Retirement Planning

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

The interest can be multiples of the base amount depending on how many years are being calculated. For instance, I know of someone who left an agency in 1991 and the base service credit deposit was right around $200. With interest added from after the grace period, he owed over $2,000. It was still worth it for him, but it's a major consideration. The annual interest rates are available at the OPM website, although 2018 has not yet been added. I will try to reprint them below. As I understand, interest is compounded annually and is charged to the date the deposit is paid in full or annuity begins, whichever is earlier. Interest is charged at a variable rate determined by the Department of the Treasury every year.

https://www.opm.gov/reti...d=&url=interestrates

I'm at ~14 years civil service now. Buying back the 20.8 years would put me at 35 years by this November. If I didn't have the money saved it would be an easy decision (no). The interest rates posted above look kind of scary. I had a break in service from Aug 2002 to Jan 2007 so I'm not sure when the three year grace period starts and ends. Officially, beause of my break in service, my service comp date is recalculated to Jul 2005, so perhaps the interest penalty wouldn't start or be calculated until Jul 2008? If that was the case, the interest rates don't look as scary.

I don't lose Tricare, my retired ID card or my 10% VA disability payment. My military retirement stops the day my FERS retirement begins.

Off topic but I'm 59 and will have to do Tricare for Life when I turn 65 which you only qualify for if you participate in Medicare Part B, which is currently running $165 a month. Not sure what most FERs retirees pay a month for FEHB but between Tricare (~$50) and Medicare part B ($165) my monthly medical premiums will be ~$215.

My last year as an E-7 (1998) I only earned $27K. We were deep in the middle of the cold war drawdown. I'm sure you did much better retiring in 2008. Timing is everything! Seems like after 9/11 the military was getting consistent 3-4% a year raises for at least the next 10-12 years. I don't begrudge anyone their raises, you guys earned them!

Good info! Thanks.

Your thoughts are correct....

Committed today and paid the deposit amount via pay.gov.

The only thing to do now is continue working until I retire (early 2022) and focus on getting my "high-3" as high as possible.

As acquisition workforce I am eligible for annual "pay point" bonuses (the gift that keeps on giving) so between those and possible annual raises from congress there are at least six opportunities for my pay to increase between now and early 2022.

Current rumor is congress is looking at a possible 3.1% raise for Feds in 2020. Keeping my fingers crossed.

Got my payment notification letter about 2 weeks ago from DFAS. Paid in full.

The next LES I got showed the amount also paid in full in block 20.

Scanned and sent a copy of the letter to my HR team for inclusion into my personnel file.

Will also maintain the original and digital copies in case something gets screwed up later during my retirement processing.

Not sure whether the time I bought back will adjust my SCD date now, or if they wait to do that during retirement processing.

Guess I'll send an e-mail to the HR rep I have been working with and ask.

Interesting thread. I appreciate the details.



let us know if the SCD changes.
is there a separate SCD for RIF purposes?

definitely let us know if your milpay stops. :)


were you charged interest for that period when you were out of federal service?

did you have "veterans preference for RIF" already? my LES does not show that I have it, but it should. eventually I will ask for that to be fixed.



someday I will consider buying some time, but as a retired reservist.

Edited by user Tuesday, July 16, 2019 8:35:12 PM(UTC)  | Reason: Not specified

It's kind of confusing, but based on the following OPM criteria for retirees below the rank of Major, I don't think I qualify:

1. My retirement was NOT based on disability resulting from injury or disease....
2. My retired pay from a uniform service IS based on 20 or more years of full-time active service....
3. I was NOT employed on 30 Nov 1964 in a position covered by 5 U.S.C. Chapter 35 for 30 or more consecutive days. I was 5 years old in Nov 1964.