How Much Is E-8 Retirement Pay With 20 Years?

Military retirement pay is a key benefit for individuals who dedicate their lives to service. Understanding its calculation is important for long-serving members, especially as they approach 20 years. Factors influencing the final amount include the retirement system, pay grade, and years of service. This article clarifies these elements, focusing on the calculation for an E-8 with 20 years of service and outlining various adjustments.

Understanding Military Retirement Systems

The military offers different retirement systems, each with its own rules for calculating retired pay. The system applicable to a service member is primarily determined by their Date of Initial Entry into Military Service (DIEMS). These systems include the Final Pay, High-3 (also known as High-36), and REDUX plans.

The Final Pay system applies to service members who began their military career before September 8, 1980. Under this system, retired pay is based on the service member’s basic pay at the time of retirement. The High-3 system applies to those who entered service between September 8, 1980, and December 31, 2017 (unless they opted into REDUX or BRS). It calculates retired pay based on the average of the highest 36 months of basic pay.

The REDUX system was an option for service members who entered between August 1, 1986, and December 31, 2017. This system offered a Career Status Bonus (CSB) around the 15-year mark in exchange for a reduced retirement multiplier and different cost-of-living adjustments (COLAs) compared to the High-3 system. Those who previously elected it remain under its provisions.

Determining Your Retirement Base Pay

Calculating military retirement pay begins with establishing the “retired pay base.” This figure forms the basis for all subsequent calculations. The method for determining this base depends directly on the retirement system under which a service member falls.

For individuals under the Final Pay system, the retired pay base is simply their basic pay on the last day of active duty. The final month’s basic pay, without any averaging, becomes the starting point for their retirement calculation. Service members can find their current basic pay on official pay charts.

For those under the High-3 or REDUX systems, the retired pay base is determined by taking the average of the highest 36 months of basic pay. This usually corresponds to the basic pay earned during the last three years of service, as pay typically increases with rank and time in service. To calculate this, one would sum the basic pay for each of those 36 months and then divide the total by 36.

Calculating Retirement Pay for an E-8 with 20 Years

Retirement pay is calculated by multiplying the retired pay base by a specific percentage, which is tied to the number of years served and the retirement system. For an E-8 with 20 years of service, the multiplier varies by system. The general formula is: Retired Pay = Retired Pay Base × Multiplier Percentage.

Under the Final Pay system, an E-8 retiring with 20 years of service would receive 2.5% of their final basic pay for each year of service. Therefore, for 20 years, the multiplier is 50% (20 years × 2.5%). If an E-8’s final basic pay was, for example, $6,500 per month, their monthly retirement pay would be $3,250 ($6,500 × 50%).

For service members under the High-3 system, the calculation also uses a 2.5% multiplier per year of service. So, an E-8 with 20 years would again have a 50% multiplier. If their average highest 36 months of basic pay was $6,200 per month, their monthly retirement pay would be $3,100 ($6,200 × 50%).

The REDUX system, however, applies a different multiplier. For 20 years of service, the multiplier is 40%. Using the same hypothetical average highest 36 months of basic pay of $6,200, an E-8 under REDUX would receive $2,480 per month ($6,200 × 40%).

Key Adjustments to Retirement Pay

Once the initial retirement pay is calculated, several factors can adjust the actual amount a retiree receives. These adjustments are designed to help maintain the purchasing power of the pension and provide additional benefits for specific circumstances.

Cost of Living Adjustments (COLAs) are applied annually to military retired pay to help it keep pace with inflation. These adjustments are based on the Consumer Price Index (CPI), as measured by the Department of Labor. For retirees under the Final Pay and High-3 systems, the annual COLA is equal to the full percentage increase in the CPI. However, for those under the REDUX system, COLAs are reduced by one percentage point compared to the CPI. This reduction continues until the retiree reaches age 62, at which point their pay is adjusted to what it would have been under the High-3 system, though subsequent COLAs revert to the reduced rate.

The Survivor Benefit Plan (SBP) is a program that allows military retirees to provide a continuous income stream to eligible beneficiaries, such as a spouse or children, after the retiree’s death. Participation in SBP results in a deduction from the gross monthly retired pay. This deduction ensures that the chosen beneficiaries receive a portion of the retirement pay, providing financial security to survivors.

Concurrent Retirement and Disability Pay (CRDP) and Combat-Related Special Compensation (CRSC) are two distinct programs that can allow eligible military retirees to receive both their full military retired pay and Department of Veterans Affairs (VA) disability compensation. Traditionally, VA disability compensation would offset military retired pay dollar-for-dollar. CRDP applies to retirees with 20 or more years of service and a VA disability rating of 50% or greater, regardless of whether the disability is combat-related. CRDP payments are generally taxable.

In contrast, CRSC provides tax-free payments to retired veterans whose disabilities are determined to be combat-related, even if their VA disability rating is 10% or higher. Service members cannot receive both CRDP and CRSC simultaneously; they must choose the program that offers them the greater financial benefit.