In this article, we’ll talk about how military service may be used to enhance your years of service and enable you to retire earlier – and with a larger annuity – than if you only used your time as a FERS or CSRS employee.
Who is eligible for the credit?
You can earn credit for time spent in the United States military services if it was 1) active duty that ended honorably and 2) completed before retiring from your civilian career. The Army, Navy, Marine Corps, Air Force, and Coast Guard are all considered “armed forces,” as are the service academies. It also includes service in the Public Health Service’s Regular or Reserve Corps and as a National Oceanic and Atmospheric Administration commissioned officer.
General guidelines for obtaining credit
By depositing to the Civil Service Retirement and Disability Fund (CSRDF), you can get credit for any time of active duty service – barring weekend exercises. That deposit will be calculated as a percentage of your basic pay while on active duty. If the deposit is made within two years of the date you first became an employee, no interest will be charged. Following that, interest will be charged.
If you’re a reservist, making a deposit won’t affect your eligibility for reserve retirement pay. On the other hand, if you’re getting military retirement pay, you cannot normally continue to earn that benefit while still collecting credit for your service in your civilian annuity.
The exceptions are if you were granted military retirement pay for a service-connected disability sustained in combat with a U.S. enemy or sustained in battle in the line of duty during a war caused by an instrumentality of war. If you don’t meet one of the exclusions, you can maintain your military retired pay and have your FERS or CSRS annuity calculated solely on your civilian service, or you can forgo the military retired pay and make a deposit to the CSRDF to receive credit for your service toward a FERS or CSRS annuity.
Specific guidelines for obtaining credit
If you’re a FERS employee who served in the military after 1956, the only option to earn credit for that period is to submit a payment to the CSRDF. The deposit is typically 3% of your base salary while on active duty, plus interest.
CSRS workers with post-1956 military service are divided into two groups: those employed after October 1, 1982, and those hired before that date. If you were employed after October 1, 1982, you’d be treated the same as FERS workers, except for having to make a bigger deposit. Generally, a 7% deposit (plus interest) is required to have that service counted for civilian retirement reasons.
You would have two options if you were employed before October 1, 1982. You have the option of paying the 7% deposit for any post-1956 military service or not. The consequence of failing to pay the deposit is obvious. If you become eligible for Social Security at age 62, those years of non-deposit service will be deducted, reducing your CSRS annuity. That won’t affect only you but also your survivor, who will have their annuity recalculated based on your reduced annuity.
If you have any post-1956 military service and have not yet made a deposit but are considering doing so, you should contact your personnel office. The benefits specialists there may show you what your annuity (and, if applicable, your survivor’s annuity) would be with and without that service.
Contact Information:
Email: [email protected]
Phone: 8132032515
Disclosure:
Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice has been filed, or is excluded from notice filing requirements. This information is not a complete analysis of the topic(s) discussed, is general in nature, and is not personalized investment advice. Nothing in this article is intended to be investment advice. There are risks involved with investing which may include (but are not limited to) market fluctuations and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making any investment decision. You should consult a professional tax or investment advisor regarding tax and investment implications before taking any investment actions or implementing any investment strategies.
