How much does it cost to buy back military time is not one flat fee. For most FERS employees, a post-1956 military deposit starts at 3 percent of military basic pay. Interest can raise that amount after a grace period. Allowances, combat pay, and flight pay do not go into that base. Your agency, not a public calculator, sets the amount you actually owe.
This guide covers the cost factors, the timing of an estimate, and the questions worth asking before you decide. It does not replace your agency’s bill or a review of your full retirement picture.
How Much Does It Cost to Buy Back Military Time?
The starting point is a percentage of military basic pay, not a price per year of service. OPM’s guidance for benefits officers states the usual rates this way:
- FERS: generally 3 percent of military basic pay for the period of service.
- CSRS: generally 7 percent of that same basic pay.
- Service in 1999 and 2000 used slightly higher rates, then the FERS rate returned to 3 percent in 2001.
Basic pay is the military pay you received for the service itself. It does not include allowances, flight pay, or combat pay. Two people with the same years of service can owe very different deposits because their pay histories differ.
Interest is the second part of the bill. For post-1956 military service credit, interest generally begins on a set date. That date is October 1, 1985, or two years after your first covered civilian hire, whichever is later. The early rate was 3 percent. After that, Treasury sets a new rate each year. Your agency compounds interest on the unpaid balance at your interest accrual date.
The U.S. Treasury set the calendar year 2026 rate at 4.25 percent for these accounts. OPM applies a composite rate around each employee’s own accrual date, so two coworkers can see slightly different interest even in the same year. That is why a screenshot of a rate table is not a bill.
| Cost factor | What usually drives it | What it does not include |
|---|---|---|
| Deposit base. | Military basic pay for the creditable period. | Allowances, flight pay, and combat pay. |
| FERS percentage. | Generally 3 percent of that basic pay. | A flat fee per year of service. |
| CSRS percentage. | Generally 7 percent of that basic pay. | The FERS rate. |
| Interest. | Starts after the grace period and compounds yearly. | A rate you can pick from a blog. |
| Who calculates it. | Your employing agency, from your pay records. | A public online calculator. |
Pre-1957 active duty is treated differently. OPM’s military deposit training states there is no deposit for military service before 1957. Do not assume an older period of service adds the same 3 percent charge.
What Pay and Service Go Into the Deposit?
The deposit follows a defined period of service. OPM counts the years, months, and days from your entry on active duty through your final discharge or release. If the service started before 1957, the count starts on January 1, 1957. A break of even one day can split service into two periods. Each period needs its own pay figure.
Creditable service for this purpose is active duty in the uniformed services that ended under honorable conditions. OPM’s training materials exclude some endings. A dishonorable discharge, a clemency discharge, a neutral or uncharacterized discharge, or an officer dismissal is not creditable. Title 10 active duty is the service this deposit is built to cover.
Your agency needs proof of both the service and the pay. The usual records are:
- A DD-214 or an equivalent record of the service.
- Actual military pay records, when you still have them.
- Estimated earnings when actual pay records are not available.
- An SF-2803 or SF-3108 that the agency has modified for a military deposit.
If you do not have a DD-214, the employee asks the military records center for one, often with SF-180. If you do not have pay records, the next step is RI 20-97, Estimated Earnings During Military Service, sent to the right branch with the DD-214. Estimated earnings can be enough to start a bill. They are still an estimate, so read the figure before you treat it as final.
Military retired pay can also change whether a period counts, even after you pay. OPM’s Benefits Administration Letter 17-101 notes that retired pay may bar CSRS or FERS credit for that service, with specific exceptions in the retirement rules. Ask your human resources office about that bar before you write a check.
When Should You Ask for a Military Deposit Estimate?
Ask early, while you are still employed. OPM’s general rule is strict. The deposit must be paid in full to the employing agency on or before the separation date that your annuity is based on. A payroll deduction that starts before separation can still count. That remains true even if the last paycheck arrives after you leave. Waiting until the retirement application is usually too late for installments.
The grace period is the practical window. Interest generally does not start until two years after your first covered civilian hire, or October 1, 1985, if that date is later. Employees hired many years ago are often already past that window. Newer hires may still be inside it. Your interest accrual date, not a calendar you find online, tells you which group you are in.
A useful order of steps looks like this:
- Confirm the retirement system that covers you, and whether any service sits in a CSRS component.
- Gather each DD-214 and note every break in service.
- Collect pay records or request estimated earnings with RI 20-97.
- Ask human resources for the deposit amount, the interest already due, and your interest accrual date.
- Decide whether to pay a lump sum or installments while you are still on the rolls.
OPM also tells agencies to counsel employees about the effect of not paying. You should not have to guess. If a former employee believes an administrative error stopped a timely deposit, BAL 17-101 says that person may ask OPM in writing about a belated deposit. The agency cannot grant that exception on its own.
How Does Interest Change the Amount You Owe?
