Buying Back Military Time Under FERS
Federal employees who served on active duty can buy that time back for FERS credit by paying a deposit of 3 percent of total military basic pay, plus interest after a two-year grace period following their first civilian appointment. Each year of credited military service adds one year to the annuity computation, worth 1.0 percent of high-3 pay per year. The deposit must be completed before separation for retirement, and military retirees must generally waive military retired pay to receive the credit.
Active-duty military service does not automatically count toward your FERS pension. You have to buy it back with a cash deposit. For many veterans turned federal employees, that deposit is one of the highest-return investments available: a few thousand dollars today can add tens of thousands of dollars of lifetime annuity income. The math is simple, but the rules around timing and interest have real bite.
What buying back means
Under the law, periods of honorable active-duty military service can become creditable FERS service if you make a deposit into the retirement fund. The deposit equals 3% of your total military basic pay for the periods you are buying back. It is not 3% of your current federal salary; it is 3% of what you were paid while in uniform, which is almost always a smaller number than people expect.
The deposit is made through your employing agency, usually in installments by payroll deduction, and it can take years to complete. What matters is that it is fully paid before you separate for retirement. An incomplete deposit at separation means the military service is not credited in your annuity computation, and there is no post-retirement way to finish paying it.
The two-year grace period and interest
After your first federal civilian appointment, you have a two-year interest-free window to complete the deposit. Once that window closes, interest begins to accrue on the unpaid balance, and it compounds annually at a variable rate set by law. Interest on military deposits can quietly double or triple the cost over a career.
This is why retirement counselors push employees to start the deposit early. A veteran with $60,000 of total military basic pay owes a $1,800 deposit. Paid within the grace period, the cost is exactly $1,800. Left unpaid for twenty years at accruing interest, the balance can grow far beyond that. Early payment is the difference between a bargain and a burden.
What it adds to your annuity
Each year of military service for which the deposit is paid adds one full year to your creditable service in the annuity formula. At the standard 1.0% accrual rate, four years of bought-back service adds 4% of your high-3 pay to your annual annuity, for life.
Worked example: an employee with a $100,000 high-3 and 26 years of civilian service would have a $26,000 annuity. Buying back four years of military time raises creditable service to 30 years, and the annuity becomes $30,000. The gain is $4,000 per year, or about $333 per month, every year of retirement. Against a $1,800 deposit paid early, the payback period is under six months.
Bought-back military time also counts toward eligibility thresholds, such as reaching 30 years for MRA retirement or 20 years for the 1.1% multiplier rule. Military service that counts for FERS computation but not eligibility is a common confusion; properly deposited military time generally counts for both.
Military retirees and the waiver rule
If you are receiving military retired pay, you generally must waive it to receive FERS credit for the same service. You cannot be paid twice for the same years. Limited exceptions exist, including retirements based on service-connected disability and certain National Guard and Reserve retirements under specific conditions. The waiver decision is permanent and should be made with full knowledge of the trade, because the FERS annuity gain often, but not always, exceeds the waived military pay.
Guard and Reserve service
Active-duty periods, including active-duty training and inactive-duty training under qualifying orders, can generally be bought back. Weekend drill and annual training credit is computed from the retirement points earned during those periods. Each retirement point converts to a day of creditable service for FERS purposes. Keep your DD-214 and your retirement points statements; you will need them to establish the service and the earnings.
How to start the deposit
Contact your agency human resources office or retirement counselor and request a military deposit calculation. You will need your DD-214 showing honorable discharge and your military earnings records, which DFAS can provide. The agency computes the deposit amount, applies any interest, and sets up the payment arrangement. Do this early in your career, while the interest-free window is open.
To see what bought-back years are worth in your own case, run your numbers with our FERS pension calculator, with and without the additional years.
Data current as of October 2026. Source: U.S. Office of Personnel Management (opm.gov) retirement information on military service deposits.