If you are currently serving in the military or have recently retired, it is important to know how to calculate military retirement pay. For the typical service member, the military offers three distinct military retirement plans dependent upon the initial date of service entry. Understanding how to calculate military retirement pay under each of these systems facilitates transitions from active duty to retirement.
To calculate military retirement pay, you will need:
- Final basic pay rate (or an estimation of that final basic pay rate)
- Basic pay rates for the three highest-paying years of a service member’s career
- Recall your initial date of military service. Those retiring from the military fall under one of three pay systems: Final Pay, High-3 and Career Status Bonus(CSB)/Redux. A service member’s initial date of service determines which military retirement pay system applies to him.
- Determine the applicable military retirement pay system. Final Pay applies to service members who entered the military before September 8, 1980. The High-3 military retirement system is for those service members who entered the service between September 8, 1980 and August 1, 1986. CSB/Redux applies to military personnel who entered military service after August 1, 1986 (these service members can select either the High-3 or CSB/Redux retirement plans).
- Calculate Final Pay military retirement pay, if applicable. In Final Pay, those retiring with twenty years of service receive half of their final basic pay each month. For each year of service beyond 20 years, the rate of pay is increased by 2.5 percent of basic pay to a maximum of 100 percent at 40 years of service.
- Calculate High-3 military retirement pay, if applicable. This retired military pay rate is determined by an average of the basic pay for the three highest-paying years of a service member’s career. Calculate the average of your three highest paid years. The High-3 retirement pay rate is 2.5 percent for each year of service times this average value (up to a maximum of 100% for 40 years of service). If a service member has twenty years of service, the retirement pay rate would be 50% of the three-year average (2.5% times 20 years equals 50%).
- Calculate the CSB/Redux retirement pay, if applicable. Under the CSB/Redux military retirement plan, a service member can elect to receive a $30,000 payment (lump sum or in installments) after fourteen years of service. This lump sum payment reduces military retirement pay, however. For 20 to 30 years of service, a service member receives 2.5 percent of an average of the highest paid three years of service (similar to High-3), minus one percent for each year of service short of 30 years. For example, a service member with 25 years of service would receive 57.5% of an average of the highest three years’ pay rates (25 years times 2.5 percent minus 5 percent). After 30 years, the CSB/Redux military retirement system pays 2.5 percent times the average of the highest three years of service with no further deductions–though the post-retirement annual cost of living increase is one percentage point lower than that for High-3 or Final Pay.
- Use an online military retirement calculator to determine military retirement pay. Rather than calculating military retirement pay by hand, a service member may use an online calculator to determine retirement pay rates. The Department of Defense provides such calculators as well as a comparison calculator for service members eligible to choose either the High-3 or CSB/Redux military retirement plans.
To calculate military retirement pay a service member must apply a complex process with several variables. Calculate your retirement pay by hand or use an online calculator to input variables that will apply to you at the time of your retirement.
What Others Are Reading Right Now.
Acting, comedy and strong spirits converge in Speakeasy. When host Paul F. Tompkins interviews entertainers—Key and Peele, Alison Brie, Rob Delaney, Zach Galifianakis—about all sor …
21 Fantastic Facts About Ronda Rousey
This trivia’s like her fights: quick and jarring.
21 Hairstyles Women Love
Female experts reveal the ’dos that drive them wild.