Table of Contents
- Final Pay Retirement System
- High-36 Retirement System
- REDUX Retirement System
- Blended Retirement System
- Blended Retirement System – Defined Benefits
- TSP Matching Contributions
- BRS Continuation Pay
- BRS Lump Sum
- Military Disability Retirement
- Active Duty Retirement vs. Reserve Retirement
- Military Reserve Retirement
Military retirement plan eligibility varies depending on your entry date and will determine how your retirement pay is calculated.
Generally, active-duty service members qualify for retirement after serving at least 20 years of active service. Active-duty retirees receive retirement pay immediately after they retire from active duty.
In comparison, Guard and Reserve members qualify for retirement after 20 good years of service. Reserve Component retirees generally receive military retirement pay and healthcare benefits starting at age 60. However, they may be eligible for early retirement pay based on deployments and qualifying activations.
In this article, we will detail each military retirement plan and differentiate between active and Reserve Component (RC) retirement benefits.
Final Pay Retirement System
Those who entered service before September 8, 1980, are eligible for the Final Pay retirement system. This system calculates retirement pay by taking a percentage of the service member’s final monthly base pay at the time of retirement, multiplied by the number of years of service.
Final Pay Retirement Example:
Let’s consider an O-3 with 20 years of service and a monthly final basic pay rate of $7,890.52.
Take (Years of Service) x (Retired Pay Multiplier) x (Final Basic Pay):
20 years x 2.5% x $7,890.52 (Final Basic Pay)
In this example, 20 x 0.025 x $7,890.52 = $3,945.26 per month
Therefore, the annual retirement payout for this hypothetical O-3 under the Final Pay retirement system would be $3,945.26 x 12 months = $47,343.12 per year.
High-36 Retirement System
Service members who entered the military on or after September 8, 1980, are eligible for the High-36 retirement plan. The plan uses the average of your highest 36 months of base pay as the pay multiplier.
You must take information from several pay charts to estimate your retirement pay. You can start with the 2024 pay chart (there are links to previous pay charts at the bottom). Remember, you may need to use up to four separate pay charts to get your averages. For example, if you retired in June, you would count six months from the year you retired, the entirety of the two previous years, and six months from the year before that.
Retirement Pay = (Years of Service) x (Retired Pay Multiplier) x (High-36 Average Monthly Pay)
High-36 Retirement Pay Example:
Let’s consider an E-7 with 24 years of service and a High-36 average monthly pay of $5,782.54.
Take (Years of Service) x (Retired Pay Multiplier) x (High-36 Average Monthly Pay)
24 years x 2.5% x $5,782.54 (High-36 Average Monthly Pay)
In this example, 24 x 0.025 x $5,782.54 = $3,469.53 per month
Therefore, the annual retirement payout for this hypothetical E-7 under the High-36 retirement system would be $3,469.53 x 12 months = $41,634.36 per year.
REDUX Retirement System
The REDUX retirement system offered military service members a choice at the 15-year mark between two retirement benefit options: the High-36 system and the reduced retirement benefit (REDUX).
REDUX retirement plan eligibility applied to service members who began military service on or after August 1, 1986, but before January 1, 2003, AND who elected to receive the Career Status Bonus. It remained an option until December 31, 2017, when the military closed this retirement plan in favor of the High-36 plan and the Blended Retirement System. Members who served during the eligible time period could opt-in to the REDUX retirement plan or choose the High-36 retirement plan.
REDUX Career Status Bonus and Retirement Pay Modification
REDUX offered a $30,000 Career Status Bonus (CSB) in exchange for a retirement pay modification and a decreased annual retirement Cost of Living Adjustment (COLA) that was 1% less than the COLA under the other military retirement plans (but not less than zero). Members receive a one-time COLA adjustment at age 62 to restore COLA to what it would have been under the High-36 plan. Thereafter, the COLA reverts to the lesser amount, as referenced above.
REDUX Retirement Multiplier
Instead of the standard 2.5% multiplier for each year of service under the High-36 system, the REDUX multiplier is calculated as follows:
2.5% times the number of years of service minus 1.0% for each year of service less than 30 years.
The REDUX retirement results in a reduced retirement payout compared to the High-36 system for everyone except those who serve 30 years or more.
For example, at 20 years of service, you would receive 2.5% per year x 20, which is 50%. Then, you would subtract 1% per year of service that you served less than 30 years. In this case, you would subtract 10 years (30-20 = 10) and then multiply that by 1%.
