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Considering all of the benefits, a military retirement is easily worth more than one million dollars.
This guide provides an overview of benefits with helpful resources to provide comprehensive insights into military compensation, pensions, and retirement strategies, meeting the needs of those who have served across various branches. It’s structured to aid you in making informed decisions for a secure financial future, ensuring that every detail of military compensation and retirement planning is clearly laid out and accessible.
Military Pension
National Guard and Reserve retirements differ significantly from active duty military retirements, primarily in how and when benefits are received.
For National Guard and Reserve members, retirement pay is based on a points system, where each drill, active duty day, and certain other service activities earn points toward retirement.
Unlike active duty retirement, which allows service members to start receiving benefits immediately upon retirement after 20 years of service, Guard and Reserve members typically must wait until age 60 to begin receiving retirement pay, though it is possible to qualify for early retirement by serving enough active duty time. These differences in retirement eligibility reflects the part-time nature of their service commitment, balancing their civilian careers with military duties.
Despite the differences in retirement eligibility, the retirement plans that are available to servicemembers are the same no matter what service you are in.
Blended Retirement System
The Blended Retirement System (BRS) is a modern military retirement plan combining a traditional pension with a defined contribution plan. It includes monthly retired pay and a Thrift Savings Plan (TSP) with DoD matching contributions, designed to offer greater flexibility and benefits for service members.
All active-duty military and National Guard and Reserves service members who entered the military on or after January 1, 2018, are automatically enrolled in the Blended Retirement System.
High-36
Service members who joined the military on or after September 8, 1980, qualify for the High-36 retirement plan, which calculates benefits based on the average of your highest 36 months of base pay.
To estimate your retirement pay, you’ll need data from multiple pay charts. Start with the 2024 pay chart and refer to links for previous years as necessary. For accurate calculations, especially if retiring mid-year, you might need to pull figures from up to four different pay charts. For example, if retiring in June, consider the first six months of the retirement year, the full previous two years, and the last six months of the year before last.
REDUX/CSB
The REDUX retirement system gave military service members a choice at their 15-year service mark between the High-36 plan and the REDUX plan, which offers reduced benefits.
Eligibility for the REDUX plan was limited to those who entered service between August 1, 1986, and January 1, 2003, and chose to receive the Career Status Bonus (CSB). This option was available until December 31, 2017, when it was phased out in favor of continuing the High-36 plan and introducing the Blended Retirement System. During this period, eligible members could decide whether to opt for the REDUX plan or stick with the High-36 plan.
Cost of Living Adjustments (COLA)
The military retirement system includes an annual Cost of Living Adjustment designed to counteract the effects of inflation on retired pay. These adjustments are linked to the Consumer Price Index, ensuring that the purchasing power of your pension remains intact regardless of economic fluctuations. COLA increases typically vary each year, but they act as an aid in maintaining the standard of living for military retirees.
Income Tax Exemptions
Military pensions are subject to federal income tax, but some states exempt all military retirement pay from income taxes, while others provide partial exemptions or credits. Understanding your specific state’s policy will be crucial in planning your financial landscape and can lead to significant tax savings.
Thrift Savings Plan
The Thrift Savings Plan (TSP) is a federal government-sponsored retirement and investment plan that offers the same type of savings and tax benefits that many private corporations offer their employees under 401(k) plans. The amount in each TSP account depends on what the participant invests and if an employer matches any contributions. The majority of military service members are not eligible to receive matching funds. Managing your TSP account effectively can significantly impact your retirement savings, especially when considering contributions and withdrawal strategies.
Tricare Healthcare
Tricare is a healthcare program serving active-duty service members, retirees, and their families. Tricare provides comprehensive coverage to all eligible beneficiaries, including health plans, prescriptions, and special programs tailored to the military community’s needs.
Navigating Tricare can be complex as there are many programs that one can be enrolled in, including Tricare Prime and Tricare Select, but understanding the different plans and benefits available will ensure you and your family are taken care of.
