A military retirement is worth millions of dollars. That’s a bold headline, but it’s true. In both cash and benefits, a military retirement is really worth well over a million bucks. In some cases, it’s worth several million dollars.
Before we get too deep into this, I want to define what I’m talking about. In this article, I’ll break down two factors:
- The long-term value of how much you could receive in a direct pension over the lifetime of your retirement benefits.
- The value of other military retirement benefits, such as a Thrift Savings Plan and healthcare coverage.
Combined, these benefits are easily worth over a million dollars. Let’s look at an example of retirement pay for an average military career.
How Much is a Military Retirement Worth?
The bulk of your military retirement’s value will be in your retirement plan. This section will calculate examples of retirement pay based on a hypothetical military career. Since military members are eligible for retirement benefits at 20 years, we’ll use a reasonable rank and service time for our examples.
We can assume that after 20 years, an average enlisted member will have achieved the rank of E-7, and the average officer will have achieved the rank of O-5. While there are several different military retirement plans, for the purposes of this article, we’ll be comparing examples using the High-36 and Blended Retirement System (BRS) programs, as they apply to most contemporary service members.
Of course, there will be outliers based on when you served and other factors. For example, service members can earn extra on their retirement pay when they serve past 20 years. But for now, let’s get into the examples.
*disclaimer about this article: The calculations are for illustrative purposes only and do not reflect the exact retirement benefits you will receive. This is a simplified look at military retirement benefits and does not take many factors into consideration, including taxes, disability benefits, inflation, COLA, and others.
Monthly and Annual Military Retirement Pay Examples
As we mentioned before, our military retirement pay examples focus on Veterans who retire at the ranks of E-7 for enlisted members and O-5 for officers. Since military retirement pay is based on the average of your highest pay during active duty, we’ll start by noting the monthly and annual base pay for these two pay grades at 20 years of service:
2024 E-7 Gross Pay:
- Monthly: $5,757.90
- Annually: $69,094.80
2024 O-5 Gross Pay:
- Monthly: $11,093.10
- Annually: $133,117.20
With these figures in mind, we can now estimate the monthly and annual payment amounts under High-36 and BRS.
High-36 Monthly and Annual Pay
Most retirees under the High-36 Plan receive 50% of their highest average base pay if they retire with 20 years of service, which, in our example, would be dispersed in the following amounts:
E-7 Retirement Pay Estimate:
- Monthly: $2,878.95
- Annually: $34,547.40
O-5 Retirement Pay Estimate:
- Monthly: $5,546.55
- Annually: $66,558.60
Blended Retirement System Monthly and Annual Pay
Those under the BRS receive 40% of their average highest base pay at 20 years. In our example, the retirement pay would be dispersed in the following amounts:
E-7 Retirement Pay Estimate:
- Monthly: $2303.16
- Annually: $27,637.92
O-5 Retirement Pay Estimate:
- Monthly: $4,437.24
- Annually: $53,246.88
How Much is Military Retirement Pay Worth Over a Lifetime?
There are few careers in which someone could receive a lifetime pension starting at age 38. Many military retirees will receive a monthly cash payment for over 40 years. When you add in the cost of living and inflation adjustments (COLA), we’re talking about some serious cash!
Using the numbers above from a recently retired E-7 or O-5, we get the following lifetime payments:
Cumulative Retirement Pay Under High 36
E-7 Retirement Pay Estimate:
- 20 years: $690,948.00
- 30 years: $1,036,422.00
- 40 years: $1,381,896.00
O-5 Retirement Pay Estimate:
- 20 years: $1,331,172.00
- 30 years: $1,996,758.00
- 40 years: $2,662,344.00
Cumulative Retirement Pay Under BRS:
E-7 Retirement Pay Estimate:
20 years: $552,758.40
30 years: $829,137.60
40 years: $1,105,516.80
O-5 Retirement Pay Estimate:
20 years: $1,064,937.60
30 years: $1,597,406.40
40 years: $2,129,875.20
Even without COLA or other inflation adjustments, we’re reaching some huge numbers. Additionally, remember that each year of active duty you serve past 20 years adds another 2.0% (BRS) or 2.5% (High-36) to your monthly and annual retirement pay, and each higher pay grade you achieve can add hundreds or even thousands of dollars per year.
Thrift Savings Plan
You’ve likely noticed that the BRS provides a lower pension than comparable service under the High-36 retirement plan. What makes up for that discrepancy is the option to contribute to a Thrift Savings Plan (TSP) with automatic and matching contributions made by the Department of Defense (DoD). While both retirement plans allow you to make deposits into your TSP account, only those enrolled in the BRS are eligible for 1% in automatic contributions and up to 4% in matching contributions.
Each time a service member in the BRS gets paid, the DoD automatically deposits an amount equal to 1% of the member’s basic pay to their TSP, regardless of whether the member contributes. The DoD also matches 100% of the member’s contributions for the first 3% of their basic pay, and 50% for the next 2%, when the member contributes at least 5% of their pay.
Like other retirement savings plans, TSP accounts also accrue compounding interest. This system helps build the TSP balance over time.
