I’m a retired AF E-7 (retired in 1998). Conventional wisdom has always said that as retired military, it doesn’t make sense for me to buy back my military time and get the additional 20 years, 8 months credited to my FERS retirement. Bored one day, I decided to test this theory and crunch the numbers. I was surprised to learn that by buying back my time, 20.8 years at a cost of approximately $16,940, and retiring with 37 years under FERS instead of 17, as I had previously planned, I would actually end up with a gain of $750 a month in my gross pay. I would be giving up my military retirement ($1782 per month) to get a $4250 a month FERS annuity. Without buyback, and only 17 years, my FERS annuity would only be $1718 a month.
Without buyback: $1718 (FERs annuity) + $1782 (military retirement) = $3500 gross pay.
With buyback: $4250 (FERS annuity) + $0 (military retirement) = $4250 gross pay
$4250 – $3500 = $750 net gain for buying back my military time.
Buyback payoff: $16,940 / $750 = 22.5 months to pay off the buyback amount using my $750 a month net gain.
After 22.5 months I would have the buyback amount paid off and starting in month 23 be enjoying my net gain of $750 a month ($9K a year) for the rest of my life.
For calculation purposes, I’m a GS-13 Step 7 equivalent (NT-05) in a 33% locality area and I expect my high-3 at retirement to be about $125K.
Buyback amount: $16,940 – based on 3% of my military base pay earned between 1978 and 1998, plus interest. I do have the cash saved to pay the deposit in one lump sum.
FERS multipliers used:
17 year retirement: 17 X 1.0 = 17%
37 year retirement: 37 X 1.1 = 40.7%
I also have a 10% VA disability of about $140 a month which I assume will not be affected or will lose as a result of the buyback.
Just throwing this out there for a group sanity check. Am I overlooking or missing anything? It seems a no brainer to me.
Edited by user Tuesday, April 30, 2019 5:33:20 AM(UTC)
| Reason: Not specified