You must enroll in a Tricare health plan within 90 days of your retirement date. Additionally, you might be eligible to enroll up to 12 months after retiring from active duty.
Tricare Prime
Tricare Prime is a managed care option similar to a civilian health maintenance organization (HMO). It is designed for retirees and their families who prefer a lower out-of-pocket cost and accept a network of providers assigned to them. Enrollees receive most of their care from a primary care manager (PCM) who coordinates their treatment, including referrals to specialists. This plan is ideal for those who value simplicity and cost efficiency, as it generally results in fewer out-of-pocket expenses compared to other Tricare plans.
Tricare Select
Tricare Select, on the other hand, is a preferred provider organization (PPO) plan that offers more flexibility in choosing healthcare providers. This plan is suitable for those who prefer to directly manage their healthcare and are willing to handle higher out-of-pocket costs for the sake of wider provider options. Unlike Tricare Prime, Tricare Select does not require referrals for specialist visits, giving retirees and their families the autonomy to make their healthcare decisions without primary care manager oversight.
Tricare Retired Reserve
Tricare Retired Reserve is tailored specifically for members of the Retired Reserve who have not yet met retirement age, also known as “gray area retirees.” It offers comprehensive health coverage similar to Tricare Select but requires that participants pay monthly premiums.
This plan is a crucial stopgap for retired reservists under the age of 60, providing necessary health coverage until they become eligible for additional Tricare benefits as they age.
Tricare For Life
Tricare For Life (TFL) acts as a secondary payer to cover costs that Medicare does not, filling gaps in Medicare coverage for retirees over 65 who are eligible for Medicare Parts A and B. TFL requires no additional enrollment fees and offers peace of mind of nearly universal coverage, including prescriptions, outpatient services, and inpatient care. It is an excellent choice for those seeking comprehensive healthcare coverage in their senior years.
Other Tricare Plans
Tricare offers various other healthcare programs tailored to meet the different needs within the military community. Tricare Reserve Select caters to members of the Selected Reserve who are not on active duty, providing comprehensive health coverage with a required premium. Tricare Young Adult extends coverage to adult children of Tricare eligible beneficiaries up to age 26, offering both Prime and Select options. The US Family Health Plan, a Tricare Prime option, is available in specific regions, providing care through designated providers, focusing on personalized attention and community-based medical services.
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VA Loan Eligibility
The VA Loan is a significant benefit, offering veterans, service members, and select military spouses the opportunity to purchase a home with no down payment, no private mortgage insurance, and competitive interest rates. Understanding the eligibility criteria and the application process can help you make the most of this benefit, providing a stable financial future and housing security.
For more information, you can visit our VA loan benefits guide.
Moving, Storage, and Travel
Retiring from the military often comes with travel and moving plans. The Department of Defense (DoD) offers several moving and storage benefits to assist with transitions from active service to retirement. These benefits often cover the cost of moving household items and finding temporary storage options. Additionally, travel benefits can include space-available flights on military aircraft, which can be a significant advantage for personal travel.
G.I. Bill & Higher Education Grants
The Post-9/11 G.I. Bill is one of the most valuable benefits for military personnel wishing to pursue higher education after service. It covers tuition and fees, provides a monthly housing allowance, and an annual stipend for books and supplies. For those not using the G.I. Bill themselves, it can be transferred to spouses or dependents, a benefit that can significantly reduce the financial burden of higher education.
Federal Job Preference
Military retirees benefit from preference points when applying for federal jobs, which can be a considerable advantage in the competitive federal job market. This preference allows veterans to highlight the unique skills and experiences gained during military service, which can lead to rewarding and well-paying federal employment opportunities.
Survivor Benefits
Understanding survivor benefits is crucial for planning the financial security of a retiree’s dependents. The Survivor Benefit Plan (SBP) allows retirees to ensure that a percentage of their retirement benefits continue to a designated beneficiary upon death. This plan maintains the financial stability of survivors and requires careful consideration and planning.
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