Assuming enlisted members and officers get paid bi-weekly, and meet the requirements to receive the maximum DoD matching contributions, we can use the previously mentioned monthly pay rates to estimate how much they would be able to generate in gross TSP deposits:
E-7 TSP Contributions Estimate:
| 5% Servicemember Contribution | $143.95 |
| 5% DoD Contribution | $143.95 |
| Total Servicemember and DoD Contribution Per Paycheck | $287.90 |
| Total Servicemember and DoD Contribution Per Month | $575.79 |
| 1 Year of Contributions | $6,909.48 |
O-5 TSP Contributions Estimate:
| 5% Servicemember Contribution | $277.33 |
| 5% DoD Contribution | $277.33 |
| Total Servicemember and DoD Contribution Per Paycheck | $554.65 |
| Total Servicemember and DoD Contribution Per Month | $1,109.30 |
| 1 Year of Contributions | $13,311.72 |
Value of Military Retirement Medical Benefits
Military-sponsored medical benefits are incredibly valuable, especially as you and your potential spouse age. Few civilian healthcare plans provide as extensive benefits as the Tricare system. It would not be unreasonable to place a value of $15,000-$20,000 per year on military retiree medical benefits, even for a healthy individual. Add a spouse to the benefits, and you can easily double or triple that number.
If you have not yet retired from active duty, it’s almost certain that you’re on a Tricare Prime or Tricare Select health insurance plan. You can remain on one of these plans after you retire, until you reach age 65, when you will transition to Tricare For Life, a Medicare-wraparound healthcare plan for military retirees. Guard and Reserve retirees are eligible for Tricare Retired Reserve until age 60 when they transition to either Tricare Prime or Select. They transfer to Tricare for Life at age 65.
Healthcare benefits for military retirees are also guaranteed, meaning they won’t drop you after you have required expensive procedures or for preexisting conditions. You’ll have little to no out-of-pocket expenses for complex medical procedures.
Commissary, Base Exchange, and Other Base Benefits
I won’t even try to assign a value to these benefits because they don’t apply to all military retirees equally. Some retirees practically live on base, visiting the base clubs, shopping at the Commissary and Exchanges, using the gyms, auto hobby shops, etc. Others may not live near a base at all.
While this category isn’t a part of the core military retirement benefits, it’s worth mentioning because many retirees save a lot of money each year by shopping on base.
Value of Military Discounts
Retired Veterans can also save big by taking advantage of military discounts. Thousands of stores and online retailers across the U.S. seek to express their gratitude to servicemembers by offering perks like money off, free shipping, and upgrades. Many of these discounts also extend to military spouses and dependents. If you haven’t taken advantage of these savings yet, you can check out our guide on how to get a military discount.
Military Retirement is Worth It
Thousands of dollars coming in regularly quickly add up over the years. If you add up the COLA increases in pay for inflation, essentially free health care, and other benefits you can see how a military retirement can quickly be worth millions of dollars over a lifetime.
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Andy says
I was raised in Cuba under the oppression of the Castro regime before my parents brought my brothers and I to the US in 1995. I realized early on that this was the most positive life change a child could have – to move to the US from a communist state.
I joined the Army two weeks after graduating high school. I humbly served over 21 years as enlisted and as a Warrant Officer, retiring as a CW2 in July 2022. I now receive retirement and disability benefits, and if I make it another 40 years, my retirement will be worth over $3.4 million. And that is not including the healthcare benefits and all the other things. And, if my wife survives me, she will receive 50% of my retirement and my disability benefits. There are other benefits for military retirees/disabled veterans that vary by state, so I won’t discuss them here.
Now, I compare this with my fellow elementary students in Cuba that either served or are still serving in the Cuban armed forces, who don’t even have food to eat. One single egg costs about $3, one pound of pork meat costs about $20, and the average monthly salary of a Cuban worker is about $100, just to state a few facts. And guess what, potable water is only available for short periods at a time. Electricity is only available for a couple of hours a day, and they get lucky if it’s during the day and they are able to escape the heat in front of a fan.
My point with stating all of this is that America is great. Every US resident should aspire to serve their nation.
Mark says
It’s so worth it to stick with it. Medical alone saves us thousands of dollars per year. I retired after 23 years as an E-8, and my monthly income was $2,292 in 2006. Now it’s $3,437 monthly at age 59. This has allowed us to send our youngest to private school while living in Hawaii. Granted, I must continue to work to live in paradise! So worth it!!!
robert davis says
I retired in 1995 after 20 years in the US Navy. To be honest, there were a lot of things I didn’t like about navy life, being away from my family for Westpac’s, constantly being at sea, and having to move every few years, among many other things. But I’m coming up on 66 years old now. And without hesitation, I have to say that staying in till retirement was without a doubt the smartest thing I ever did in my life. The retirement pay and medical benefits can’t be beaten in the civilian sector.
Dave Twombly says
From the time I used a government pen to sign up at the age of 16 then the transportation, uniforms and equipment .Weapons and ammunition. housing ,food, medical care. serve 21and ahalf years as E7 with 60 0/0 disability . The space A travel and with 51 years since retirement I believe I have received more then a million dollars.