How Military Retirement Pay Is Calculated
Military retirement pay provides a monthly pension for service members who complete at least 20 years of service. Understanding how your retirement pay is calculated helps you plan your financial future and make informed decisions about your military career. This guide covers both the legacy High-3 system and the Blended Retirement System (BRS).
Retirement Pay Calculator
Your military retirement pay depends on three factors:
- Your retirement system (High-3 or BRS)
- Your “High-3” average (average of your highest 36 months of basic pay)
- Your years of creditable service
High-3 Retirement System
If you entered service before January 1, 2018 and did not opt into BRS, you’re under the legacy High-3 system.
High-3 Formula
Monthly Retirement Pay = High-3 Average × 2.5% × Years of Service
High-3 Retirement Pay Examples
| Years of Service | Multiplier | High-3 of $6,000 | High-3 of $8,000 | High-3 of $10,000 |
|---|---|---|---|---|
| 20 years | 50% | $3,000/mo | $4,000/mo | $5,000/mo |
| 24 years | 60% | $3,600/mo | $4,800/mo | $6,000/mo |
| 26 years | 65% | $3,900/mo | $5,200/mo | $6,500/mo |
| 30 years | 75% | $4,500/mo | $6,000/mo | $7,500/mo |
Blended Retirement System (BRS)
If you entered service on or after January 1, 2018, or opted into BRS, your retirement works differently.
BRS Formula
Monthly Retirement Pay = High-3 Average × 2.0% × Years of Service
Plus: Government matching contributions to your TSP (up to 5% of basic pay)
BRS Retirement Pay Examples
| Years of Service | Multiplier | High-3 of $6,000 | High-3 of $8,000 | High-3 of $10,000 |
|---|---|---|---|---|
| 20 years | 40% | $2,400/mo | $3,200/mo | $4,000/mo |
| 24 years | 48% | $2,880/mo | $3,840/mo | $4,800/mo |
| 26 years | 52% | $3,120/mo | $4,160/mo | $5,200/mo |
| 30 years | 60% | $3,600/mo | $4,800/mo | $6,000/mo |
BRS Continuation Pay
BRS members receive a lump-sum continuation pay bonus at the 12-year mark (between 8-12 years for some services):
- Active Duty: 2.5x to 13x monthly basic pay
- Reserve/Guard: 0.5x to 6x monthly basic pay
- Requires additional service commitment
Calculating Your High-3 Average
Your “High-3” is the average of your highest 36 consecutive months of basic pay. For most retirees, this is the final 3 years of service.
What Counts Toward High-3
- Included: Basic pay only
- NOT included: BAH, BAS, special pays, bonuses, COLA
Example High-3 Calculation
An E-7 retiring with the following final 36 months:
- Months 1-12: $4,500/month basic pay
- Months 13-24: $4,650/month basic pay
- Months 25-36: $4,800/month basic pay
High-3 Average: ($4,500 + $4,650 + $4,800) ÷ 3 = $4,650
COLA Adjustments
Military retirement pay receives annual Cost-of-Living Adjustments (COLA) based on the Consumer Price Index:
- High-3 retirees: Full COLA adjustment
- BRS retirees: COLA minus 1% until age 62, then recomputed to full COLA
Disability Retirement
Service members medically retired with a disability rating may have different calculations:
- Less than 20 years: Disability percentage × High-3 (minimum 30%)
- 20+ years: Higher of disability calculation or longevity calculation
- Combat-related: May qualify for Combat-Related Special Compensation (CRSC)
Reserve/Guard Retirement
Reserve and National Guard members earn retirement points rather than years of service:
- Need minimum 20 “good years” (50+ points each)
- Retirement pay starts at age 60 (earlier for mobilized service)
- Formula: (Total Points ÷ 360) × 2.5% (High-3) or 2.0% (BRS) × High-3 Average
Taxes on Military Retirement Pay
Military retirement pay is generally taxable at the federal level, but many states offer partial or full exemptions:
- Fully exempt states: Alabama, Hawaii, Illinois, Iowa, Kansas, Louisiana, Massachusetts, Michigan, Mississippi, Missouri (partial), New Jersey, New York, Ohio, Pennsylvania, Wisconsin
- No income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming
Survivor Benefit Plan (SBP)
The Survivor Benefit Plan provides continued income to your spouse or dependents after your death:
- Costs approximately 6.5% of retirement pay
- Provides 55% of your retirement pay to survivors
- Decision must be made at retirement (irrevocable after 2 years)
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