Hi, I'm Curt Sheldon from C.L. Sheldon & Company, and welcome to "Curt's Chalk Talk". Today, I'd like to talk to you about your time at a service academy.
Now, most of us think our time at the service academy isn't going to count for much of anything after we graduate from the academy. It doesn't count towards your military retirement. It pretty much only gets you another oak leaf cluster on your longevity ribbon. But if you decide to go to work for the federal government after you leave the military, it can become quite valuable, you see, because you can sell back your time or buy back your time on active duty to increase your federal pension.
Now, if you're retired from the military, you don't want to buy back your active duty time because you'd actually give up some of your military pension or all of your military pension and you wouldn't get as much from your first pension. But remember your time at the academy doesn't count towards time served in military but it does count as federal service. So you can buy back your time at the academy to increase your federal pension. You're basically going to pay about 3% of what you earned at the academy. And when I was there, it was, which was shortly after the earth cooled, you didn't earn much as a cadet. So you're not going to pay back that much money and you're going to increase your time of federal service by four years.
Now, you can use those four years two different ways. If you decided you're going to work to 10 years so that you can get a federal pension, you could actually retire after working six years for the government can credit for your four years at the academy and retire with 10 years of service. Or if you're going to decide to work to a certain age and then retire, let say, you've decided you're going to work to age 65, and you've worked 20 years for the federal government at that point, when you retire you're going to get credit for 24 years worth of service, which is going to increase your pension by about 4%.
Now, if you've just separated from the service and gone to work for the federal government without retiring then you want to sell back your time on active duty to the government as well to get credit for that service and increase your longevity with the government and increase your first retirement.
Would you like more information about the military and your finances? We put out a blog digest once a month with some of our best blog articles in it every time. Just sign up by using the form below.
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by C.L. Sheldon & Company, LLC ), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. C.L. Sheldon & Company, LLC does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to C.L. Sheldon & Company, LLC website or incorporated herein, and C.L. Sheldon & Company, LLC takes no responsibility therefore. All such information is provided solely for convenience, educational, and informational purposes only and all users thereof should be guided accordingly. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from C.L. Sheldon & Company, LLC . To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. C.L. Sheldon & Company, LLC is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the C.L. Sheldon & Company, LLC ’s current written disclosure statement discussing our advisory services and fees is available for review upon request. DISCLAIMER OF TAX ADVICE: Any discussion contained herein cannot be considered to be tax advice. Actual tax advice would require a detailed and careful analysis of the facts and applicable law, which we expect would be time consuming and costly. We have not made and have not been asked to make that type of analysis in connection with any advice given in this blog post. As a result, we are required to advise you that any Federal tax advice rendered in this blog is not intended or written to be used and cannot be used for the purpose of avoiding penalties that may be imposed by the IRS. In the event you would like us to perform the type of analysis that is necessary for us to provide an opinion, that does not require the above disclaimer, as always, please feel free to contact us.