The following is a question submitted by a reader to Federal Times columnist Reg Jones, a charter member of the senior executive service and the resident expert on federal employee retirement issues.

A Fed Times reader asks:

“I retired from the military after 20 years of service as an E8. I’ve been offered a federal position; however, I’m not sure whether to keep my military retirement pay separate from my newly acquired federal position or buy-back the 20 years from the military.

How do I calculate which option is more financially beneficial?

Also, will I have to give up my retirement pay from the military if I choose to buy-back the years?”

Reg’s response:

While you’ll need a financial adviser to get the most complete answer to your question, I can help you by going over the basic rules.

Because you’ll be covered under the Federal Employees Retirement System (FERS), you would need to make a deposit to get credit for that active duty service in determining your length of civilian service. For periods of active duty prior to January 1, 1999, the deposit equals 3 percent of basic military pay (not allowances or differentials); for periods of service performed during 1999, the deposit equals 3.25 percent; for periods of service performed during 2000, the deposit equals 3.40 percent; after December 31, 2000, it equals 3 percent. No interest on the amount owed will be charged if a deposit is made within two years after the date you first become employed by the federal government.

If you come to work for the government, the following combinations of age and service would be used to determine your eligibility to retire:

- age 62 with 5 years of service

- age 60 with 20 years of service

- at your minimum retirement age with 30 years of service

- (MRAs range from 55 to 57, depending on your year of birth

You could also retire at your MRA with between 10 and 29 years of service; however your annuity would be reduced by 5 percent per year (5/12ths of 1 percent per month) that you were under age 62. You could reduce or eliminate that penalty by postponing the receipt of your annuity to a later date.

The formula used to calculate a FERS annuity is a simple one: .01 X the average of your three highest consecutive years of basic pay X .01 percent. That multiplier is increased to .011 percent if you retire at age 62 with at least 20 years of service.

Finally, if you decide to make a deposit to get credit for your active duty service in determining your years of civilian service, you would have to waive your military retired pay when you retire from your civilian job. Waiving military retired pay has no effect on the waiver’s other military benefits.

Got a question for the Federal Times expert? Send inquiries to:

Correction: This story was updated to fix a typo in the age at which the multiplier is increased to .011.

Reg Jones, a charter member of the senior executive service, is our resident expert on retirement and the federal government. From 1979 to '95, he served as an assistant director of the Office of Personnel Management handling recruiting and examining, white and blue collar pay, retirement, insurance and other issues. Opinions expressed are his own.

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