Mixing Civilian and Military Retirement

By Tammy Flanagan

June 30, 2006

What comes after a career in the military services? Sometimes, a second career in the civilian service is the next logical step. But as the second career nears completion, an important decision needs to be made between two retirement options:

The decision depends on the financial impact of keeping the careers separate or combining them. A decision to use military service toward a civilian retirement would not affect Social Security retirement benefits. The decision to combine careers into one retirement also would not alter other military retirement perks such as health care and commissary privileges.

Generally, an employee must waive military retired pay in order to receive credit for military service in the computation of the CSRS or FERS annuity, unless he or she is:

Sample Decision Processes

Steve: Steve completed 20 years of military service in 1973 and is receiving a military retirement benefit of $12,000 per year. He has been employed as a civilian employee with the Defense Department since his military retirement and now has 23 years of civilian service. He is covered by CSRS.

* By combining his careers, Steve has 43 years of service. CSRS provides a maximum benefit after 41 years and 11 months of 80 percent of the high-three. Steve will be entitled to a refund of excess retirement contributions of $4,200 since retirement contributions continue to be withheld until he retires, even though his last year of service is not being used to compute his retirement benefit.

Things to consider:

Stan: Stan completed 20 years of military service in 1985 and is receiving a military retirement benefit of $18,000 per year. He has been employed as a civilian employee with the Defense Department since his military retirement and will have 23 years of civilian service by the time he retires in 2008. He is covered by FERS.

*Stan will be 62 years old by the time he retires. His FERS benefit will be computed at 1.1 percent of his high-three for his years and months of service. FERS provides this computation for employees who retire at age 62 or later and who have at least 20 years of creditable service.

Things to consider:

Sarah: Sarah completed 20 years of military service in 1985 as a member of the Naval Reserves. She has been employed as a civilian employee with the Defense Department since 1985 and will have 23 years of civilian service by the time she retires in 2008. She is covered by FERS.

*Sarah will not need to waive her retirement from the Reserves (see the exception above). She will receive credit for 7 years of active duty performed while serving as a member of the Naval Reserves.

Things to consider:

To Do

Resources

Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.


By Tammy Flanagan

June 30, 2006

http://www.govexec.com/pay-benefits/retirement-planning/2006/06/mixing-civilian-and-military-retirement/22164/