What Civilian Military Employees Often Miss About Their Retirement Perks Until It’s Too Late

Key Takeaways

• Many civilian military employees overlook how different retirement rules and benefits apply to them compared to other government workers, especially when it comes to eligibility age, buyback opportunities, and FEHB coordination.

• Strategic planning—particularly around military service credit, TSP withdrawals, and FEHB coverage—is essential to avoid late surprises that can reduce long-term income or delay eligibility.

The Unique Position of Civilian Military Employees

Civilian military employees serve critical roles within the Department of Defense and related agencies, yet their retirement benefits often don’t receive the attention they deserve. You operate under the Federal Employees Retirement System (FERS), just like other government workers, but the nature of your service, particularly if it includes prior military time, adds unique complexities.

These complexities are often underestimated until retirement is just around the corner—or worse, already underway. By understanding the key elements of your retirement benefits today, you can plan with greater clarity and avoid preventable mistakes.

Military Service Buyback: A Commonly Missed Advantage

If you previously served in the uniformed military, that time doesn’t automatically count toward your FERS retirement. But it can—if you take action early.

What You Can Do

• You can buy back your active-duty military time by paying a deposit, which includes a small percentage of your base military pay plus interest.

• The deposit must be completed before you separate from federal service to receive credit.

Why It Matters

• Each year of service you buy back adds directly to your creditable service, increasing your FERS annuity.

• If you wait too long, the interest compounds annually, significantly increasing the cost.

Some civilian military employees discover the buyback option only after their retirement paperwork is submitted. At that point, it’s often too late to complete the process.

MRA, Early Retirement, and Eligibility Nuances

Under FERS, your Minimum Retirement Age (MRA) depends on your year of birth. For most people retiring now, that age is between 56 and 57. But simply reaching your MRA isn’t enough—you also need to meet service time requirements.

Key Rules

• You can retire with full benefits at your MRA with 30 years of creditable service.

• Alternatively, age 60 with 20 years or age 62 with 5 years qualifies you for full retirement.

• MRA+10 allows retirement with at least 10 years of service at MRA, but with a permanent reduction unless you postpone.

Civilian employees working on military bases or within defense-related agencies often misunderstand these rules, particularly if they’ve transferred between agencies or had a break in service. Delays in understanding how your service adds up can result in years of postponed retirement or unexpected penalties.

Special Retirement Supplement Disappears at 62

Many employees under FERS receive a Special Retirement Supplement (SRS) if they retire before 62 with full eligibility. But the supplement ends the month you turn 62, regardless of when you begin claiming Social Security.

If you were counting on this income stream to continue until you file for Social Security at 67 or later, you’ll face a gap.

Planning Tip

Review your income strategy between ages 62 and your planned Social Security filing age. You may need to tap into your TSP or other savings during this time.

FEHB: You Can Keep It, But With Conditions

The Federal Employees Health Benefits (FEHB) program is one of the most valuable retirement benefits. But don’t assume you’ll automatically carry it into retirement.

Eligibility Rules

• You must have been continuously enrolled (or covered as a family member) in FEHB for the five years prior to retirement.

• You must retire with an immediate annuity. Delayed or deferred retirement can disqualify you.

Why This Is Often Missed

Civilian military employees who separate before meeting these conditions—often planning to “come back later”—can unintentionally forfeit lifelong FEHB coverage. Understanding the five-year rule in advance is crucial to preserving this benefit.

TSP Timing and Withdrawals: Sequence Matters

The Thrift Savings Plan (TSP) is your primary defined contribution retirement savings plan. What many civilian military employees fail to understand is that how and when you withdraw from it significantly affects your tax burden and retirement cash flow.

What to Watch

• Required Minimum Distributions (RMDs) begin at age 73 in 2025.

• Partial withdrawals, installment payments, and annuities each have different tax and income implications.

• If you separate from service in the year you turn 55 (or later), you can access your TSP penalty-free—this rule changes if you roll it into an IRA or return to federal service later.

Mapping out your withdrawals before retiring helps prevent inefficient tax outcomes and better coordinates with Social Security and FERS annuity timing.

Sick Leave Credit Still Counts

Unused sick leave is converted into additional creditable service time for FERS retirement. It cannot be used to meet eligibility thresholds but can increase your annuity once you qualify.

This can be especially beneficial if you’re just short of a full year, as every 2087 hours of sick leave equals one year of service credit.

Don’t burn sick leave toward the end of your career unless it’s medically necessary. Preserving it can add months—or even a full year—to your pension calculation.

Survivor Benefits Need a Formal Election

You may assume your spouse will automatically receive your benefits if you pass away, but that only happens if you elect a survivor benefit at retirement.

Two Options

• Full survivor benefit: your spouse receives 50% of your annuity.

• Partial survivor benefit: your spouse receives 25% of your annuity.

Each option reduces your monthly annuity slightly. However, failing to elect one means your spouse could lose access to your pension entirely, along with FEHB coverage.

Spouses of civilian military retirees often face unexpected denials of health benefits or income continuation if no survivor benefit was chosen.

COLA Doesn’t Start Immediately

If you retire under age 62 under regular FERS rules, you won’t receive a Cost-of-Living Adjustment (COLA) until you turn 62. Law enforcement and special category retirees are exceptions—but not most civilian military employees.

This means the purchasing power of your annuity will erode until COLAs begin, which can have a significant impact in inflationary periods.

Your Strategy

• Build a cushion using your TSP or personal savings to offset inflation.

• Consider postponing retirement to age 62 if you want to receive COLAs immediately.

The Impact of Returning to Federal Service

Many civilian military retirees return to federal work after retirement. But reemployment affects your annuity.

Key Consequences

• In most cases, your annuity is suspended during reemployment unless you serve in a position eligible for a reemployed annuitant waiver.

• Your salary and annuity may not be received simultaneously unless approved.

• Returning for more than one year may make you eligible for a supplemental annuity or a re-determined annuity, depending on length and type of service.

Clarify these impacts with your HR office before accepting post-retirement employment to avoid unanticipated income gaps or pension issues.

Don’t Overlook Military Facility Perks

Some DoD civilian retirees continue to have access to base facilities like commissaries, exchanges, and recreation areas. However, eligibility rules vary by installation and aren’t guaranteed.

Check with your local installation before assuming access. Some facilities may require ID renewal or restrict access based on post-retirement civilian status.

Annual Leave Payouts Can Be Substantial

Unlike sick leave, unused annual leave is paid out in a lump sum at separation. This can be a large sum, especially for those with higher leave balances and years of accrued time.

Why It Matters

• The lump sum is taxable in the year received.

• It can push you into a higher tax bracket if not coordinated with your retirement year plan.

Time your retirement at the start of a calendar year to manage tax consequences and maximize leave accrual.

Taking the Long View Before Retirement Hits

As a civilian military employee, your retirement outlook includes FERS, TSP, Social Security, FEHB, and possibly credit for military service. It’s a complex package that requires careful timing and decisions across several federal programs.

Missing one detail—like forgetting the FEHB 5-year rule or delaying a military service buyback—can reduce your income or delay eligibility for years.

Use the final five years of service as your preparation window. Conduct benefit reviews, request service time calculations, and talk to a licensed professional listed on this website to help you shape your strategy.