In last week’s article, we reviewed the benefits of making a military service deposit or “buy back” and when it could make sense to do so. We saw that although every situation is different, for most buying back military time makes sense since it can reduce the time until retirement eligibility and increase the FERS pension. However, one point not covered was what military service is creditable for a deposit; so, this week, we’ll review just that.
What Military Service Is Creditable?
Although most active-duty military service is eligible to be bought back, some service is not. According to OPM, generally, military service is creditable for “retirement purposes if it was active service terminated under honorable conditions and performed prior to your separation from civilian service for retirement.” In addition to active-duty service, your service may be eligible for a deposit if it was: 1) at a military service academy 2) active-duty reserve time, 3) Reserve Officer Training or 4) National Guard Service when “ordered to active duty in service of the United States” or when the active-duty interrupts civilian service and is followed by reemployment*.
Note: OPM states that when a reservist performs active-duty service “during a period in which he or she is on military leave (or furlough) from a civilian position, the period is credited as civilian, not military service.”** Meaning any active-duty time performed while you’re on leave will already be counted as creditable civilian service, so no deposit will be necessary.
*OPM Administrative Letter Number: 95-101
**CSRS & FERS Handbook Ch22
What Military Service Is Not Creditable?
Now that we know what service is eligible for a deposit, let’s look at what’s not. Generally, your military service is not creditable if it was 1) a dishonorable discharge, 2) clemency discharge, 3) neutral or uncharacterized discharge, 4) officer dismissal, or 5) non-active reserve time (weekend duty).
Knowing what military service is creditable is an excellent example of how knowing the rules can make a significant difference in your retirement. Because although you have a robust benefits package, it is up to you to make sure you understand and utilize those benefits. Now that you know whether your military service is creditable or not, you can evaluate whether it makes sense to make a deposit for that time. As always, if you don’t feel confident in creating your financial plan or just want a second opinion, consult with a qualified financial planner.
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2023 Legislative Change Notice
The SECURE ACT 2.0 passed and impacted many of the articles on this website. While the articles were correct when written, it’s impossible to re-write every article. Please consult a qualified professional (i.e., CFP®, CPA, or attorney) before implementing any strategy.