Does Time Serviced in Active Duty Count towards Federal Retirement in the U.S.?

Many Americans serving in the armed forces wonder about their eligibility for federal retirement, especially when transitioning from military to civilian careers. This article explores the intricacies of how active duty service time can be credited towards federal retirement benefits in the U.S.

Understanding Federal Retirement Benefits

Upon joining the U.S. Customs Service in 1969, I was credited with three years of active duty time in the U.S. Navy both as earned service time and for longevity in Civil Service. I had the option to count my naval reserve service as either part of my Civil Service retirement or my Navy retirement, with the latter being more financially advantageous. However, I chose to embark on a civilian career with the additional three years of service credited towards my Federal Civil Service retirement.

Military Buyback Process: A Closer Look

If you buy back your time, you essentially count your prior military service towards your federal retirement benefits. The timing of your buyback can affect the amount you need to pay and any accrued interest. If you buy back your time within three years of joining federal service, you won't have to pay interest. More details and a calculator to estimate the costs can be found here.

Contribution to FERS

For those who opt for a buyback, it's crucial to understand that during the time you were serving in the military, no contributions were made to your retirement fund. Upon joining a federal job, a small portion of your paycheck is withheld for retirement contributions. To compensate for the lost time, you can make a deposit into the Federal Employee Retirement System (FERS).

Factors to Consider for Buyback

While it may seem like a straightforward decision to buy back your military time, several factors must be considered. First and foremost, the treaty between the military and federal governments states that you can only buy back time if you are not an active-duty retiree. If you were an active-duty retiree and chose to buy back your years, you would lose your military pension in favor of a higher Federal Employee retirement pension.

One instance where a buyback makes more sense is when you have not been an active-duty retiree. By paying into the FERS, you can effectively fund your retirement as if the years had been contributed to FERS.

It's important to note that while you can technically buy back your military time and contribute it to FERS, you should only do this if you are not a retired active-duty military member. In most other cases, the benefits of civilian FERS outweigh the potential downsides of double-counting service time.

Final Thoughts

When considering the buyback of military service time for federal retirement, it's essential to consult with a financial advisor or human resources representative. Understanding the nuances and potential impacts on your pension can help you make an informed decision about whether to buy back your time. The Military Buyback Program, as it is often referred to, can be a valuable tool for those with military service backgrounds seeking to enhance their federal retirement benefits.

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