Estimate your monthly and annual military retirement payments.
How Status At Retirement Affects Pay
Calculating your retirement using the status you retired under or expect to retire under is important. Your retirement pay and when you are eligible to claim it changes drastically depending on your status at retirement. So, if you are currently on active duty but plan to retire in the Reserve Component, then make sure to use our Reserve/Guard calculator.
As a refresher, here are the military retirement pay eligibility requirements:
- Active duty servicemembers of all branches are eligible for military retirement pay after serving 20 years of service.
- Reserve and National Guard Members are typically eligible for retirement after 20 years of qualifying service, with pay starting at age 60. However, Reserve and Guard members have different retirement pay eligibility requirements, which is why we have a separate calculator for them.
Reserve Component members can use our Reserve/Guard calculator or simply click the “Reserve/Guard” button on this calculator.
- Medical military (Chapter 61) retirees with qualifying disabilities receive VA disability pay instead of retirement pay, regardless of the number of years served. Read our guide on military medical retirement here.
Your pay is also impacted by the retirement plan you are eligible for.
How to Figure Out Your Retirement Plan
Your military retirement plan eligibility depends on when you entered service. Your plan also impacts how your monthly pay is calculated.
Here are the military plan eligibility dates:
| Retirement Plan | Eligibility |
|---|---|
| Final Pay | If you entered service before September 8, 1980 |
| High 3 (High-36) | If you entered service on or after September 8, 1980, but before August 1, 1986, OR If you entered service after August 1, 1986, and did not opt into the Career Status Bonus/REDUX retirement system. |
| CSB/REDUX | If you entered service on or after August 1, 1986, but before January 1, 2003 AND elected to receive the Career Status Bonus (CSB) |
| Blended Retirement System (BRS) | If you entered service on or after January 1, 2018, OR If you entered service before December 31, 2017, and elected to opt into BRS. |
| Medical Retiree | Determined medically unfit for continued service with a DoD disability rating of at least 30% |
The Thrift Savings Plan
The Thrift Savings Plan (TSP) is a retirement savings and investment plan available to military members. It functions similarly to a 401(k) plan in the civilian sector.
Under the retirement plans before BRS, the TSP was a purely optional benefit that military members could contribute to. Under the BRS, the TSP plays a large role. With the BRS, you receive a cut in your pension in exchange for automatic government contributions on your TSP.
See our full guide on how the TSP works under the Blended Retirement System.
Because the TSP is extremely variable per servicemember and per military pension type, we currently don’t have it incorporated into our military pay calculator. If you would be interested in a TSP calculator from The Military Wallet, make sure to leave a like or comment.
How to Calculate Your TSP
To model your estimated TSP savings goals you can use the “Retirement Income Modeler” calculator by logging into your TSP account. You can also view your current TSP amount and projected contributions.
Here’s a great introductory guide to military TSP management.
What Factors Affect Military Retirement Pay?
Before we discuss your military pension, let’s make sure to clarify what your post-military pay looks like. Many members also don’t consider that they will no longer get housing allowance (BAH) or subsistence allowance (BAS) – which are tax-free benefits. This may mean you’ll want to consider another career to supplement this tax-free income.
To fully plan for retirement, you should be aware of everything that impacts your monthly retirement pay including your rank at retirement, cost of living adjustments (COLA), taxes and more.
Rank at Retirement
The higher the rank you have at retirement, the higher your pay. This is the case because military retirement is calculated using the final base pay you received before retirement or your highest 36 months of base pay. Either way, your retirement pay should hopefully capture the pay you received during your highest-ranking tenure.
This means that, generally speaking, the closer you get to retirement, the more attention you should pay to Time in Grade (TIG) requirements. TIG requirements are the amount of time you must spend at a certain rank in order to retire with the pay at that rank. It’s important to note, if your rank gets demoted before retirement your military pay will still be based on the highest 36 months of base pay. So if you’re a Colonel for two years, but are demoted to a Lieutenant Colonel in your final year before retirement, you’re retirement pay will still figure those two years of Colonel pay.
TIG requirements are typically more complex for Officers than Enlisted members, they may also vary by branch.
