This is the first post in our new series, based on members' real questions to us.
I was recently asked, "Can I still purchase military service even though I am receiving a pension from the military?"
The quick answer is yes, you may still purchase military service even though you receive a military pension. However, you must be an active LAGERS member to do so. The following information provides more details about purchasing service at LAGERS.
There are two kinds of service you can purchase:
1. Military service, and
2. Service from a Missouri public non-Federal position where you either didn't have a retirement plan with the employer or didn't become vested in the retirement plan offered by the employer.
Military Service: If you're an active LAGERS member who had previous active duty service in the United States military, you may purchase up to four years of that service toward your LAGERS benefit.
To do this you must:
- Complete and submit a Purchase of Military Service form
- Submit your honorary discharge papers
- Not be receiving a benefit from any other retirement plan except for benefits from the US military for the period of time you are purchasing
Non-Federal Public Employment in Missouri: If you're an active, vested member, you may purchase service toward your LAGERS benefit for any time you were employed in a non-Federal public position within the state of Missouri. For example, let's say you worked for a local government entity in Missouri that didn't have a retirement plan for 3 years. You'd be eligible to purchase that 3 years of service and add it to your LAGERS credited service. Even if that local government had a retirement plan,you'd be able to purchase that service as long as you weren't vested in their plan.
To be eligible for this type of purchase you must:
- Either not have been covered by a retirement plan from your former employer or
- You were covered by a plan, but are not eligible for benefits from that plan
- Complete and submit a purchase of service form
Once LAGERS receives your application, the cost of the purchase will be calculated, and you'll be sent a form indicating this cost and your options for payment. You then have 60 days to decide if you would like to proceed with the purchase.
Payment options: Lagers provides some flexibility for you in paying for your purchased service. There are multiple payment options available.
- Lump sum
- 12 month installments
- 24 month installments
- Directly rollover funds from another retirement account
NOTE: All service purchases must be paid prior to your last day of LAGERS covered employment.
The cost of purchasing service will be different for each member since it's based on your accrued credited service, salary, age, employer elected benefit program, etc. And, since purchasing service is actually taking a lump sum of money and spreading it out into guaranteed monthly lifetime payments, the initial cost may seem expensive, but the lifetime payoff of that investment is more than adequate.
One way to estimate your payoff is to compare your annual LAGERS benefit without the purchase to your annual LAGERS benefit with the purchase. The easiest way to do this is to use the benefit calculator in your myLAGERS account. Calculate the benefits both with and without the purchase.
You must decide if you think the investment will have the opportunity to pay off for you, and every situation is different. If you believe you will enjoy a long retirement, it may be well worth your initial investment. If you aren't so sure about the longevity of your retirement, you may want to research other alternatives to supplement your retirement.
There is no right or wrong answer when it comes to purchasing service. Log on to your myLAGERS account and do your research. Just remember, the money used to purchase service is always guaranteed to be returned back to you or a beneficiary.
As always, if you ever have any questions or concerns regarding your LAGERS benefit, including purchasing service, please contact us.