How Much Does Retired Military Get Paid?

Military retirement pay represents a significant financial benefit for service members who complete a qualifying career. This compensation provides a continuous income stream for eligible individuals throughout their retirement years, reflecting their dedicated service. Understanding the components of this pay is important, as various factors contribute to the total amount a retiree receives and ensure long-term financial stability.

Understanding Military Retirement Systems

The military retirement landscape is shaped by several distinct systems, each determined by a service member’s Date of Initial Entry into Military Service (DIEMS). These systems dictate the fundamental framework for calculating retirement pay, ensuring a structured approach to compensation. The primary systems include the Final Pay, High-3 (or High-36), Redux, and the Blended Retirement System (BRS). Eligibility for a military pension under any system typically requires at least 20 years of active service.

Service members who entered the military before September 7, 1980, fall under the Final Pay system, which calculates retirement pay based on their final basic pay. This system is the earliest and most direct of the plans. For those who began their service between September 8, 1980, and July 31, 1986, the High-36 system applies, basing calculations on the average of the highest 36 months of basic pay. This approach helps protect retirees if their final pay rate was lower for any reason.

Individuals who entered service between August 1, 1986, and December 31, 2017, generally fall under the High-36 system but also had the option to choose the Career Status Bonus/REDUX (CSB) system. The REDUX system offered a one-time bonus at 15 years of service in exchange for a reduced annual cost of living adjustment (COLA) and a different multiplier for retirement pay. The BRS became effective for those who entered service on or after January 1, 2018.

The BRS combines a traditional defined-benefit pension with a defined-contribution component through the Thrift Savings Plan (TSP). This system offers automatic and matching contributions to a service member’s TSP account, providing an additional savings vehicle for retirement.

Determining Your Basic Retirement Pay

The calculation of basic military retirement pay depends on the specific retirement system. Under the Final Pay system, retirement pay is computed by multiplying the service member’s final basic pay by 2.5% for each year of service. For example, a service member with 20 years of service would receive 50% of their final basic pay (20 years x 2.5%).

Under the High-36 system, the calculation uses the average of the highest 36 months of basic pay. This average is then multiplied by 2.5% for each year of creditable service. A service member with 20 years of service would receive 50% of their highest 36-month average basic pay (20 years x 2.5%). For instance, a 24-year High-3 participant would receive 60% of their average highest 36 months of basic pay (24 years x 2.5%).

The REDUX system uses a different multiplier. For 20 years of service, the multiplier is 2.0% of the highest 36 months of basic pay, increasing to 3.5% for each year beyond 20 years, up to 30 years of service. A service member retiring under REDUX with 24 years of service would receive 54% of their high-36 average basic pay (40% for 20 years + 3.5% for each of the additional 4 years, resulting in 40% + 14%).

The Blended Retirement System (BRS) calculates the defined benefit portion by multiplying the average of the highest 36 months of basic pay by 2.0% for each year of creditable service. For a service member with 20 years of service, this results in 40% of their highest 36 months of basic pay (20 years x 2.0%).

Impact of Disability and Concurrent Receipt

Military retirement pay can be influenced by service-connected disabilities, particularly concerning the interaction with Department of Veterans Affairs (VA) disability compensation. VA disability compensation is a separate, tax-free benefit for injuries or illnesses incurred or aggravated during military service. Generally, a federal law requires that military retired pay be offset, or reduced, dollar-for-dollar by the amount of VA disability compensation received. This means a retiree typically cannot receive full amounts from both sources simultaneously.

However, specific provisions exist that allow for concurrent receipt of both benefits, mitigating or eliminating this offset. Concurrent Retirement and Disability Pay (CRDP) allows eligible retirees to receive both their full military retired pay and their full VA disability compensation. To qualify for CRDP, a military retiree must have at least 20 years of creditable service and a VA disability rating of 50% or higher. This program restores the portion of retired pay that would otherwise be waived.

Combat-Related Special Compensation (CRSC) is another program providing tax-free payments to eligible retirees whose disabilities are directly related to combat or hazardous duty. CRSC is paid in addition to military retired pay and is not subject to the VA disability offset, meaning it can be received concurrently with both retired pay and VA disability compensation. Eligibility for CRSC requires the disability to be combat-related and generally that the service member has 20 years of service (or 10 years for active duty if medically retired). Unlike CRDP, which restores waived retired pay, CRSC is a separate entitlement that acknowledges the unique circumstances of combat-related injuries. These concurrent receipt programs can substantially increase the total financial benefit received by many disabled military retirees. While the rules surrounding CRDP and CRSC are complex, they provide financial relief and recognition for service members with qualifying disabilities.

Other Financial Aspects of Military Retirement

Several other financial elements impact the total amount a military retiree receives. Cost of Living Adjustments (COLAs) are a key factor, as they help maintain the purchasing power of military retirement pay over time. These adjustments are typically applied annually and are based on changes in the Consumer Price Index (CPI), ensuring that retirement benefits keep pace with inflation. While most retirement systems receive full COLAs, the REDUX system applies a COLA that is one percentage point less than the standard CPI increase.

Taxation is another aspect of military retirement pay. Generally, military retirement pay is subject to federal income tax. However, the portion of pay received as VA disability compensation is tax-exempt. At the state level, taxation of military retirement pay varies widely; some states fully exempt it, some offer partial exemptions, and others tax it fully. Retirees should consult state tax laws in their specific location to understand their obligations.

The Survivor Benefit Plan (SBP) is a voluntary program that allows military retirees to provide a continuous income stream to eligible survivors, such as a spouse or children, after the retiree’s death. Participation in SBP requires premiums, which are deducted from the gross retirement pay. The amount of the premium depends on the level of coverage elected, directly impacting the net amount received by the retiree each month. This plan is a valuable tool for financial planning, providing financial security for surviving family members.