I What the deposit actually buys
Paying the deposit converts your active-duty military time into creditable civilian service. That has two separate effects, and the second is the one people underestimate.
A larger annuity. Every bought-back year adds 1 percent of your High-3 to your annual pension — or 1.1 percent if you retire at 62 or later with at least 20 years of total creditable service.
Four years of service, worked through
A veteran with four years of active duty and a High-3 of $100,000 buys back that time.
Four years × 1 percent × $100,000 = $4,000 per year added to the annuity, for life, with COLA adjustments after 62.
Earlier eligibility. The years also count toward the thresholds that govern when you may retire: MRA plus 30, age 60 plus 20, and age 62 plus 5. A four-year veteran with 26 years of civilian service reaches MRA plus 30 immediately, rather than waiting for age 60 with 20.
The deposit is priced against your military basic pay from decades ago and pays out against your federal civilian High-3 — which is why the arithmetic is so lopsided in your favor.
II What it costs
| System | Deposit rate | Basis |
|---|---|---|
| FERS | 3% | Military basic pay earned during the service period |
| CSRS | 7% | Military basic pay earned during the service period |
Basic pay means base salary only. Excluded from the calculation:
- Basic Allowance for Housing (BAH)
- Basic Allowance for Subsistence (BAS)
- Combat pay and hazardous duty pay
- Special duty pay, flight pay, sea pay, and similar
- Bonuses of any kind
That exclusion matters, because it means the deposit is computed on a much smaller number than your total military compensation. A junior enlisted service member's basic pay across four years might total $110,000, producing a FERS deposit near $3,300 before interest.
III The interest clock
The deposit is interest-free for a grace period that begins when you are first employed in a position subject to federal retirement deductions. After that window closes, interest compounds annually at a rate set by Treasury — 4.25 percent for 2026.
Under the standard OPM rule the interest-free window is two years from your first covered appointment, though published sources sometimes state it differently. Ask your payroll office for your specific interest accrual date rather than relying on any summary, including this one. The practical guidance does not change either way: start the paperwork in your first year, because the process itself takes months and the window is shorter than the process.
The compounding is the argument for urgency. A deposit left unpaid does not sit still — it grows every year, and an employee who waits fifteen years can see the total rise substantially above the original principal.
IV Which service qualifies
Active duty service in the uniformed services performed after 1956 generally qualifies and requires a deposit. Service performed before January 1, 1957 is credited automatically at no cost, though virtually nobody currently working has such service.
National Guard and Reserve service is where people get this wrong. The rule turns on the authority you served under:
| Type of service | Creditable? |
|---|---|
| Active duty, any branch, post-1956 | Yes — deposit required |
| Federal activation under Title 10 | Yes — deposit required |
| Drill weekends | Generally no |
| Annual training | Generally no |
| State activation under Title 32 | Generally no |
| Service before Jan 1, 1957 | Yes — automatic, no deposit |
Guard and Reserve members frequently assume none of their service counts, when in fact multiple Title 10 activations across a long career can add up to substantial creditable time they never claimed. Each activation period is evaluated separately, and the DD-214 from each one is the evidence. If you deployed more than once, pull every DD-214 before concluding you have nothing to buy.
V If you receive military retired pay
This is the one branch of the decision that genuinely requires calculation rather than a default answer.
Generally, if you receive military retired or retainer pay, you must waive it to receive credit for that service in your civilian annuity. You cannot count the same service twice.
Limited exceptions exist, including retired pay awarded for a service-connected disability incurred in combat or caused by an instrumentality of war, and reserve retired pay under Chapter 1223 — which generally does not require a waiver.
VA disability compensation is not military retired pay and is unaffected by any of this. You can waive military retired pay to buy federal credit while continuing to receive your full VA compensation. These two get conflated constantly, and the confusion costs veterans money in both directions.
If you are drawing a military pension, run actual numbers before deciding. Waiving a pension in exchange for civilian credit is not automatically favorable, and the answer depends on the size of the retired pay, your civilian High-3, and how many years you will work.
VI Buyback Break-Even Calculator
Enter your service and pay figures. The tool estimates the deposit with interest, the annuity it buys, and how long it takes to pay for itself.
What does the deposit buy?
Estimates only. Your payroll office computes the binding figure after DFAS returns your earnings.
What Waiting Costs — Deposit Growth at 4.25%
A $3,300 principal deposit compounding annually at the 2026 rate, by years elapsed after the interest-free window closes. The deposit does not sit still, and the process itself takes three to nine months before payment can even begin.
VII Catch-62 — CSRS only
If you are under FERS, skip this section entirely. It does not apply to you.
For the small remaining population under CSRS, there is a provision that removes military service credit years after you thought the question was settled.
