https://crsreports.congress.gov
Updated November 14, 2022
Defense Primer: Military Retirement
The military retirement system is a government-funded
system that provides a defined benefit to all retirees and
matching government contributions to the Thrift Savings
Plan (TSP) for eligible servicemembers. It has historically
been viewed as a significant retention incentive for military
personnel. The system includes monthly compensation for
qualified active and reserve retirees, disability benefits for
those deemed medically unfit to serve, and a survivor
annuity program for the eligible survivors of deceased
retirees. The amount of compensation depends on years of
service (YOS), basic pay at retirement, and annual Cost-of-
Living-Adjustments (COLAs).
What is the Purpose of the Military
Retirement System?
The non-disability military retirement system for active-
duty members has evolved since the late 1800s to meet four
main goals.
To keep the military forces of the United States young
and vigorous and ensure promotion opportunities for
younger members.
To enable the armed forces to remain competitive with
private-sector employers and the federal Civil Service.
To provide a reserve pool of experienced military
manpower as a “retired reserve” that can be recalled to
active duty in time of war or national emergency.
To provide economic security for former members of
the armed forces during their old age.
Who is Eligible for Retired Pay?
Eligibility for non-disability retired pay depends on years of
service (YOS). In order to be vested in the defined benefit,
a member must complete 20 years of qualifying service. For
active component members this is one calendar year, and
for reserve component members, it is a year in which the
member earns at least 50 retirement points, typically
through weekend drill. Servicemembers determined to be
unfit for continued service and who have a permanent and
stable disqualifying physical condition may qualify for
disability retirement, commonly referred to as a Chapter 61
retirement. Eligibility is based on having a permanent and
stable disability of 30% or more that was not noted at the
time of entrance on active duty. As a result, these members
might retire without having reached the 20-year mark.
How is Regular Retired Pay Calculated?
Retirement pay calculations for active-duty personnel are
based on the date when the servicemember first entered on
active duty, the pay base at the time of retirement, and a
multiplier as defined by statute. Changes in law have
created four distinct systems for calculating retired pay: (1)
Final Basic Pay, (2) High-Three, (3) Redux, and (4)
Blended Retirement System (BRS). The pay base is either
the final pay at retirement or average of the highest three
years of basic pay. The multiplier for retirees in the Final
Basic Pay or High-Three system is 2.5%. See Table 1 for
the Redux formula. For those entering service on or after
January 1, 2018, the multiplier is 2.0%.
The basic formula for calculating retired pay is:
YOS x multiplier x retired pay base
For a member who retired in 2017 with 20 YOS, retired pay
is 50% of the average of the individual’s highest 36 months
of pay. If another member with 30 YOS retired in 2017,
retired pay is 75% of the high-three average. A
servicemember who entered service in 2018 and retires in
2038 with 20 YOS will receive 40% of the high-three
average and one who retires with 30 YOS in 2048 will
receive 60% of the high-three average.
How is Disability Retired Pay Calculated?
A servicemember retired for disability may select one of
two options for calculating their monthly retired pay; (1)
the longevity formula for regular retirement:
YOS x multiplier x retired pay base.
Or, (2) the disability formula:
DOD disability percentage x retired pay base.
The maximum retired disability pay may not exceed 75% of
the pay base.
Figure 1. Retirement System Eligibility
Source: CRS Report RL34751, Military Retirement: Background and
Recent Developments, by Kristy N. Kamarck
