By Jay Shareef ChFEBC℠ and Chris Rhoads ChFEBC℠
If you served in the military, you may be eligible to receive credit for your military service through the Military Buyback Program. This program allows veterans with active-duty military service to receive credit for their military service that can be added to their years of civil service toward their retirement.
What this means is, if you were active-duty military before working for the federal government, your years in the military can count toward your retirement. Most veterans have likely heard of this program and can benefit greatly from it. At Certa Advisors, we have nailed down a few key takeaways that all veterans should understand about the Military Buyback Program.
Upfront Costs Mean Long-Term Benefits
In order to participate in the Military Buyback Program, you need to make a Military Service Credit Deposit. This payment is between 3 and 3.4% of your military basic pay, depending on the years of service, and it will count toward your Federal Employment Retirement Service annuity.
Of course, the deposit amount will vary depending on several factors and could mean that you pay a significant chunk of change now. However, not buying in could cost you many more thousands in retirement funds available for you in the long run.
For example, if your base pay was $25,000 and you served in the military for six years, your total base pay would be $150,000. And your Military Service Credit Deposit would be between 3% to 3.4% of the total base pay. If your percentage rate is 3%, then your deposit amount would be $4,500.
Now, let’s consider how much more you will receive in retirement if you are including those six years of military service. Let’s say that you worked for the federal government as a civil servant for 20 years and your high-3 salary was $100,000. Your pension calculation, without including your military service, would look like this: $100,000 x 20 x 1% = $20,000 per year.
With the six years of military service included, the new equation would be $100,000 x 26 x 1% = $26,000 per year. That’s a $6,000 difference per year and $500 difference per month, approximately.
You Could Retire Earlier
While circumstances surrounding every individual is different, it is possible for a civil servant, who is also a veteran, to retire earlier than their counterparts. For example, if you are 60 years old and have worked for the federal government for 15 years, and prior to that time you served in the military for six years, you would meet the minimum 20 years necessary to retire and could retire without penalty. This signifies that you would be eligible for an immediate annuity without working another five years.
Another important aspect to keep in mind is that buying back military time will increase your spouse’s lifetime survivor annuity.
Military Service Information
If the Military Buyback Program sounds like something that could benefit you but you can’t quite recall all the details of your service, don’t worry. You can begin by completing an Estimated Earnings During Military Service request form. In your submission to the relevant military branch, remember to include your Certificate of Release or Discharge from Active Duty, DD 214.
Still Have Questions?
Are you still wondering if this program is right for you and your family? Don’t worry. We’re here to help. If you don’t already have an advisor helping you do that, reach out to me at (301) 798-5250 or schedule a phone call now.
Jay Shareef is vice president, financial advisor, federal benefits consultant, and co-founder at Certa Advisors. As a U.S. Army veteran, Jay is passionate about helping federal employees create a bulletproof plan for retirement and navigate the often confusing and complicated federal benefits landscape. He spends his days educating and providing clients with unbiased insurance benefits and retirement strategies to help his clients create guaranteed income for life. As a problem-solver and trustworthy resource, Jay always puts his clients and their needs first so they can find financial peace of mind. He holds the Chartered Federal Benefits consultant (ChFEBC℠) credential. To learn more about Jay, connect with him on LinkedIn.
Chris Rhoads is a co-founder and vice president of Certa Advisors. As a registered investment advisor and independent financial professional, Chris is committed to helping his clients in retirement and he takes a holistic approach to financial planning that includes insurance and risk management, investments and wealth management, retirement income planning, and estate and tax planning. He is a Chartered Federal Employee Benefits Consultant (ChFEBC℠) and he is currently pursuing the Chartered Financial Consultant® (ChFC®) designation through the American College of Financial Services. Chris has been married to his wife Tia since 2009 and they live in Frederick, MD together with their two young daughters. In his free time, Chris enjoys traveling, watching sports, and being active in causes he cares passionately about. To learn more about Chris, connect with him on LinkedIn.