Catch-62 applies when all of these are true:
- You are covered by CSRS;
- You were first hired before October 1, 1982;
- You have post-1956 military service;
- You never paid the deposit; and
- You become eligible for Social Security at 62.
When those line up, OPM recomputes your annuity at the later of age 62 or retirement and deletes the military service credit. The loss runs roughly 2 percent of your High-3 per unpaid military year — four years is about an 8 percent permanent cut.
Nothing happens at retirement. The annuity is computed with the military years included, checks arrive normally, and then on the 62nd birthday the amount drops permanently. There is no new paperwork and no warning beyond a letter from OPM. Employees who never paid the deposit and assumed the question had expired discover it years into retirement.
CSRS employees hired on or after October 1, 1982 are in a different position: they receive no credit for post-1956 military service at all unless the 7 percent deposit is paid before separation. The Social Security Fairness Act repealed WEP and GPO in 2025, but it did not touch Catch-62 — see Topic 17.
VIII The process, in order
The sequence matters, because step one gates everything after it and takes the longest.
- Gather your DD-214s. One for every period of active duty or Title 10 activation. Your DD-214 shows dates, not pay.
- Submit form RI 20-97, Estimated Earnings During Military Service, to your branch's pay center through DFAS, with your DD-214. This produces the earnings record the deposit is computed from. Allow several weeks to a few months.
- Submit SF-3108 (FERS) or SF-2803 (CSRS), Application to Make Service Credit Payment, to your HR office with the earnings statement and DD-214 attached.
- HR forwards to payroll, which computes the exact deposit including accrued interest and sends you a bill.
- Pay it — lump sum or payroll deduction, depending on what your agency offers.
- Get written confirmation that the deposit is paid in full, and keep it permanently with your SF-50s.
Your deposit record has to survive until you retire, which may be decades and several agencies away. Payroll systems change, agencies reorganize, and records get lost. Keep the paid-in-full confirmation somewhere you will still have it in thirty years. Reconstructing a deposit you already paid is a miserable process, and the burden of proof will be on you.
Typical end-to-end timeline is three to nine months, with the DFAS earnings estimate as the long pole. That is the real reason to start in your first year rather than your second.
IX The eligibility effect people miss
Most discussion of the buyback focuses on the annuity increase. The eligibility effect is frequently worth more.
Bought-back military years count toward every retirement eligibility threshold:
| Threshold | Effect of 4 bought-back years |
|---|---|
| MRA + 30 | Reach 30 years of service four years sooner |
| Age 60 + 20 | Reach 20 years four years sooner |
| Age 62 + 5 | Vest and qualify substantially earlier |
| Age 62 + 20 for the 1.1% multiplier | Can be the difference between 1.0% and 1.1% across your entire career |
That last row is the largest single effect available. Crossing age 62 with 20 years raises the multiplier from 1.0 to 1.1 percent on every year of service you have — a permanent 10 percent increase to the whole annuity, not just to the military years. A veteran sitting at 18 years of civilian service at 62 who bought back four years crosses that line immediately.
The eligibility framework is covered in Topic 11, and the High-3 levers in Career & Pay Topic 35.
X When it is not worth it
The honest exceptions, few as they are:
- You receive military retired pay you would have to waive. This is the real one. Run actual numbers — waiving a pension for civilian credit is not automatically favorable.
- You will not reach five years of civilian service. Without vesting there is no annuity for the credit to attach to.
- You are pressing the CSRS 80 percent cap. Additional years add little once you are at or near the maximum annuity.
- You are about to separate. The deposit must be completed before separation to count. Starting a nine-month process two months out does not work.
- You genuinely cannot afford it now. A real constraint — but note that most agencies offer payroll deduction, and interest makes waiting more expensive, not less.
Outside those cases, the deposit is favorable by a wide margin.
XI The deadline that actually matters
Two deadlines exist, and they are not equally forgiving.
The interest-free window is soft. Missing it costs money — compounding at 4.25 percent — but the deposit remains available.
Separation is hard. The deposit must be paid before you separate from federal employment to count. Once your retirement case is adjudicated, the window closes permanently.
There may still be a narrow opportunity. Call OPM immediately about completing the deposit before your case is finalized. This is time-critical and worth a phone call the same day rather than a letter.
