Updated August 2, 2026. Quick answer: a federal civilian employee can buy prior active military service into a FERS annuity for 3% of the military basic pay earned during that service, plus interest after a two-year grace period. It is often an extraordinary return. But there is a condition most summaries bury: if you are receiving military retired pay, you generally cannot credit that service unless you waive the retired pay — which changes the calculation completely.
The deposit, and why it is usually cheap
OPM states the rule directly: military service is creditable if it was “active service terminated under honorable conditions”, and “to receive FERS credit for military service performed after 1956, you must pay a deposit.” The deposit is 3% of the basic pay you earned while serving — not 3% of today’s salary, and not 3% of the pension it buys.
That distinction is the whole reason this works. Four years of junior enlisted pay from two decades ago is a small number. The annuity those four years add is computed on your current high-3 and paid for life. The deposit is priced against your past; the benefit is priced against your future.
Interest is the part that punishes delay: there is a two-year interest-free grace period, and after it “interest is accrued and compounded annually at a variable interest rate.” Someone who discovers this fifteen years into a civil-service career pays considerably more than someone who handled it in year one — for the identical benefit.
The condition that decides whether you can do it at all
Here is the sentence that reframes this for anyone already drawing a military pension:
“You cannot receive credit for any military service in your FERS retirement computation, if you are receiving military retired pay, unless you were awarded the retired pay:”
OPM
The two exceptions that follow are narrow: retired pay awarded for a service-connected disability “either incurred in combat with an enemy of the United States or caused by an instrumentality of war and incurred in the line of duty during a period of war”, or retired pay under Chapter 1223 of Title 10 — reserve-component retirement.
That second exception matters more than it looks. A Guard or Reserve retiree drawing reserve retired pay can generally credit the service without giving anything up. For them the buyback is close to a free win, and it is routinely missed.
If you are drawing active-duty retired pay
Then it is a genuine trade, and OPM sets out the mechanism: “you can elect to waive the retired pay and have the military service added to your civilian service in computing your FERS annuity.”
Whether that is worth doing turns on arithmetic neither we nor any article can do for you, because it depends on the size of the military pension you would surrender, your FERS high-3, the years at stake, and how long you expect to draw each. What can be said is which direction the factors push: a higher civilian salary and more military years favour the waiver, because both raise what the credited years produce. A large military pension pushes hard the other way, and for most twenty-year active-duty retirees it pushes hard enough to settle it.
The other consideration people forget: waiving military retired pay can affect other things attached to it. Anything computed as a share of retired pay is computed on a number you no longer receive.
If you cannot work to retirement age
Run the two annuities before you decide
What the military pension is worth and what the FERS annuity comes to, with and without the extra years. The FERS side also carries the rule that decides how much those years are worth at all — the 1.1% multiplier at 62 with 20 years of total creditable service, where bought-back military years count toward the 20.
And if you are still deciding when to leave federal service, the separation choice that decides whether federal health insurance survives is the larger decision sitting next to this one.
Creditable service, the post-1956 deposit and the waiver rule with its two exceptions from OPM’s published guidance; the 3 percent rate and the two-year interest grace period from OPM’s Military Deposits briefing. Read August 2026. Deposit computations are done by your agency and by OPM on your actual pay records. General information, not advice. Nothing here addresses how disability ratings are determined or pursued, which is outside what this site covers.