Military Retirement

What is Military Retirement?

Military Retirement benefits are received after 20 years of active service or qualifying reserve service. Each year they increase with a cost of living adjustment. Retirees are still subject to the Uniform Code of Military Justice and it is possible they can be recalled to duty. The military retirement system includes:

  • Initial retired pay increases for active duty service between 20 and 26 years but not for service over 26 years. Retirement pay is tied to basic pay and bonuses and allowances are not factors.
  • Maximum retirement pay is 75 percent of basic pay for 30 years or more of service.
  • Active Duty are eligible for retirement pay immediately upon separation and reservists must wait until their 60 th birthday except drilling reservists who spend 20 years active duty.

The formulas for calculating 20 year retirement pay are:

  • Those retirees who joined the military prior to September 8, 1980 collect monthly checks based on their rank and the number of years they served. Those who served 20 years receive 50 percent of their final basic pay. For each year over 20 years of service, there is an increase of 2.5 percent of basic pay up to a maximum of 75 percent of basic pay for 30 years of active duty service.
  • Those retirees who joined the military after September 8, 1980 but prior to August 1, 1986 can use the “High-3” system. Their retirement pay is based on their average basic pay over their last three years of service. This average is multiplied by 2.5 percent for each year of service to determine their retirement pay.
  • Those retirees who joined the military after August 1, 1986 may select either the High-3 system or the Career Status Bonus/Redux Option. Service members who have attained 14 ½ years of service and agree to stay a minimum of five more years may elect to receive a $30,000 bonus either in a lump sum or installments each year at their 15 th year of service. However, their 20 year retirement pay is lower at only 40 percent of average base pay over the three highest earning years. This increases by 3.5 percent a year for each year over 20 years. It works out that at 30 years, the retirement pay is the same rate as the High-3 system except that the yearly cost of living adjustments are one percent lower. At age 62, there is a one time catch up adjustment.