XII The playbook
| Situation | What to do |
|---|---|
| New federal hire, prior military service | Submit RI 20-97 this month. The interest-free window is shorter than the process. |
| Mid-career, never paid | Still favorable. Interest has accrued but the annuity math almost always wins. |
| Guard or Reserve background | Pull every DD-214. Title 10 activations count and are commonly overlooked. |
| Receiving military retired pay | Run the waiver comparison with actual numbers before deciding. |
| Drawing VA disability | Unaffected. It is not retired pay and continues either way. |
| CSRS, hired before Oct 1982, unpaid | Catch-62 will cut your annuity at 62. Pay the deposit. |
| Near age 62 with 18–19 years | Buyback may cross you into the 1.1% multiplier — a 10% lift on everything. |
| Approaching separation | Must complete before you separate. Start now or not at all. |
How to get this done
- Locate every DD-214, including one for each Title 10 activation if you served in the Guard or Reserve.
- Submit form RI 20-97 to DFAS now — it is the long pole and everything else waits on it.
- Ask your payroll office for your specific interest accrual date rather than assuming the window length.
- Submit SF-3108 for FERS or SF-2803 for CSRS once the earnings statement arrives.
- Compute the deposit against your basic pay only — exclude BAH, BAS, combat pay, and special duty pay.
- If you receive military retired pay, run the waiver comparison before committing.
- If you are CSRS and were hired before October 1982, treat Catch-62 as the deciding factor.
- Check whether the added years cross you into age 62 with 20 years — that raises the multiplier on your entire career.
- Ask whether your agency offers payroll deduction if a lump sum is difficult.
- Get written confirmation the deposit is paid in full, and store it where it will survive until you retire.
Frequently asked questions
For FERS employees the deposit is 3 percent of the military basic pay you earned during your service period, plus interest once the interest-free window closes. For CSRS employees the rate is 7 percent. Basic pay means base salary only — Basic Allowance for Housing, Basic Allowance for Subsistence, combat pay, hazardous duty pay, and special duty pay are all excluded from the calculation. Because military basic pay is modest relative to federal civilian salaries, four years of enlisted service often produces a deposit in the low thousands of dollars.
Two things. Each bought-back year adds 1 percent of your High-3 to your annual pension, or 1.1 percent if you retire at 62 or later with at least 20 years of total creditable service. Four years at a $100,000 High-3 is roughly $4,000 more per year for life. Second, and often more valuable, the years count toward retirement eligibility thresholds — MRA plus 30, age 60 plus 20, and age 62 plus 5 — which can let you retire two to five years earlier than you otherwise could.
There is an interest-free grace period that begins when you are first employed in a position subject to federal retirement deductions. Under the standard OPM rule that window is two years, after which interest compounds annually at a rate set by Treasury — 4.25 percent for 2026 under OPM BAL 26-301. Because published sources sometimes state this window differently, confirm your specific interest accrual date with your payroll office rather than assuming. The practical guidance is the same either way: start the paperwork in your first year, because the process itself takes months.
Active duty service in the uniformed services performed after 1956 generally qualifies. Service performed before January 1, 1957 is credited automatically with no deposit required, though almost nobody currently working has such service. National Guard and Reserve service is the common source of confusion: periods of federal activation under Title 10 count and require a deposit, while drill weekends and annual training generally do not count at all. Look at each activation period separately, and your DD-214 from each one is the documentary evidence.
It applies only to CSRS employees, not FERS. If you are covered by CSRS, were first hired before October 1, 1982, have post-1956 military service, never paid the deposit, and become eligible for Social Security at 62, OPM recomputes your annuity at the later of age 62 or retirement and removes the military service credit entirely. The loss runs roughly 2 percent of your High-3 for each unpaid military year, so four years means about an 8 percent permanent pension cut arriving on your 62nd birthday with no new paperwork.
Generally yes, if you receive military retired or retainer pay, you must waive it to receive credit for that service in your civilian annuity — with limited exceptions, including retired pay awarded for a service-connected disability incurred in combat or caused by an instrumentality of war, and reserve retired pay under Chapter 1223. VA disability compensation is a separate matter entirely and continues unaffected. Anyone receiving military retired pay should treat this as a genuine calculation rather than an assumption, because waiving a pension to buy credit is not automatically favorable.
Start with form RI 20-97, Estimated Earnings During Military Service, submitted to your branch's pay center through DFAS, along with your DD-214. Your DD-214 shows dates but not pay, and you need actual earnings for the calculation. Allow several weeks to a few months for that response. Then submit SF-3108 for FERS or SF-2803 for CSRS to your HR office, which forwards it to payroll to compute the exact amount including any accrued interest. The full process commonly runs three to nine months end to end.
A few. If you are receiving military retired pay you would have to waive, the comparison can go either way and needs actual numbers. If you will not reach five years of civilian service and vest, there is no annuity for the credit to attach to. If you are already pressing the CSRS 80 percent maximum annuity, additional years add little. And if you are near separation with no intention of returning, the deposit must be completed before you separate to count at all. Outside those cases, the deposit is one of the most reliably favorable financial decisions in a federal career.