Finally, you would subtract 10% from 50%, giving the retiree 40% of the average of their High-36 retirement pay.
REDUX Retirement Pay Example:
Using the example above, let’s look at how the same E-7’s retirement pay would change under the REDUX system.
Take (Years of Service) x (Retired Pay Multiplier) x (High-36 Average Monthly Pay)
Under Redux, we need to take an extra step to determine the member’s retirement pay.
Let’s start by finding the years of service multiplier under REDUX.
24 years x 2.5% = 60%. Then, we must subtract 1% per year of service less than 30. 30-24 = 6. Next, we subtract 6% from 60%, giving us 54%. This is our years of service multiplier.
In this example, we will take 54% x $5,782.54 = $3,122.57.
Therefore, the annual retirement payout for this hypothetical E-7 under the REDUX retirement system would be $3,122.57 x 12 months = $37,470.84 per year and a one-time career status bonus payment of $30,000.
This is an 11% decrease from the retirement pay the same individual would earn under the High-36 retirement plan. The member would also have smaller annual COLA pay raises each year.
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Blended Retirement System
The Blended Retirement System (BRS) is a combination of a defined benefit (like the High-36) and government-matching contributions to the Thrift Savings Plan (TSP). The BRS also introduces a Continuation Pay Bonus, which is a one-time, mid-career bonus in exchange for an agreement to perform additional obligated service and the option to receive a portion of retirement pay as a one-time lump sum.
Service members who entered after January 1, 2018, automatically fall under the BRS, while those with fewer than 12 years of service by December 31, 2017, could choose to opt into the BRS.
Blended Retirement System – Defined Benefits
The defined benefit portion functions like the High-36 system, calculating retirement pay based on the average of the highest 36 months of basic pay multiplied by a percentage determined by years of service. The main difference is the High-36 plan uses a 2.5% multiplier per year of service, while the BRS uses a 2.0% multiplier per year of service.
BRS Retirement Pay Example:
Let’s use the same E-7 from the High-36 Retirement Plan example, with 24 years of service and a High-36 average monthly pay of $5,782.54.
Take (Years of Service) x (Retired Pay Multiplier) x (High-36 Average Monthly Pay)
24 years x 2.0% x $5,782.54 (High-36 Average Monthly Pay)
In this example, 24 x 0.020 x $5,782.54 = $2,775.62 per month
Therefore, the annual retirement payout for this hypothetical E-7 under the Blended Retirement System would be $2,775.62 x 12 months = $33,307.44 per year.
While the fixed retirement benefit is 20% less than under the High-36 plan, BRS participants also have TSP matching contributions of up to 5% per year and a Continuation Pay bonus they can receive, enhancing the total value of their retirement benefits.
TSP Matching Contributions
Government matching contributions to the Thrift Savings Plan are a significant addition to the BRS. This gives members a portable retirement savings plan similar to a 401(k).
Government contributions to the TSP account, known as the service member’s Automatic Contribution, begin after 60 days of service and continue until separation or retirement. However, TSP matching contributions are capped at 26 years of service.
The military provides a 1% automatic contribution for all eligible members. Members can receive up to an additional 4% in matching contributions, starting at year two and extending through 26 years of service. They will receive a 1% match for the first 3% they contribute, then an additional .5% match for each of the next two percentage points of pay they contribute.
You can see this in practice in the following chart:
| You Contribute | Automatic 1% DoD Contribution | Service Matching Contribution | Total Combined Contribution |
|---|---|---|---|
| 0% | 1% | 0% | 1% |
| 1% | 1% | 1% | 3% |
| 2% | 1% | 2% | 5% |
| 3% | 1% | 3% | 7% |
| 4% | 1% | 3.5% | 8.5% |
| 5% | 1% | 4% | 10% |
| More than 5% | 1% | 4% | Your contribution plus 5% |
The exact amount in the TSP account at retirement will depend on individual contributions, government matches, and investment performance.
BRS Continuation Pay
The Continuation Pay Bonus is calculated between 2.5 and 13 times the monthly basic pay and is available to service members between 8 and 12 years of service. The details of the Continuation Pay Bonus vary by military branch.
BRS Lump Sum
Finally, BRS participants are eligible to receive a lump sum of either 25% or 50% of the discounted present value of future retirement payments, in exchange for reduced monthly retirement pay, until they reach full Social Security retirement age, which for most is age 67.
Military Disability Retirement
Military disability retirement (also referred to as Chapter 61 retirement) is a benefit offered to service members who suffer from medical conditions or injuries that render them unable to perform their military duties.
