies)
• Service after December 31, 1956 (earlier service has different rules under CSRS)
• You are currently a FERS employee
• The deposit must be paid before you retire — OPM will not accept it after your retirement date

Reserve and National Guard service generally does not qualify unless it was active-duty (Title 10 mobilization orders). Weekend drills and annual training are not creditable.

What does it cost?

The deposit is 3% of your military basic pay for each year of service, plus interest if you wait more than about two years from your federal hire date.¹

Interest accrual

Interest begins accruing on the second anniversary of your federal appointment and compounds annually. The interest rate adjusts each year based on the Treasury rate. For 2026, the OPM interest rate is 4.25% per year.²

If you pay within two years of being hired, the deposit is exactly 3% × military basic pay with no interest. Every year you wait after that, the balance grows. At 4.25% compounding, a $5,000 deposit left unpaid for 10 years becomes roughly $7,600.

Example: 4 years of military service

Use the DFAS Military Service Deposit Estimator to calculate your actual deposit based on your service dates and earnings.

What do you get?

Annuity increase

Each additional year of creditable service adds 1% of your high-3 to your annual annuity (or 1.1% if you retire at 62+ with 20+ years total). For a GS-13 employee with a high-3 of $120,000:

• 4 years of military credit added → $120,000 × 1% × 4 = $4,800 more per year for life
• Break-even on a $4,200 deposit paid interest-free: less than 11 months of retirement

Retirement eligibility

This is often the bigger prize. Under FERS, the milestones that unlock an immediate unreduced annuity are:

• MRA (55–57 based on birth year) + 30 years of service
• Age 60 + 20 years of service
• Age 62 + 5 years of service

If you have 26 years of civilian service at MRA, you cannot retire with an immediate unreduced annuity — you'd need to use MRA+10 rules (with a penalty) or wait until 60. But if you add 4 years via military buyback, you have 30 years and retire immediately — fully unreduced, with the FERS supplement.

In that scenario, the buyback effectively bought you the ability to retire years earlier. The value of that is far greater than the annuity math alone.

The military retired pay trap

If you are currently receiving military retired pay (you completed 20+ years of active duty and receive a military pension), the rules change significantly:

• To use that service for FERS credit, you must waive your military retired pay for the years you're buying back³
• For most 20-year military retirees, this is a bad trade — the military pension is worth more than the incremental FERS annuity increase from adding those years
• Exception: if you receive disability retirement pay or Combat-Related Special Compensation (CRSC), you can keep that pay and still receive FERS credit — consult an advisor on the specifics

If you served 8 years but left without a military pension, there is no waiver issue. The buyback decision is straightforward math: deposit vs. lifetime annuity increase.

Step-by-step process

1. Get your military earnings statement from DFAS. Request a Proof of Service (earnings breakdown by year) at the DFAS Military Service Deposits page. This shows your actual basic pay for each year — the basis for the 3% calculation. Allow 6–8 weeks for processing.
2. Complete OPM Form SF-3108. SF-3108 (Application to Make Service Credit Payment) is the formal application. Submit it to your agency's Human Resources office, not directly to OPM.
3. HR submits to OPM. Your agency HR forwards the paperwork. OPM calculates the exact deposit amount (including any interest owed) and sends you a billing statement.
4. Pay the deposit. You can pay as a lump sum or in installments via payroll deduction. The balance earns no credit — only a completed payment in full before retirement date counts toward your service credit. Partial payments do not give partial credit.
5. Verify in your Official Personnel File. After payment, confirm your SF-50 (Notification of Personnel Action) reflects the updated years of creditable service. Errors occasionally occur; catching them before retirement is far easier than correcting them after.

Timeline tip: The DFAS earnings statement alone can take 6–8 weeks, and HR-to-OPM processing adds more time. If you're within 18–24 months of retirement, start immediately. If you have 10+ years of federal service, start now regardless — interest is compounding.

When does doing it early matter most?

Two reasons to pay the deposit as early as possible:

• Interest stops accruing once paid. Every year you delay past the two-year grace period, your deposit grows by 4.25%. A $5,000 deposit deferred 10 years costs you roughly $2,600 in unnecessary interest.
• The deposit window closes at retirement. If you miss it, there is no grace period after your retirement date. OPM processes retirements without military service credit if the deposit wasn't paid — permanently.

Worked example: GS-14, 6 years of military service

• Military service: 6 years, average basic pay $38,000/yr
• Deposit (if paid within grace period): 6 × $38,000 × 3% = $6,840
• High-3 salary at retirement: $145,000
• Annuity increase: 6 × 1% × $145,000 = $8,700/year
• Break-even: $6,840 ÷ $8,700 = 0.79 years (≈9 months)
• Eligibility impact: employee had 24 civilian years at MRA — with 6 military added, now has 30 years → retires immediately unreduced with FERS supplement instead of waiting until age 60

Common questions

Can I use military service credit if I also have civilian federal service from before FERS?

Yes, provided you're covered under FERS now. Mixed-service employees (CSRS Offset) should consult an advisor — the rules interact with CSRS Offset calculations differently.

Does paying the deposit affect my TSP contributions or matching?

No. The military buyback is a separate OPM transaction that only affects your FERS annuity. TSP balances and contributions are unaffected.

What if I don't have my military records?

DFAS can reconstruct earnings from military payroll records even without your DD-214. DFAS will cross-reference the National Personnel Records Center if needed. Start the process early given the timeline.

Is the deposit tax-deductible?

The deposit is made with after-tax dollars and is not deductible. However, contributions made toward the deposit are tracked — a portion of your eventual FERS annuity may be excludable from income under the Simplified Method, just as FERS contributions are (OPM calculates the exclusion ratio at retirement).

Sources

1. OPM — FERS Service Credit: Military Service Deposit (3% of basic pay after 1956).
2. OPM Benefits Administration Letter 26-101 — 2026 interest rate for service credit deposits: 4.25%.
3. OPM — Military Retired Pay and FERS: waiver requirement for concurrent receipt.
4. DFAS — Military Service Deposits for Civilian Federal Employees: request earnings statement.
5. OPM Form SF-3108 — Application to Make Service Credit Payment (FERS).

Deposit amounts and interest rate verified as of April 2026. OPM recalculates the annual interest rate each January; confirm the current rate with your HR office or at OPM.gov.

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