How Much Is E-7 Retirement Pay With 23 Years?
Understand how military retirement pay is calculated for an E-7 with 23 years of service and the key factors determining your final net amount.
Military retirement pay represents a significant financial benefit for service members who dedicate years to their country. Understanding how this pay is determined becomes a primary concern as individuals approach the end of their careers. This article clarifies the calculation of military retirement pay for an E-7 with 23 years of service, exploring the elements that influence the final amount.
Understanding Military Retirement Systems
Military retirement benefits are determined by the system applicable to a service member’s entry date. For those with 23 years of service, the most common systems are High-3 and, for some, REDUX. The Blended Retirement System (BRS) applies to those who entered service on or after January 1, 2018, or who opted into it. However, a service member with 23 years would fall under an earlier plan.
The High-3 system, common for service members who entered before 2018, 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. In contrast, the REDUX system, an option for some who entered before 2018, features a different multiplier and Cost of Living Adjustment (COLA) structure. Under REDUX, the multiplier is initially reduced, impacting the annual COLA by being one percentage point less than other retirement plans.
While High-3 provides full COLAs annually, REDUX’s reduced COLAs mean that, over time, the purchasing power of the retirement pay may erode more significantly. Service members under REDUX receive a one-time upward adjustment to their pay at age 62 to bring it closer to the High-3 equivalent, but the reduced COLA then resumes. For a service member with 23 years, the High-3 system is more advantageous due to its consistent COLA application, making it the prevalent choice for those who did not elect the Career Status Bonus (CSB) associated with REDUX.
Determining Your High-3 Average Basic Pay
The “High-3 Average Basic Pay” forms the foundation for calculating military retirement benefits under the High-3 system. This figure is the average of the highest 36 months of a service member’s basic pay, excluding allowances like Basic Allowance for Housing (BAH) or Basic Allowance for Subsistence (BAS). For most, these highest 36 months occur during their final three years of service due to pay raises tied to rank progression and longevity.
Identifying this average is a key step in the retirement pay calculation. It requires reviewing pay records to pinpoint the 36 months in which the highest basic pay was received. While often the last 36 months, this is not always universally true, particularly if there were fluctuations in pay grade or time in service. The determined average basic pay becomes the “retired pay base” used in the subsequent formula.
Calculating Your Monthly Retirement Pay
The calculation of gross monthly military retirement pay under the High-3 system follows a straightforward formula: (High-3 Average Basic Pay) x (Years of Service x Multiplier). The multiplier for the High-3 system is 2.5% for each year of creditable service. For retirement purposes, years of service include all active duty time and, for reservists, any credited reserve points converted to equivalent active duty days.
To illustrate, consider an E-7 with 23 years of service. A plausible monthly basic pay for an E-7 with over 22 years of service in 2025 is approximately $6,238.20. Assuming this is the High-3 average basic pay, the calculation is: $6,238.20 multiplied by (23 years of service x 2.5% multiplier). This results in a total multiplier of 57.5% (23 x 2.5%). Therefore, the gross monthly retirement pay would be $6,238.20 x 0.575, equaling $3,586.97.
Under the REDUX system, the calculation would differ significantly due to a reduced multiplier. For example, a 20-year retiree under REDUX would receive 40% of their High-3 basic pay, compared to 50% under High-3, and this reduction continues for each year under 30 years of service. This difference highlights why understanding the applicable retirement system is important, as it directly impacts the gross amount received before any deductions.
Factors Influencing Your Net Retirement Pay
The gross monthly retirement pay calculated is not the exact amount a retiree receives in their bank account; various factors reduce this to a net amount. Military retirement pay is considered taxable income at the federal level, meaning federal income tax is withheld from the gross amount. State income tax treatment of military retirement pay varies significantly across the United States, with some states fully exempting it, others partially exempting it, and a few taxing it fully.
Another significant deduction can be for the Survivor Benefit Plan (SBP), which provides an annuity to eligible survivors upon the retiree’s death. Participation in SBP results in a deduction from gross retirement pay, a percentage of the elected base amount, which can be up to 6.5% of the designated base amount for spouse coverage. These premiums are deducted on a pre-tax basis for federal income tax purposes.
For retirees with service-connected disabilities, Concurrent Retirement and Disability Pay (CRDP) can impact their net pay. Historically, military retired pay was reduced dollar-for-dollar by the amount of VA disability compensation received, a process known as waiver of retired pay. However, CRDP allows eligible retirees with a VA disability rating of 50% or greater to receive both their full military retired pay and VA disability compensation, eliminating this offset. This restoration of retired pay is automatic for those who qualify.
Additional deductions can include TRICARE health insurance premiums, which vary based on the plan selected and the retiree’s group. For instance, retirees may pay monthly or annual enrollment fees, along with potential deductibles and copayments for services. Other potential deductions might involve allotments for various purposes or, in rare cases, garnishments. Understanding these deductions is important for retirees to accurately project their actual take-home retirement pay.