For military service members and veterans
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Request a conversationFor most military retirees the military buy back for FERS does not pay, because the credit usually counts only if you waive retired pay, and FERS rarely replaces what you give up. A quick test: with no military retired pay, the deposit (3% of military basic pay) usually pays for itself within the first 1 to 2 years of the annuity. With retired pay, compare the extra FERS pension with the retired pay you would waive. What's unknown is your own basic pay history, your High-3 and the interest rate if you wait, and those numbers decide the answer. What doesn't change is the waiver rule itself. Savant Wealth Management handles this for its own clients as one decision on a short list, placed by due date and checked against the real numbers before any money moves.
Quick summary
- Check whether you draw regular military retired pay before you do anything else, because that decides whether the credit is usable.
- Request Form RI 20-97 through your agency HR and wait for the earnings figure instead of estimating the deposit from memory.
- Pay the deposit within 2 years of starting FERS-covered work to avoid interest.
- Compare years × 1% × High-3 with the retired pay you would waive, and pay only if the FERS credit is larger.
- Pay the deposit in full before you leave federal service, or the credit is lost for good.
Step 1: Check whether you draw retired pay
Many people believe that buying back military service always helps a FERS pension. It doesn't, and the rule that decides it is short. The deposit is 3% of the military basic pay you earned, and it buys FERS credit for those active-duty years. Pay it within 2 years of starting FERS-covered work and no interest is charged. After that, interest accrues at a rate OPM sets each year, so check the current rate. The deposit must be paid in full before you separate from federal service.
Now the waiver. A military retiree generally counts those years in FERS only by waiving military retired pay when the FERS annuity starts. There are 2 exceptions: retired pay awarded for a combat-related disability, and Reserve retired pay under chapter 1223. Those retirees keep their retired pay and still get the credit. Reserve pay at 60 has its own page, so that's all we say here.
VA disability compensation is not part of this choice. A 60% rating matters through CRDP, which another page covers.
Step 2: Gather the numbers before HR does
You need 5 documents, and each has a known source. The DD 214 comes from your own records or the National Archives. Form RI 20-97 goes through your agency HR to the military finance center, which returns your basic pay earnings. Your HR office then gives you a deposit estimate. Your pay stubs give you the current salary and a High-3 estimate. Your military retiree account statement shows the retired pay figure.
Estimating the deposit from memory is the slip people make at this step. Basic pay in your early years was low, and your recollection will be off by thousands. Wait for the RI 20-97 earnings figure before you decide anything.
- DD 214 from your own records
- Form RI 20-97 earnings report
- Agency HR deposit estimate
- Pay stubs for High-3 estimate
- Retiree account statement
When does the military deposit pay for itself?
The deposit pays for itself when you have no regular military retired pay to waive, usually within 1 to 2 years of the annuity, and it does not pay when the FERS credit is smaller than the retired pay you would give up. Maureen's case shows the second outcome.
A hypothetical household: Maureen, 52, has 20 years of active service, $60,000 a year of retired pay (round, for illustration) and a $165,000 federal salary under FERS. Her deposit is 3% × $1,500,000 of basic pay = $45,000. The credit, retiring before 62, is 20 × 1% × $165,000 High-3 = $33,000 a year. Using it means waiving $60,000, so she nets $33,000 − $60,000 = −$27,000 a year. The deposit does not pay for her.
Delay changes only the price. Paying 5 years after hire instead of now adds 3 interest-bearing years. At 3% for illustration: $45,000 × 1.03³ = $49,173, which is $4,173 more. Timing changes the price, not the verdict.
Now a second hypothetical person, a 4-year Army veteran with no retired pay. His deposit is 3% × $120,000 = $3,600. It adds 4 × 1% × $100,000 High-3 = $4,000 a year, so it pays back in under a year. The 2 cases point opposite ways for one reason: whether there is retired pay to give up.
Run it in this order:
1. Confirm your retired pay status. 2. Request RI 20-97. 3. Get the deposit estimate from HR. 4. Estimate the FERS credit (years × 1%, or 1.1% at 62 or later with 20 years, × High-3). 5. Compare it with your retired pay, or with zero. 6. Pay within the 2-year window, as a lump sum or by installments.
If you receive no military retired pay, or only combat-related or chapter 1223 Reserve retired pay, the deposit usually pays for itself within 1 to 2 years of the annuity, so make it inside the 2-year interest-free window. If you draw regular retired pay, pay only when years × 1% × High-3 is larger than the retired pay you would waive.
The deposit row is the only one with a due date tied to your hire date. The credit also counts toward retirement eligibility, such as MRA plus 30, which can matter for the 4-year veteran.
One honest limit: this page does not settle the CRDP, CRSC or survivor-benefit effects of waiving retired pay, and those can change the answer for a retiree with a VA rating. Get the waiver math checked before you pay a large deposit. All investing and pension choices carry risk, and a wrong call can cost you money.
| Income or account | How it is taxed | What to do with it |
|---|---|---|
| Military retired pay | Federal income tax; states vary | Compare before waiving |
| FERS basic annuity | Federal income tax | Price credit with High-3 |
| Military deposit | Paid with after-tax dollars | Pay within 2 interest-free years |
| VA disability compensation | Tax-free | Leave out of the waiver math |
| Traditional TSP | Taxed when withdrawn | Don't drain it for the deposit |
Step 4: Pay before the interest clock starts
Retiring from federal service before the deposit is paid in full loses the credit permanently. For the 4-year veteran above, that is $4,000 a year of annuity, about $80,000 over 20 years before COLAs. Waiting past the 2-year window only adds interest, which is a smaller loss but an avoidable one. Put the 2-year date on your calendar the day you start the job.
Common questions on a military buy back for FERS
Can I change my mind after I start paying the military deposit in installments?
Usually yes, within limits. Most agencies let you pay in installments, and you can generally pay the remainder in full later. What you can't do is skip the final payment: the credit counts only once the deposit is paid in full, and interest may start after the 2-year window. Ask your HR office about its installment rules in writing.
How much is the military deposit for 4 years of active duty?
The deposit is 3% of the basic pay you earned during those years. If your 4 years of active duty paid $120,000 in total basic pay, the deposit is $3,600. Your own figure comes from the earnings report on Form RI 20-97, so don't estimate it from memory. Your high pay years, if any, will raise it.
What do I do with the Form RI 20-97 estimate once HR gets it back?
Use it to get a firm deposit amount from your agency HR, then compare it with the FERS credit it buys. Multiply the credited years by 1% (or 1.1% at 62 or later with 20 years) and by your High-3. Subtract any retired pay you would waive. Pay inside the 2-year interest-free window if the result favors it.
Does a paid military deposit count toward the FERS MRA plus 30 retirement date?
Yes, in most cases. Once the deposit is paid in full, the military years count as creditable service for eligibility, including the minimum retirement age with 30 years of service. For a 4-year veteran, that can move the first date you can retire without a reduction. Ask HR to confirm the date in writing.
Savant Wealth Management puts the deposit on your due-date list
Savant Wealth Management advisors set the 2-year interest-free due date beside your other decisions, such as TSP withdrawal planning and Survivor Benefit Plan election, and compare the deposit with your retired pay using your own RI 20-97 numbers. The work happens by video or phone. If you want that done, send the request form on this site, and we'll set up an intro call.
Primary sources
This content is general information and education. It is not individualized investment advice, tax advice or legal guidance. Investing involves risk, including the possible loss of principal. Before making financial decisions, talk to a professional who understands your full situation.