You Served in the Military—Here’s How That Time Could Still Add Value to Your Retirement

Key Takeaways

• Military service can add substantial value to your public sector retirement, but only if you take steps like making a military service credit deposit within the appropriate timeframe.

• The rules for crediting military time vary depending on whether you’re covered by FERS or CSRS, and timing, payments, and paperwork can all affect your eligibility for enhanced benefits.

Understanding How Military Service Counts Toward Your Retirement

If you served in the military and are now working in a civilian government role or preparing to retire from one, your prior service could offer far more than just a thank you. In many cases, your time in uniform may be creditable toward your civilian retirement under the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS).

But that credit doesn’t happen automatically. To benefit, you typically must make a military service deposit and meet certain deadlines. And for those nearing retirement, understanding these details is more than helpful—it’s essential.

Who Qualifies to Use Military Time?

If you served on active duty in the Army, Navy, Air Force, Marine Corps, Coast Guard, or commissioned corps of the Public Health Service or NOAA, your time could count. National Guard time generally only counts if it was under federal (Title 10) orders, not state (Title 32) status, unless otherwise specified.

Your service must have been:

• Honorable

• Completed before your civilian government service (although some exceptions apply)

• Documented properly (DD Form 214 is typically required)

Making a Military Service Deposit

The key to having your military time credited toward your pension is the military service deposit. This is a one-time payment you make to cover retirement contributions as if you had been a civilian employee during your military service.

Timing Matters

You generally have a two-year window from your date of civilian federal hire to make the deposit interest-free. After that, interest accrues annually. If you joined the federal workforce years ago and haven’t yet made a deposit, interest may have significantly increased your required payment.

If you’re under FERS, your deposit is typically 3% of your basic military pay. Under CSRS, it’s 7%. Those figures do not include interest.

Why It’s Worth It

Crediting military time can:

• Increase your total service time and potentially help you qualify for retirement earlier

• Boost your monthly annuity payment by increasing your years of creditable service

Without the deposit, most military service is not creditable for annuity computation under FERS unless it was performed after 1956 and you don’t qualify for Social Security based on that time.

What Happens If You Don’t Make the Deposit?

If you don’t pay the deposit and you’re covered under FERS, that military time won’t count toward your retirement eligibility or computation unless you were first hired before 1989 and aren’t eligible for Social Security based on that service.

For most current employees and retirees under FERS, not making the deposit means:

• You cannot count the service toward your annuity calculation

• You may still count the time for leave accrual, but that’s a minor benefit compared to the annuity impact

Retirement Eligibility Implications

Military service that has been credited can directly impact your retirement eligibility.

Under FERS in 2025, you generally need:

• 30 years of service at your Minimum Retirement Age (MRA)

• 20 years of service at age 60

• 5 years of service at age 62

Adding your military time could get you to one of these milestones faster. For example, if you’ve worked 28 years in the civilian workforce and have two years of military service credited, you could meet the 30-year threshold sooner and retire with an unreduced pension.

How It Affects Your High-3 Average

Military time does not affect your high-3 salary average directly, since it does not add additional high-paying civilian years. However, it does increase the number of years multiplied by your high-3 to compute your pension. That can lead to a substantial increase in your monthly benefit.

For FERS, the calculation is:

• 1% of your high-3 average salary multiplied by your years of creditable service

• 1.1% if you retire at age 62 or later with at least 20 years of service

So, for a high-3 salary of $80,000 and 30 years of service (including 3 years of military time), your pension would be $24,000/year instead of $21,600/year if you had only 27 civilian years.

What About TSP and Other Benefits?

Your military time does not count toward your Thrift Savings Plan (TSP) balance directly, since no TSP contributions were made during that time. However, retiring earlier due to added service credit could allow you to access your TSP funds sooner, depending on your age and circumstances.

For Federal Employees Health Benefits (FEHB) and Federal Employees Group Life Insurance (FEGLI), the key requirement is typically that you were covered under the plan for the five years immediately preceding retirement. Military time does not replace or affect this rule.

Veterans’ Preference and Post-Retirement Impact

Veterans’ preference is a separate issue from service credit for retirement. It helps you in hiring and reductions in force (RIFs) while employed but does not impact retirement calculations.

If you’re a retired military member drawing a military pension, there are additional considerations:

• You generally cannot receive dual credit for the same service unless you waive your military retired pay

• Waiving military retired pay is only advisable if your civilian retirement benefit with added service credit will exceed the value of your military pension

This decision requires careful calculation and often guidance from a retirement expert.

Special Considerations for Disability Retirees

If you received a military disability retirement, you may still be eligible to make a deposit and receive credit for that time, provided you waive the military pay. Each case is unique, so you’ll want a detailed analysis of how this would affect your benefits.

How to Start the Process

If you haven’t yet looked into making a military deposit, the best time is now. Here’s what you need to do:

1. Request your military earnings from the Defense Finance and Accounting Service (DFAS) or equivalent

2. Submit your earnings to your civilian HR office to calculate the deposit amount

3. Make your payment as early as possible to avoid interest accumulation

Once paid, ensure the deposit is recorded correctly in your Official Personnel Folder (OPF) and that you retain all documentation.

Avoid Common Pitfalls

Several mistakes can limit or eliminate the value of your military service:

• Missing the two-year interest-free window: Procrastination can cost thousands in interest

• Failing to verify deposit documentation: If it’s not in your OPF, it doesn’t count

• Assuming the rules are the same for all systems: FERS and CSRS rules differ

• Overlooking the impact of Social Security eligibility: This is critical for post-1956 service

Recap: A Valuable Piece of Your Retirement Puzzle

Military service can be one of the most valuable enhancements to your civilian retirement, but it’s only effective if you take deliberate action. In 2025, with continued changes to public sector retirement structures and rising retirement costs, optimizing every benefit available to you is more important than ever.

Your DD-214 could do more than sit in a file cabinet. With the right steps, it could be the key to earlier retirement, a larger pension, and more peace of mind in your post-employment years.

If you haven’t yet explored how to credit your military time, now is the moment. A licensed professional listed on this website can walk you through the costs, potential savings, and long-term strategy specific to your case.