Interest is why a deposit that looks small on paper can look large a decade later. The agency charges interest on the unpaid balance, and it compounds once a year on your interest accrual date. Paying part of the bill reduces the balance that future interest is charged on. Leaving it unpaid does the opposite.
The rate is not fixed at the 3 percent deposit rate. Treasury announces a new calendar-year rate. OPM then tells agencies to use a composite of the rates in effect during the twelve months before your accrual date. For 2026, the announced rate is 4.25 percent. A January accrual date does not get the exact same composite as a December date.
Three timing facts matter more than any single rate:
- Interest generally waits until the later of October 1, 1985, or two years after your first covered hire.
- After that date, the unpaid balance compounds annually.
- The deposit, including interest, generally has to be finished before separation.
None of this tells you the dollar amount. Only the agency’s calculation, built from your basic pay and your accrual date, does that. A planner can help you compare that bill with the rest of your retirement income. The planner cannot replace the bill.
What Should You Compare Before You Pay?
The cost question and the credit question are related, but they are not the same decision. Under FERS, OPM’s training materials put the effect of a post-1956 deposit in plain terms. If you pay, the service can count for both eligibility and the annuity computation. If you do not pay, it counts for neither. That is the tradeoff. It is not a promise that paying is always worth it.
CSRS rules are older and different. An employee first covered by CSRS before October 1, 1982, may receive credit at retirement. That credit can then drop out of the benefit at age 62 if Social Security applies. Someone first hired under CSRS on or after that date generally gets the credit only when the deposit is paid. The same is true for FERS. If your record has both systems, ask which rules apply to which years before you use a FERS example.
Before you pay, compare the estimate with the rest of your plan.
- Your annuity estimate with the service included, and the same estimate without it.
- Whether the added service changes your eligibility date, not only the monthly amount.
- How the payment would be made, as a lump sum or as installments from pay.
- Whether military retired pay already bars credit for that period.
- How the choice sits next to TSP withdrawals, a survivor election, and your tax picture.
A broader benefits map still belongs in a separate conversation. Our federal employee retirement planning road map covers how FERS, TSP, and health coverage fit together. The FERS retirement planning checklist is the place for eligibility dates, high-3 pay, and leave. This article stays on the deposit bill.
Sick leave and a survivor annuity are also separate credits. FERS sick leave retirement credit does not require a military-style deposit. What the FERS survivor annuity costs is a reduction in the monthly benefit, not a payment into a military deposit account.
Which Questions Should You Ask Before You Decide?
Bring a short list to human resources, and keep the answers in writing. The goal is an estimate you can compare, not a general explanation of military credit.
- Which retirement system covers this period, and is any of it in a CSRS component?
- What basic pay did you use, and was any of it estimated?
- How much of the current balance is the original deposit, and how much is interest?
- What is my interest accrual date, and what happens if I pay only part of the balance?
- Does military retired pay bar credit even if I pay the deposit?
- Can I pay by installment, and what is the last date to finish payment?
- Will you show my annuity estimate with this service and without it?
If the answers conflict with your DD-214, stop and reconcile the dates before you pay. A one-day break can create a second period of service. An estimated earnings figure can also differ from a pay record you later find.
Hoxton plans federal benefits as one picture: pension, TSP, taxes, and estate choices. The Discover, Plan, Implement, Monitor, and Evolve process is how that review is organized. The military deposit is one input. It should not be decided from a percentage you saw online.
You can also use the retirement readiness checklist to gather the dates and documents before a meeting. For a wider look at how federal income sources fit together, see federal employee retirement income sources.
Talk with Hoxton Planning & Management LLC before you commit to a military deposit.
Frequently Asked Questions
How much does it cost to buy back military time under FERS?
For most FERS service, the deposit starts at 3 percent of military basic pay earned during the creditable period, plus interest after the grace period. Your agency calculates the dollar amount. A blog cannot give you the bill.
Does the deposit include housing or combat pay?
No. OPM’s military deposit guidance says the base is basic pay. Allowances, flight pay, and combat pay are not part of that base.
When does interest start on a military deposit?
Interest generally starts on the later of October 1, 1985, or two years after you were first employed in a covered civilian position. After that, it compounds each year on your interest accrual date.
Can I wait until I retire to pay the deposit?
Usually, no. The deposit generally must be paid in full to your agency on or before the separation date your annuity is based on. Ask human resources about installments while you are still employed.
Is pre-1957 military service part of the same bill?
No. OPM states there is no deposit for military service performed before 1957. Confirm how your agency treats that older service before you add it to a post-1956 estimate.
Get a Military Deposit Estimate Before You Pay
A military buyback is a personal calculation. The percentage is only the start. Basic pay, the grace period, compounded interest, and your separation date decide the amount. Ask your agency for the figure, then compare it with the annuity estimate that includes the service and the one that does not.
Hoxton Planning & Management LLC works with federal employees and retirees across the DMV corridor from our Shepherdstown, West Virginia office. Call (304) 876-2619 or use the contact form to review the estimate alongside your pension, TSP, tax, and estate plans.
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