Custom Search

Military Retirement

Popular Military

Military Retirement Loans

Military Retirement
Information About Military Retirement for US Armed Forces Personnel
Service members who remain on active duty or serve in the Reserves or Guard for a sufficient period of time may retire and receive retired pay. Retirees also retain the privilege to use base facilities, including the commissary and gym. Members who entered Service on or after August 1, 1986, and who will qualify for an active duty retirement, may choose between two of the current three systems. Members who become disabled while on duty may be medically retired and receive a disability retirement. Additionally, all retirees may choose to participate in the Survivor Benefit Plan or the Reserve Components Survivor Benefit Plan, which protects the retiree's family financially in the event of his or her death. Social Security will likely provide additional retirement benefits to most retirees beginning after turning 62.
Active Duty Retirement System

Members who remain on active duty for twenty or more years are eligible for retirement. There are three non-disability retirement systems currently in effect. These are Final Pay, High-3 Year Average, and Military Retirement Reform Act of 1986 (more commonly referred to as REDUX). REDUX was revised by the FY2000 National Defense Authorization Act -- a $30,000 Career Status Bonus (CSB) was added for those who accept the REDUX system retirement. Individuals formerly under REDUX may now choose between the High-3 and CSB/REDUX systems. The date you first entered the service determines which retirement system applies to you and whether you have the option to choose your retirement system.
Which System

To decide which system applies to you, determine the date you first entered service. This date is called the DIEMS (Date of Initial Entry to Military Service) or DIEUS (Date of Initial Entry to Uniformed Services). The date you entered is the first time you enlisted or joined the active or reserves. This date is fixed and does not change. Leaving the military and rejoining does not affect your DIEMS.
Retirement System Criteria
Final Pay Entry before September 8, 1980
High 3 Entry on or after September 8, 1980, but before August 1, 1986 or
entered on or after August 1, 1986, and did not choose the Career Status Bonus and REDUX retirement system.
CSB/REDUX Entered on or after August 1, 1986, AND elected to receive the Career Status Bonus (if you do not elect to receive the Career Status Bonus, you will be under the High-3 retirement system)
Final Pay Retirement System
Final Pay applies to those who entered the Service before September 8, 1980.

Each year of service is worth 2.5% toward the retirement multiplier. Hence, 2.5% x 20 years = 50% and 2.5% x 30 years = 75%. The longer an individual stays on active duty the higher the multiplier and the higher the retirement pay, up to the maximum of 75 percent.

Years of service 20 21 22 23 24 25 26 27 28 29 30
High-3 50% 52.5% 55% 57.5% 60% 62.5% 65% 67.5% 70% 72.5% 75%

This multiplier is applied against the final basic pay of the individual's career. Only basic pay is used in retirement calculations. Allowances and special pays do not affect retired pay.

Cost of Living Adjustments (COLAs) are given annually based on the increase in the Consumer Price Index (CPI), a measure of inflation. Under the Final Pay System, the annual COLA is equal to CPI. This is a different index than the one used for active duty annual pay raises. The index used for active duty pay raises are based upon average civilian wage increases. Retirement pay COLAs and annual active duty pay raises will differ.

High 3 Retirement System
High 3 applies to members who first entered the military after September 8, 1980, but before August 1, 1986. It also applies to individuals who entered on or after August 1, 1986, and who do not elect the REDUX retirement system with the Career Status Bonus at their 15th year of service.

Each year of service is worth 2.5% toward the retirement multiplier. For example, 2.5% x 20 years = 50% and 2.5% x 30 years = 75%. The longer an individual stays on active duty the higher the multiplier and the higher the retirement pay, up to the maximum of 75 percent.

Years of service 20 21 22 23 24 25 26 27 28 29 30
High-3 50% 52.5% 55% 57.5% 60% 62.5% 65% 67.5% 70% 72.5% 75%

This multiplier is applied against the average basic pay for the highest 36 months of the individual's career. This usually, but not always, equals the average basic pay for the final three years of service. Only basic pay is used in retirement calculations in all retirement system options. Allowances and special pays do not affect retired pay.

Cost of Living Adjustments (COLAs) are given annually based on the increase in the Consumer Price Index (CPI), a measure of inflation. Under the High-3, the annual COLA is equal to CPI. This is a different index than the one used for active duty annual pay raises. The index used for active duty pay raises are based upon average civilian wage increases. Retirement pay COLAs and annual active duty pay raises will differ.

