Military buybacks are an opportunity for people who served as active duty in the military to buy back some of their military time and apply it to their years of civil service. This helps them to increase their retirement annuity and bring in much more money in the long term.
In some cases, your annuity could decrease if you do not buy back some of your military time, under the CSRS. This is the case if you work at least 40 calendar quarters while paying taxes to Social Security by the time you reach age 62.
For military service after 1957, your civilian hire date makes a difference as to your credit and the deposit you owe. With a civilian hire date before 1982, if you are not eligible for Social Security benefits when you reach age 62, you do not need to make a deposit to have your military service count toward your annuity. If you are eligible for Social Security with a civilian hire date before 1982, you have to make a military deposit or face your annuity being reduced based on the number of years you served in the military. For time in the CSRS, your annuity is reduced by 2% for each year of military service. With a civilian hire date after 1982, you must pay the deposit.
For service after 1957, you are required to make a deposit to receive credit for your military service. You will then receive your full annuity with no reduction.
To be eligible for an annuity, you need to have served for at least 30 years by the time you reach your minimum retirement age, at least 20 years at age 60, or at least 5 years at age 62. IF you served slightly under some of these limits and want to retire, you can buy back a few years of your military time to reach these service requirements.
You will need to pay a deposit to buy your military time back. This deposit is calculated based on your military base pay and a multiplier of around 7% for CSRS employees and 3% for FERS employees.
You have a three-year grace period to buy back your military time before the deposit starts to accrue interest. It is common to owe two to three times more as a deposit than the original amount. Buyback your military time early to avoid paying more than you need to for your buyback.
How to Buy Your Military Time Back
Buying back your time is done by a calculation of your high 3 with your years of creditable service and multiplier based on when you retire. If you retire after you reach age 62, your multiplier would be 1.1% and if you retire before age 62 your multiplier would be 1%.
FERS employees can fill out SF Form 3108 and CSRS employees can fill out SF-2803 to make their annuity deposits. You can make your deposit in a lump sum or through smaller payments as a payroll deduction.
To learn more about military buybacks, reach out to us today.