The process to qualify for disability retirement involves medical evaluations through the Integrated Disability Evaluation System (IDES), leading to assessments by medical review boards to determine the extent of the disability.
The Physical Evaluation Board (PEB) assigns a disability rating, indicating the severity of the impairment. If deemed unfit for further military service due to the disability, service members may be eligible for disability retirement. This provides them with a monthly pension and healthcare benefits. The military also offers transition assistance programs to aid in the transition to civilian life.
Disability retirement pay is based on which retirement plan the member falls under and their military disability rating.
The member can choose the higher of
- their creditable years of service multiplied by their multiplier (either 2.0% or 2.5%), or
- the member’s military disability percentage multiplied by the retirement plan they fall under (Final Pay, High-36, etc.).
- In both cases, the multiplier is limited by law to 75%.
Active Duty Retirement vs. Reserve Retirement
Reserve Component members must also serve 20 qualifying years like their active-duty counterparts to earn retirement benefits. RC members also qualify for the same retirement plans listed above: Final Pay, High-36, REDUX, BRS, or Chapter 61 Disability Retirement.
The primary differences between Reserve Component and active-duty retirement include:
- How qualifying years are calculated
- How retirement pay is calculated
- When members receive their retirement pay and other benefits
These articles provide the full spectrum of active-duty and Reserve Component retirement benefits:
- Active Duty Retirement Benefits (article + podcast)
- Reserve Component Retirement Benefits (article + podcast)
Military Reserve Retirement
Reserve retirement relies on accumulating points earned through drills, training, and active duty time over 20 qualifying years. RC members must earn at least 50 retirement points per retention year and meet readiness requirements to earn a “good year” toward retirement. Reserve Component members can earn points through active duty service, drills, man-days, correspondence courses, and more.
This article provides an overview of how retirement points work.
How to Calculate Reserve Component Retirement Pay
Reserve Component retirement pay is calculated by converting the member’s retirement points to years and then following the same calculations used for active duty retirement.
Converting points to years is easy – simply add all retirement points together, then divide by 360. This gives you an equivalent number of years served. (The Department of Defense uses a 30-day month to standardize pay and benefits. Thus, 360 points are equal to a year.)
Reserve Retirement Pay Example:
Let’s look at the E-7 example used in the High-36 section. For our Reserve Component retiree, we will assume they had the same 24 qualifying years of service, but they earned 3,600 retirement points in their career.
Let’s start by converting 3,600 points to years.
3,600 / 360 = 10. This RC retiree has an equivalent of 10 years of active duty service.
We will use the same assumptions, including the High-36 average monthly pay of $5,782.54.
Take (Years of Service) x (Retired Pay Multiplier) x (High-36 Average Monthly Pay)
10 years x 2.5% x $5,782.54 (High-36 Average Monthly Pay)
In this example, 10 x 0.025 x $5,782.54 = $1,445.64 per month
Therefore, the annual retirement payout for this hypothetical E-7 under the High-36 retirement system would be $1,445.64 x 12 months = $17,347.68 per year.
This article includes a deeper explanation of how to calculate Reserve Component retirement pay, including additional examples.
When Do Reserve Members Receive Retirement Benefits?
Retired Reserve Component members become “gray area retirees” when they file their retirement paperwork. They are eligible for some retirement benefits, such as base access, Space-A travel, shopping at the Commissary and Exchange, and more.
However, they are not eligible for retirement pay or healthcare benefits until age 60. Some Reserve Component members may be eligible to receive early retirement pay based on qualifying Title 10 activations. However, this does not impact the age at which they receive healthcare benefits.
Healthcare benefits also differ, with active-duty retirees having access to comprehensive military health coverage under Tricare Prime or Tricare Standard until age 65 when they become eligible for Tricare for Life.
Retired Reservist Component members are eligible for Tricare Retired Reserve* until age 60, when they become eligible for either Tricare Prime or Standard. They become eligible for Tricare for Life at age 65.
*Tricare Retired Reserve is virtually the same as Tricare Reserve Select. However, no government subsidy makes it an expensive healthcare option. Many retired Reserve Component members consider other healthcare options until age 60 when they become eligible for Tricare Prime or Standard.
Service members should carefully evaluate their career path, personal and financial goals when choosing a retirement plan. It’s essential to plan ahead, seek professional advice if needed, and make informed decisions that will secure a stable and fulfilling retirement after years of dedicated service to our nation.
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