Calculate Your Retired Military Pay

Calculate Your Retired Military Pay

The first step in this process is to figure out what your retired base pay.  This is done in one of two ways.  The first is for those members who fall under the Final Pay retirement system.  In this case the retired pay base is equal to the member’s last month of basic pay.  The second is for those members who will either be using the High-36 system or the CSB/REDUX retirement system.  In this situation retired pay base is equal to the average of the highest 36 months of basic pay. 

A multiplier is used to determine the amount of retired pay an individual will receive.  In both retirement systems, Final Pay and High-36, each year of service is worth 2.5% toward the retirement multiplier.  This percentage is multiplied by the number of years of service to get a total percentage which is then multiplied by the retired pay base to come up with the total amount of the retirement pay.  Years of service that count toward retirement are calculated differently depending on if the servicemember was active duty or reserves.  The CSB/REDUX retirement system is slightly different in its calculation.  This retirement option is only offered to active duty retirees.  With this plan each year of service for the first 20 years is worth 2% toward the retirement multiplier and increased to 3.5% for each additional year past 20.  Most times retirement maxes out at 100% for 40 years, however, those remaining in service past the 40 year mark will continue to increase their amount of retired pay past 100%.  The following chart is an example of the percentage of retired base pay individuals will receive according to retirement system and years in service. 

Years of Service

10

15

20

21

22

23

24

25

30

35

40

41

Final Pay

25%

50%

55%

60%

75%

80%

100%

High-36

25%

50%

55%

60%

75%

80%

100%

REDUX*

n/a

n/a

40%

47%

54%

75%

80%

100%

 

Disability retirement uses the multiplier of either 2.5% or the disability percentage assigned at the Service at the time of retirement, whichever is higher.  Disability retirement maxes out at 75% of the retired pay base. 

Reserve Retirement Years of Service Calculations

Calculating years of service in regards to retirement for Reserve members is done by using a point system.  Creditable years of service towards reserve retirement is calculated by taking the sum of the accumulated reserve points and dividing by 360.  Points counting toward years of service are accumulated in the following way.

(Source site: Military Compensation at http://militarypay.defense.gov/retirement/RESERVE/

There are 3 categories for determining years of creditable service that have applicability to the computation of reserve (non-regular) retired pay. One for determining when an individual is entitled to retired pay, one for determining the applicable active duty base pay upon which to compute retired pay, and one for determining the retired pay percentage multiplier. For reserve retirements these are generally different.

The first category we shall call- Years of Service for Retirement Entitlement. This category of years of service includes each one year period in which the person has been credited with at least 50 points, as follows:

  • 1 point for each day of active service 1 point for each attendance at a drill period 1 point for each day of performing funeral honors duty 15 points for each year of membership in a reserve component
  • Generally, a member retiring with a Reserve (non-regular) retirement must have 20 years of service for entitlement and they will receive a letter from their Service advising when this criteria has been met.

The second category we shall call- Years of Service for Pay Base. When combined with pay grade, YOS for pay base, determines the active duty pay entitlement by defining the appropriate pay table cell, e.g. E-4 over 6 years of service. This category of years of service includes all periods of active service and all periods of Reserve or National Guard service counted day for day. A unique feature of Reserve retirement is that the pay base is determined as though the reserve member were serving on active duty immediately prior to retirement, thus the years of service continue to accumulate even after the member has entered the retired reserve and continue until they actually begin receiving such pay (usually age 60).

The third category we shall call- Years of Service for Retired Pay Percentage Multiple. YOS for retirement percentage multiple determines the years of service for computing the retired pay multiplier. This category of years of service includes all periods of active service (counted as one point for each day) plus all points earned through qualifying reserve duty, not exceeding annual limits, divided by 360.

Reserve service members are not usually eligible to receive retirement pay until the age of 60.  The exception to this is those Ready Reserve members called to active duty or who respond to a national emergency.  These servicemember’s required retirement age of 60 will be reduced by 3 months for each cumulative 90 day period of above mentioned service. 

Cost of Living Allowance

The Cost of Living Allowance is adjusted annually in accordance with the Consumer Price Index.  In both the Final Pay and the High-36, the Cost of Living Allowance increase is equal to the Consumer Price Index increase.  The Cost of Living Allowance increase for the CSB/REDUX system is equal to the Consumer Price Index increase minus 1%. 

The CSB/REDUX retirement system has one feature that the other systems do not offer.  Once a servicemember, who is part of the CSB/REDUX retirement system, reaches 15 years of service, they must decide between two different retirement payout options.  For their retirement plan, they can choose to take a $30,000 cash bonus which equates to approximately $21,000 after taxes, and receive 40% of their retired base pay for their pension check, or they can refuse the bonus and follow the High-36 plan and receive 50% of their retired base pay for their pension check. 

The following links are provide to assist you in calculating your personal retirement pay in all situations available.