Military Buyback: Add Your Service Years to Your FERS Pension

Updated June 2026 · Educational only — not financial, tax, or legal advice

If you served on active duty before your federal civilian career, you may be able to turn those years into FERS pension years — by paying a one-time "military service deposit," often called a buyback. For most people who aren't drawing a military retirement, it's one of the highest-return moves in the entire federal benefits system: a small deposit, based on your old military pay, buys service credit valued against your much-higher federal salary, for the rest of your life. And it can do something a bigger TSP balance can't — it can move up the date you're allowed to retire.

What "buying back" actually does

When you pay the deposit, your active-duty time is added to your creditable service — and it counts two ways:

• Computation — each bought-back year adds to the years in your pension formula (1% of your high-3 per year, or 1.1% if you retire at 62+ with 20+ years).
• Eligibility — the years count toward the milestones that decide when you can retire: MRA+30, age 60 with 20, age 62 with 5, the 20 years that unlock the 1.1% multiplier, and the 25-year threshold for special-category and early-out rules.

Without the deposit, FERS gives you no credit at all for the military time — not toward your pension, not toward eligibility. It's all or nothing, and the deposit is the switch.

What it costs

For FERS, the deposit is 3% of the basic pay you earned during your military service (your military base pay — not allowances, and not your federal salary). Because military basic pay is usually far lower than a mid- or late-career federal salary, the dollar cost is typically modest.

Two timing rules make a big difference:

• Interest is free for the first two years after you're first covered by FERS. After that, a variable interest rate (set annually — roughly 4–5% in recent years) compounds on the unpaid balance each year. The earlier you pay, the less it costs.
• You must pay in full before you separate. A military deposit cannot be made after you leave federal service — miss the window and the credit is gone for good.

What you get — and why the math usually wins

The reason buyback is so often worth it is an asymmetry: you pay 3% of your old military pay once, but you receive 1% of your high-3, every year, for life (with COLAs once you qualify for them).

Say you served four years, with military basic pay totaling about $90,000 across those years, and your federal high-3 will be $100,000:

After that, the added pension is essentially pure return — and it keeps paying for as long as you live.

When it does not pay — and other watch-outs

• If you're drawing military retired pay. You generally can't get credit for the same years in both a military retirement and your FERS pension. To buy back, you'd have to waive your military retired pay — which usually doesn't make sense for a regular (20-year) military retiree. Exceptions exist for retired pay based on a disability or on reserve service (age-60 reserve retirement), where you can keep both. If you have any military retirement, get this analyzed before deciding.
• The clock and the deadline. Interest compounds after year two, and the deposit must be complete before you separate. Start the paperwork years out, not months.
• "Catch-62" is a CSRS thing. You may see warnings about military credit being stripped at age 62 — that's a CSRS rule. Under FERS it's simpler: without the deposit the time never counts in the first place.

How to do it

1. Request your estimated military earnings. Send form RI 20-97 (with your DD-214) to DFAS (or the Coast Guard's pay center) to get a statement of the basic pay you earned.
2. Apply to make the deposit. Submit SF 3108 (Application to Make Service Credit Payment) with the earnings statement and DD-214 to your agency's HR/payroll office. They calculate the 3% plus any interest.
3. Pay it off — by lump sum or payroll deductions — and keep written confirmation that it's paid in full for your retirement package.