A federal employee in my office last year had four years of Army active-duty time showing on his DD-214 and a clean FERS estimate that didn’t credit any of it. He had been a federal civilian for almost nine years. When he asked his HR office for a buyback quote, the number came back high enough that he set the paperwork on his desk and told himself he’d get to it next quarter.

Next quarter became next year. By the time he came back to the buyback, the deposit had grown by several thousand dollars — not because the percentage changed, but because the interest-free grace period had quietly expired. He had crossed the three-year mark from his federal hire date without realizing it.

That’s the part the system doesn’t announce. There is no letter that arrives saying “your grace period ends on this date.” There is just a number, on an estimate, that looks one way at year two and another way at year three and one — and then the door closes on a much smaller bill.

The short answer: there is no “must be done by” date.

The buyback deposit can, technically, be made at any point during your federal civilian career. Some employees pay it within their first year. Some wait until they are a decade in. Some pay it as part of their retirement application itself. There is no statute that says “you must complete the buyback by age 40” or “by your fifth federal anniversary.”

But that absence of a hard deadline is misleading, because there is a financialdeadline that functions exactly like a hard one. The longer you wait past the three-year point, the more expensive the deposit becomes, and the decision stops being “should I do this?” and starts being “can I still afford to do this?”

The clock that actually matters: the three-year grace period.

Under 5 U.S.C. § 8334(j), a federal employee who makes a military service credit deposit during the firstthree years of civilian service— the “interest-free grace period” — pays the base percentage of basic pay without any interest component. The base rate is 3% of basic pay for FERS employees.

Once the three-year window closes, the same deposit begins to accrue interest at a rate set annually by OPM, compounded annually. The interest is calculated back to the original date of the military service, not back to the date you missed the grace period. That distinction matters: a year of delay at year three can add multiple years of compounded interest to the bill.

On a buyback for, say, four years of active duty, the interest component can grow from zero to several thousand dollars between the second and the fifth year after federal hire. It does not stop at five years. It does not cap. It keeps compounding until you pay the deposit or retire.

The other dates worth knowing.

Beyond the three-year grace period, three more dates affect how a military buyback plays out:

  • Your retirement application date.A buyback deposit must be paid (or the election to pay it must be on file) before your annuity is calculated. If you elect to pay but haven’t completed payment by retirement, OPM withholds the unpaid balance from your monthly annuity. You can pay it faster — the “bracket” option gives you a multiplier discount — but you can’t pay it after retirement without OPM’s specific agreement, and the interest has already compounded.
  • Your separation date. If you leave federal service before paying the deposit and you take a refund of your retirement contributions, the buyback election is gone. You can rebuy it if you return to federal service, but the grace period math restarts from your new hire date.
  • The military service start date itself. The interest runs from this date, not from your federal hire date. So an employee who separated from the military in 2005 and was hired federally in 2018 still pays interest from 2005 once they pass their 2021 grace-period anniversary.

What to do this quarter.

If you have active-duty service showing on a DD-214 and you’re still within the grace period, the action is simple: get the deposit calculation in writing, look at the long-term annuity increase, and decide whether the math favors paying now or later. Almost always it favors paying now, because interest compounds both ways — against you on the deposit and against your annuity if you delay.

If you’re already past the grace period, the deposit is still usually worth doing, but the comparison is now “pay it this year versus pay it next year.” Every additional year adds interest, and the comparison is no longer “pay 3% of basic pay” versus “pay 3% of basic pay plus a little interest.” It’s a meaningful spread.