Is an Early Military Retirement a Good Option? A Look at TERA

Can you retire early from the military?

From time to time, the military offers servicemembers an option for early retirement through the Temporary Early Retirement Authority or TERA. This program allows members to retire with a minimum of 15 years of active duty service instead of the traditional 20 years of service. 

However, this program is only available on a limited basis and must be approved by the Secretary of each branch of service.

This article will cover TERA eligibility, how it works, and what benefits you have access to when you retire before 20 years. 

TERA Eligibility 

As of 2024, TERA is inactive, meaning you cannot currently apply for early retirement through TERA. TERA eligibility is authorized by law through FY 2025; however, the Department of Defense (DoD) typically only activates TERA to help with force size reduction. 

Due to this, the authority to approve TERA has not been active since February 2018. 

How TERA Works

When TERA is active, it is only available servicemembers with at least 15 years of service and must be approved by the Secretary of your respective branch of service.  

Early retirement also comes at a price, as your pay will be permanently lower under TERA than a traditional military retirement. The calculations, which are set by law, require the early retiree to accept a reduction multiplier of 1% per year that you retire early (before 20 years). 

Despite the reduced pension amount, you still receive full access to all other military retirement benefits, such as Tricare plans, and access to the Commissary, Base, Exchange, and more. 

How To Calculate Early Military Retirement Pay

To calculate retirement pay under TERA, find the retirement system you’re enrolled in and use the applicable retirement formula. 

For this example, we’ll use the High-36 retirement plan, which has a basic calculation of: 

(Years of Service) x 2.5% x (High-36 Average Monthly Pay)

TERA uses the same basic calculation as the High-36, but it is reduced by a reduction factor equaling -1% for each year under 20 years served.

So, if you retired after 19 years of service, your reduction factor would be 99%, 18 years would be 98%, 17 years would be 97%, etc. 

To modify your retirement pay under TERA, it would look like this: 

(Years of Service) x 2.5% x (High-36 Average Monthly Pay) x (Reduction Factor) 

The reduction factor gets a little more complicated if you want to calculate your retirement benefits if you served over 15 but less than 20 years. The military gives credit for months served, so your base multiplier wouldn’t necessarily be a round number, such as the 95% we used above.

So, how much does TERA reduce your pay? Let’s use an example. 

Assume a servicemember retired as an O-3 under TERA with the High-36 retirement plan and 16 years of service. Using the 2024 military pay charts, we’d find that the base pay for an O-3 is $8,301. 

In this example, their retirement without TERA would be 

15 x 0.025 x $8,301 = $3,112.88

Under TERA, the example retirement would be: 

15 x 0.025 x $8,301 x 0.96 = $2,988.36

In this example, the reduction is only $124.52. This doesn’t seem like much but keep in mind that if you retire under TERA, your pension will be permanently decreased. That said, the reduction can add up over time. In this example, a $124.52 monthly reduction would amount to nearly $15,000 in 10 years. 

A Brief History of Early Military Retirement 

To understand when TERA may become active again, we’ll review some historical points when it was used. 

The military last went through a major drawdown (force reduction) in the 1990s, following the Cold War and the first Gulf War. During that time, the military contracted in many ways, including the retirement of weapons systems, base closures, and the mass attrition of personnel through Force Shaping and, involuntary separations, and ETS separations. One of the other tools the military used was early retirement under the TERA program, which was authorized during the end of the Cold War era, during the 1993-2001 fiscal years.

Following a decade of relative peace, the world was rocked by the terror attacks of September 11th, which brought us into the War on Terror. Instead of decreasing in size, our military increased its numbers and even implemented measures to temporarily prevent some members from leaving the service. Many military members were unable to leave the service when they originally intended to, as several branches enacted stop-loss measures that kept servicemembers in uniform long past their initial separation date.

However, as the war slowed, the need to keep as many servicemembers in uniform decreased. In recent years, each military branch has used different methods to reduce their force size, including offering servicemembers separation pay, the opportunity to get an early transition from active duty to the Guard or Reserves, a transition to another branch of the military, or even get an early out through Force Shaping or other measures.

The National Defense Authorization Act signed in 2011 reauthorized the military branches to offer the Temporary Early Retirement Authority program, beginning in 2011 and lasting through 2018. The law was recently extended through 2025.

The time in service requirement, which is more than 15 years and less than 20 years, is set by law. The other criteria are set by each branch so they can determine how best to shape the quality of their force. Generally, this program is only available to servicemembers who are in overmanned career fields. You will need to check with your respective service to determine if you are eligible for early retirement under TERA.

Alternatives to Early Military Retirement

While TERA is currently not an option, there may be several alternatives to the program depending on your personal goals. 

Perhaps the most popular option is to leave active duty for the Reserve Component (RC). The biggest drawback of transitioning is that you’ll take a pay cut, but if your primary motivation for leaving is more time to yourself but you still want to earn military retirement, it’s a great compromise. Unlike active duty retirement, you cannot claim retirement pay immediately on completion of 20 qualifying years in the Reserves or National Guard. Instead, RC members are typically eligible to claim pension benefits at age 60, but it is possible to qualify for an early Reserve retirement and claim benefits as early as age 50. 

Another option is to leave the service and get a job in the civilian sector. It’s also possible to count military time toward a civil service pension. 

While TERA is currently unavailable, the program underscores the DoD’s ability to adapt and provide flexible retirement options. Looking forward, the end of TERA in 2025 could push the military to explore innovative new solutions to support personnel instead of simply extending the program’s availability. 

Meet the Author

Ryan Guina

Ryan Guina is The Military Wallet's founder. He is a writer, small business owner, and entrepreneur. He served over six years on active duty in the USAF and is a current member of the Tennessee Air...

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