Cost of Living Adjustments
Military retirement pay receives regular Cost of Living Adjustments (COLA) increases to adjust for inflation.
When inflation increases, COLA increases, boosting retirement pay to help retirees afford rising prices for goods and services. This adjustment is automatically applied to the retirement pay of eligible military retirees each year.
Retirement Date
In your first year of retirement, your pay is affected by the month that you retire. Basically, this occurs because COLA is applied differently throughout a fiscal year, which is why it’s referred to as the “COLA Trap.” To make sure your retirement pay isn’t reduced, you should try to retire in March.
Tax Deductions & Filing
One of the biggest impacts on your military retirement pay is how it is taxed, which is largely based on where you live. While military retirement pay is subject to federal income tax, many states don’t tax military retirement pay at all or offer partial exemptions.
Your monthly withholdings will also be largely determined by how you fill out your DD Form 2656: Data for Payment of Retired Personnel. This form directs DFAS where to send your pension after retirement and also calculates your dependent data & tax withholdings, similar to an IRS Form W-4.
When you fill out your DD 2656, you can request DFAS to withhold at a higher tax rate (which may be beneficial if you expect a large salary from your post-military job), or you can claim as many dependents and exemptions as your family status allows to minimize your tax withholdings. However, your monthly withholding is only an approximation of your tax liability.
Your tax liability depends on your total income (including what you bring in outside of your military pension), your family situation, and any deductions or credits you may be entitled to.
When you do your annual tax return, you’re actually calculating your tax liability and reconciling it with the estimated payments that have already been made to the IRS. Your refund (or payment due) is really the final calculation that tells you how close you were.
Recognize that your first year or two of post-retirement will be a huge adjustment, and you may find yourself in a different tax situation than you’re used to. If you don’t feel comfortable doing this yourself, you should talk with a tax professional (not just a tax preparer), such as a CPA, attorney, or enrolled agent, to discuss this in more depth. You should also be aware of the free tax filing services and software available to you.
Common Withholdings
Once you’ve determined your estimated tax withholding, you’ll want to account for the other programs you’ll sign up for. Here are a few of the most common:
- Survivor Benefit Plan (SBP) – Your SPB monthly rate costs 6.5% of your pay that you elect to cover. It will provide 55% of your covered retired pay to an eligible beneficiary upon your passing. You can cover up to 100% of your retired pay.
- Tricare – Your monthly payment will depend on what service you’re enrolled in and the number of dependents you have. See 2024 Tricare Prime rates here.
- Dental Care – The Federal Employees Dental and Vision Insurance Program (FEDVIP) is the dental insurance program available to retired military members. Your plan amounts will vary depending on location and which provider you choose to enroll with.
- Veterans Group Life Insurance (VGLI)—VGLI is a life insurance program that allows veterans to convert their Servicemembers’ Group Life Insurance (SGLI) coverage to renewable term insurance. VGLI costs vary based on the amount of coverage selected and the veteran’s age. You can find 2024 VGLI rates here.
Disability Compensation
If you receive disability compensation from the Department of Veterans Affairs (VA), your military retirement pay may be offset by the amount of VA disability compensation you receive. This offset is known as the VA disability compensation offset, and it can reduce the amount of retirement pay you receive, but will generally provide an equivalent amount as tax-free income.
Some veterans may qualify for “Concurrent Receipt” through the Concurrent Retirement and Disability Pay (CRDP) or the Combat-Related Special Compensation (CRSC) programs, which allow you to receive both VA disability compensation and military retirement pay without an offset.
In general, CRDP is available to members with a service-connected disability rating of 50% or more, while CRSC is available to members with a combat-related disability rating of 10% or more.
Read more on CRDP eligibility and CRSC eligibility to see if you qualify.
Stay Prepared
Many retirees are often surprised when they see their first military retirement paycheck. It is often much less than they are expecting to receive. It’s important to stay prepared, and have as accurate of an estimate as possible of what your military retirement pay will be so you can properly plan.
If you are reading this before your military transition, then run some calculations based on the pay grade and years of service you are aiming for. This will give you a good estimate of what you can expect with your military retirement pay.
For more advice, see our military retirement planning guide.
