What Is Retirement Pay for E6 With 20 Years?

Military retirement pay provides a defined benefit to service members who complete a career of at least 20 years. This compensation is a significant financial consideration for those transitioning from uniformed service to civilian life. Understanding how this pay is calculated and administered is important for financial planning.

Calculating Your Military Retirement Pay

Military retirement pay is generally determined by a formula that considers a service member’s highest earnings and total years of service. For those who entered service after September 7, 1980, the “High-3” calculation method is typically used, which averages the highest 36 months of basic pay. This average serves as the retired pay base. The formula then multiplies this base by a service percentage, which is generally 2.5% for each year of service. For example, an E6 with 20 years of service would have a multiplier of 50% (20 years x 2.5%).

To illustrate, if an E6 with 20 years of service has a monthly basic pay of approximately $4,585.20 in 2025, and assuming this is part of their highest 36 months, their retired pay base would be around this figure. Using the 50% multiplier, the estimated gross monthly retirement pay would be approximately $2,292.60 ($4,585.20 x 0.50).

The specific retirement system a service member falls under also influences the calculation. The “High-36” system, often referred to as “High-3,” applies to service members who entered between September 8, 1980, and December 31, 2017, and did not opt for the Career Status Bonus/REDUX. Under High-36, the multiplier is 2.5% per year of service.

Another system, the REDUX retirement plan, applied to service members who entered between August 1, 1986, and December 31, 2017, if they opted for a Career Status Bonus (CSB) at their 15-year mark. For REDUX, the multiplier for 20 years of service is 40% (2% per year), which is a reduction compared to the High-3 system. While the Blended Retirement System (BRS) is the current system for those entering service after January 1, 2018, it is generally not the primary system for someone with 20 years of service unless they opted in from a previous system. For those under BRS, the multiplier is 2.0% per year of service.

Key Financial Considerations for Retirement Pay

One important factor is the Cost of Living Adjustment (COLA), which helps maintain the value of retirement pay over time. COLA is applied annually, typically effective December 1st, and is based on changes in the Consumer Price Index (CPI) as measured by the Department of Labor. This adjustment ensures that retired pay keeps pace with inflation, with the COLA generally equaling the percentage increase in the CPI for most retirement plans.

However, for those under the REDUX plan, the annual COLA is typically one percentage point less than the COLA determined for other retirement plans. While a one-time adjustment at age 62 aims to restore the difference in COLA, future COLAs for REDUX continue to be reduced.

Military retirement pay is generally considered taxable income at the federal level, similar to other forms of pension or annuity income. The amount of federal tax depends on the retiree’s overall taxable income and applicable tax brackets. It is important to note that military retirement pay is not subject to Social Security or Medicare taxes. While federal taxation is consistent, state taxation of military retirement pay varies significantly; some states fully exempt it, others partially tax it, and a few tax it fully. Retirees should consult tax professionals for personalized guidance on state tax implications.

The Survivor Benefit Plan (SBP) is an optional program that allows retirees to provide a continuous income stream to eligible survivors after their death. Electing SBP involves a deduction from the gross retirement pay, which cannot exceed 6.5% of the gross retired pay for full coverage. The decision to enroll in SBP is typically made at retirement and cannot be easily changed later. Premiums for SBP are deducted from gross retired pay, which means they are excluded from taxable income, effectively reducing the net cost to the retiree.

Receiving and Administering Your Retirement Pay

The process of receiving military retirement pay typically begins the month following a service member’s retirement. The Defense Finance and Accounting Service (DFAS) is the agency responsible for administering these payments. DFAS handles the calculation, disbursement, and ongoing management of military retirement benefits.

To initiate retirement pay, service members generally need to submit essential documents, such as their DD Form 214, which is the Certificate of Release or Discharge from Active Duty, along with their official retirement orders. These documents are crucial for DFAS to process the retirement and establish the payment account.

Payments are primarily disbursed through direct deposit into a financial institution account. This electronic method is mandated for most military retirees and annuitants, providing a secure and efficient way to receive funds. Retirees can manage their direct deposit information, view pay statements, and update personal details through the DFAS myPay portal, which offers 24/7 online access. This portal serves as the main online tool for retirees to administer their pay and access tax forms like the 1099-R annually.