Military retirement pay is intended to recognize the selfless dedication to a career in the military. While important, calculating Military retirement pay benefits depend on individual circumstances determined by the circumstances below.
Those who served in the military (Active Duty, Reserves or Guard), for a typical length of at least 20 years, will receive military retirement pay. This benefit begins immediately and is based upon a specific calculation determined by the Department of Defense. Length of service, disability percentage, year the member entered the service, and type of retirement are all factors that pertain to retirement benefits equation.
In essence, retirement pay amount can be calculated by multiplying the service member’s Retired Base Pay by the Percentage Multiplier. Retired Base Pay is configured using either Final Pay or High-3.
- Final Pay: Military who started serving before September 8, 1980 (via active duty or reserve), will receive retirement pay based on their final basic pay.
- High-3: Military who started serving after September 7, 1980 (via active duty or reserve), will receive retirement pay equaling the average of the highest 36 months of basic pay. If their time in the service accounted for less than three years, base pay would be the average monthly active duty pay during the servicemember’s length of service.
The Percentage Multiplier is accounted for by the service member’s years of service. Typically, the percentage will be 2.5% per year of service. For example, a service member who has served 20 years would be given a 50% multiplier since 20 multiplied by 2.5% equals 50%.
When accounting for time of service, DIEMS (Date of Initial Entry to Military Service) is an important factor. There are a few circumstances to note when considering DIEMS. First, DIEMS for those who joined, separated, and then rejoined the military will be based on the first date of initial military service. Secondly, the DIEMS for members who enlisted under the delayed entry program will be the date in which they entered into the program as opposed to the date of when they reported for duty. Finally, if a person changes their status such as from reserve to active duty, DIEMS will be the initial joining date of service for the reserves.
Also, keep in mind that the years of service are calculated differently for a full time active duty service member versus a reserve service member. Retirement points are divided by 360 for those who served in the reserves. These points are converted to years of active duty service, and thus can be applied to the standard retirement pay formula.
Additional factors to consider when configuring retirement pay is Career Status Bonus/REDUX and Disability.
- CSB/REDUX: If you retired under the CSB/REDUX plan, which is an option available to active duty members who entered service on or after August 1, 1986 and includes a $30K bonus, the retired pay multiplier will be decreased by 1% of each year served. Additionally, this plan utilizes the High-36 retirement method.
- DISABILITY: Disability Retired pay is either 2% per service year OR a disability percentage assigned by the service at the time of retirement. By law, the multiplier cannot exceed 75%.
Regardless of the many factors and equations, it’s reassuring to know that military retired pay is considered one of the best and basically, the longer you serve, the higher your pay will be.