CSB/REDUX
The Military Reform Act of 1986 created the REDUX retirement system. This system applied to all members who joined on or after August 1, 1986. The National Defense Authorization Act (NDAA) for Fiscal Year 2000 amended this system. The act made two major changes: 1) it allows those in this group to choose between the High-3 retirement system and the REDUX retirement system and 2) it added a $30,000 Career Status Bonus as part of the REDUX retirement system.

The CSB/REDUX retirement system applies to those who entered the military on or after August 1, 1986, and who elected to receive the $30,000 Career Status Bonus at their 15th year of service.

The REDUX retirement system and Career Status Bonus is a "package deal." The combination of these two items can be advantageous to personnel. The REDUX portion determines retirement income (the longer your career, the higher the income). And the $30,000 Career Status Bonus provides current cash - available for investing, major purchases, or setting up a small business after retirement.

REDUX System Details

The REDUX multiplier calculation and annual cost of living adjustments differ from the other systems. Also, REDUX has a catch-up increase at age 62 that brings the REDUX retired pay back to the same amount paid under the High-3 System. REDUX is the only retirement system with a readjustment feature.

Each of the first 20 years of service is worth 2.0% toward the retirement multiplier. But each year after the 20th is worth 3.5%. For example, 2.0% x 20 years = 40%. But a 30-year career is computed by 2.0% times the first 20 years plus 3.5% for the 10 years beyond 20, resulting in the maximum of 75%. The table below summarizes the initial multiplier at various years of service under REDUX.

Years of service 20 21 22 23 24 25 26 27 28 29 30
REDUX 40% 43.5% 47% 50.5% 54% 57.5% 61% 64.5% 68% 71.5% 75%

Under REDUX, the longer the service member stays on active duty the closer the multiplier is to what it would have been under High-3 up to the 30-year point where the multipliers are equal.

In precisely the same way as High-3, this multiplier is applied against the average basic pay for the highest 36 months of the service member's basic pay. This usually, but not always, equals the average basic pay for the final three years of service.

Cost of Living Adjustments (COLAs) for retired pay are given annually based on the increase in the Consumer Price Index (CPI), a measure of inflation. Under REDUX, the COLA is equal to CPI minus 1%.

A unique feature of REDUX is a recomputation of retirement pay at age 62. Two adjustments are made. The first adjusts the multiplier to what it would have been under High-3. For example, a 20-year retiree's new multiplier would become 50%, a 24-year retiree's multiplier would become 60% but a 30-year retiree's would remain 75%. This new multiplier is applied against the service member's original average basic pay for their highest 36 months. Then the second adjustment is done. Full CPI for every retirement year is applied to this amount to compute a new base retirement salary. At age 62, the REDUX and High-3 retirement salaries are equal. But, REDUX COLAs for later years will again be set at CPI minus 1%.

The $30,000 Career Status Bonus

Those members who elect the CSB/REDUX retirement system at their 15th year of service receive a $30,000 Career Status Bonus. To receive this bonus, the service member must agree to complete a 20-year active duty career with length-of-service retired pay under the 1986 Military Retirement Reform Act -- 1986 MRRA or REDUX. Continuation beyond 20 years is possible, subject to personnel management actions. However, the service member''s commitment with the CSB is only to the 20-year point. The entire $30,000 bonus, or first installment payment for those electing a multi-year payment option, is paid shortly after the service member makes the CSB/REDUX election and commits to the 20-years-of-service obligation.

If the member doesn't complete the obligation of the 20-year career, the member must repay a pro-rated share of the CSB bonus.

Note: the CSB bonus is taxable, but you can shelter part of the bonus by placing it in a TSP account. For tax purposes, standard rules apply for IRAs.

Military Divorce and Retired Pay
The Uniformed Services Former Spouses' Protection Act (USFSPA), passed by Congress in 1982, gives a state court the authority to treat military retired pay as marital property and divide it between the spouses.

With the passage of the USFSPA, Congress took the opportunity to set forth various requirements to govern the division of military retired pay. The USFSPA limits the amount of the member's retired pay which can be paid to a former spouse to 50% of the member's disposable retired pay (gross retired pay less authorized deductions). It requires the parties to have been married for at least 10 years while the member performed at least 10 years of active duty service before a division of retired pay is enforceable under the USFSPA. See Uniformed Services Former Spouses' Protection Act (PDF) for more information.
(Source: US Department of Defense)