How Much Does a Retired E7 Make in Retirement?
Learn what shapes an E7's military retirement income and the full spectrum of benefits that complement it.
Military retirement pay serves as a significant financial benefit for service members who complete a qualifying career. The amount received in retirement is shaped by several factors, including the specific retirement system, years of service, and basic pay. Understanding these components is important for any enlisted service member, such as an E7, planning for their post-service financial future.
Understanding Military Retirement Pay Systems
The calculation of military retirement pay is determined by the retirement system a service member falls under, based on their Date of Initial Entry into Military Service (DIEMS). Three main systems have been in place: the High-3 system, the REDUX system, and the Blended Retirement System (BRS).
The “High-3” system, applicable to those who entered service between September 8, 1980, and December 31, 2017, calculates retired pay based on the average of the highest 36 months of basic pay. This system uses a multiplier of 2.5% for each year of service.
The REDUX system was an option for service members who entered between August 1, 1986, and December 31, 2002, and elected to receive a Career Status Bonus (CSB) at their 15-year mark. This system uses a lower multiplier of 2.0% for each year of service for 20 years, with a higher multiplier of 3.5% for years beyond 20. A feature of REDUX is its reduced Cost of Living Adjustments (COLAs) compared to High-3, typically one percentage point less than inflation. At age 62, a one-time adjustment restores pay to what it would have been under High-3, though subsequent COLAs revert to the reduced rate.
The Blended Retirement System (BRS) became effective on January 1, 2018, and applies to all new entrants. Service members who joined prior to this date had the option to opt into BRS. BRS combines a reduced defined benefit with government contributions to a Thrift Savings Plan (TSP). The defined benefit portion of BRS uses a multiplier of 2.0% for each year of service. This system also includes continuation pay, a one-time bonus offered at around 12 years of service in exchange for additional years of service.
Calculating E7 Retirement Pay
To calculate an E7’s retirement pay, the formula involves multiplying their “high-3 average basic pay” by a percentage determined by years of service and the applicable retirement system. The “high-3 average basic pay” is the average of the highest 36 months of basic pay. For a hypothetical E7, let’s assume a “high-3 average basic pay” of $5,800 per month.
Under the High-3 system, a service member retiring with 20 years of service receives 50% of their high-3 average basic pay (20 years × 2.5%). For an E7 with a $5,800 high-3 average basic pay, this results in a monthly payment of $2,900. If that E7 served for 25 years, the multiplier would be 62.5% (25 years × 2.5%), leading to a monthly payment of $3,625. This system provides full Cost of Living Adjustments (COLAs) annually.
For an E7 under the REDUX system, the calculation varies. At 20 years of service, the multiplier is 40% (20 years × 2.0%), leading to a monthly payment of $2,320 based on the $5,800 high-3 average basic pay. If the E7 served 25 years, the multiplier would be 57.5% (40% for the first 20 years + (5 additional years × 3.5% per year)), resulting in a monthly payment of $3,335.
The Blended Retirement System (BRS) also uses a 2.0% multiplier for each year of service for the defined benefit portion. An E7 retiring under BRS with 20 years of service would receive 40% of their high-3 average basic pay, amounting to $2,320 per month. If they served 25 years, the multiplier remains 2.0% per year, resulting in 50% of their high-3 average basic pay, or $2,900 per month. BRS COLAs are typically full. The government’s automatic 1% contribution to a service member’s Thrift Savings Plan (TSP) after 60 days of service, plus matching contributions of up to an additional 4% after two years of service, for a total of 5% if the member contributes at least 5%, is a key feature. These TSP contributions accumulate over a career and are portable.
Additional Retirement Benefits
Retired E7s receive a range of additional benefits. Access to healthcare is a primary benefit, with TRICARE offering comprehensive medical coverage. Retirees under 65 can enroll in TRICARE Prime or TRICARE Select, while those 65 and older who are Medicare-eligible can enroll in TRICARE for Life, which acts as a secondary payer to Medicare Part A and B.
Retired E7s also retain access to military commissaries and exchanges. Commissaries provide groceries at reduced prices. Exchanges offer tax-free retail shopping.
Space-Available (Space-A) travel allows retirees and their accompanying dependents to fly on military aircraft when spare seats are available. This offers a cost-effective way to travel.
The Survivor Benefit Plan (SBP) allows a retiree to provide a continuous lifetime annuity to their eligible survivors, such as a spouse or children, after the retiree’s death. Premiums for SBP are deducted from the gross retired pay, and the benefit amount can be up to 55% of the elected coverage amount.
Military retirement pay is generally considered taxable income for federal and most state income tax purposes. Veterans Affairs (VA) disability compensation is separate from military retirement pay and is tax-free. Retirees can receive both military retired pay and VA disability compensation concurrently under specific conditions, primarily if they have a VA disability rating of 50% or higher, or qualify for Combat-Related Special Compensation (CRSC).