UNDERSTANDING RETIREMENT PAY AND ITS CORRELATION TO YEARS OF SERVICE

If you’re an officer in the U.S. military who has served for 30 years, you are eligible for retirement and its benefits. Being a Veteran unlocks specific compensation for your service; however, retired Vets can enjoy even more benefits. One important consideration is retirement pay. Below, we’re exploring what your retirement income may look like after service.

Note: Retirement pay is complicated and unique to each Veteran. This guide is not financial advice. To learn more, consult a licensed financial professional and the resources available to you through your military instillation.

Understanding Military Retirement Pay

Military retirement pay is one of the top benefits of military service. Therefore, it is important that you have a clear understanding of what is available to you, regarding military retirement plans.

10 U.S. Code § 8322 lays out the legal framework that qualifies benefits for Veterans with 30 years of military service and allows for their retirement at the discretion of the President or the Secretary of the Navy for Navy and Marine Corps Officers.

When you retire among other factors will affect how much retirement pay you receive as a Veteran. Here’s a closer look at the plans available to retired Veterans:

Military Retirement Plans

The type of military retirement plan you are eligible for depends on when you entered the service.

Here are the different types of retirement plans that you might be eligible for as a Veteran:

• Final Pay is available for Veterans who entered service before September 8, 1980. You’ll receive 2.5% times the number of years you served times the final basic pay on the day of your retirement.
• High-36 is available for anyone who began serving on or after September 8, 1980, and before August 1, 1986, or began on or after August 1, 1986, but didn’t select the Career Status Bonus and REDUX retirement system. You can receive retirement pay equal to 2.5% times the number of years you served times the average of your highest 36 months of basic pay.
• CSB/REDUX is available for those who began serving on or after August 1, 1986, but before January 1, 2003, and chose their Career Status Bonus. You should have received a $30,000 Career Status Bonus lump sum payment during your 15th year of service and would also receive a defined benefit. If you’re under the age of 62, your defined benefit is 2.5% times your average basic pay according to the highest 36 months that apply. If you’re 62 years of age or older, your defined benefit is 2.5% times the number of years you served times your average basic pay according to the highest 36 months that apply.
• Blended Retirement System (BRS) is available to Veterans who began serving on or after January 1, 2018 (automatic enrollment), or before December 31, 2017, while opting into BRS during the opt-in period. BRS provides eligible Veterans a 1% contribution of basic or inactive duty pay to their Thrift Savings Plan (TSP) 60 days after they enter the military. There’s also up to an additional 4% matching contribution from the government to TSP from years three through twenty-six of service. Furthermore, there is a defined benefit of 2% times the number of years you served times your average basic pay according to the highest 36 months that apply.

Retirement Base Pay

To calculate your retired pay base, you’ll use either the final pay method or the high-36-month average method:

• Final Pay calculates your retired pay base equal to your final basic pay
• The High-36 Method averages the highest 36 months of your basic pay divided by 36. In most cases, this will be your final 3 years of service, typically called “high-3."

Your enlistment date will determine which method you use known as your DIEMS (Date of Initial Entry to Military Service) or DIEUS (Date of Initial Entry to Uniformed Services).

Your DIEMS is the date you first entered uniformed service in any form and cannot change—even after leaving the military and rejoining.

However, DIEMS can get tricky for some, including the following situations:

• If you graduate from a Service Academy and begin serving without prior service, your DIEMS is when you first report to the Service Academy.
• If you start serving on an ROTC scholarship program or enlist as a Reserve in the Senior ROTC program, those dates set your DIEMS.
• If you separate from service and rejoin, your DIEMS is based on the first date you entered the military service.
• If you enter using a delayed entry program, your DIEMS is when you first began the program, not when you first reported for duty.
• If you began serving in the Reserves and later joined active duty, your DIEMS is when you first entered through the Reserves.

Note that your pay date, or Pay Entry Base Date, can differ from your DIEMS and your DIEMS won’t determine when your creditable service for retirement is calculated.

Furthermore, the annual Cost of Living Adjustment (COLA) is used to help calculate your retirement pay by protecting it from rising inflation.

Retired Pay Multiplier After 30 Years of Military Service

Both the Final Pay and High-36 Method plan to apply 2.5% worth of each year you serve towards your retirement multiplier.

Therefore, if you have 30 years of military service, you’ll have a 75% multiplier, though the years of creditable service will depend on whether or not you began with the Reserves.

Keep in mind that disability retirement programs are either the percentage assigned by your branch of service when you retire, up to 75% or the figure you get by multiplying the number of years you served with the retirement plan multiplier you qualify for:

Years of Service (Multiplier):

• Final Pay: 30 (75%), 35 (87.5%), 40 (100%), 41 (102.5%)
• High-36: 30 (75%), 35 (87.5%), 40 (100%), 41 (102.5%)
• REDUX: 30 (75%), 35 (87.5%), 40 (100%), 41 (102.5%)
• BRS: 30 (60%), 35 (70%), 40 (80%), 41 (82%)

If you have at least 30 years of military service, retirement can provide notable compensation that is well deserved for a life dedicated to defending our nation.

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