What Is the Retirement Pay for a Lieutenant Colonel?

Military retirement pay provides financial security for service members who complete a qualifying period of service. This benefit offers a steady income stream in their post-service lives. Understanding how this pay is determined is important for service members and their families as they plan for the future. Calculating military retirement pay for an officer like a Lieutenant Colonel involves several factors and can appear complex due to differing retirement systems and individual service histories. This article clarifies the methods and considerations that shape the retirement pay received by a Lieutenant Colonel.

Eligibility for Military Retirement

To qualify for military retirement, active duty service members need to complete at least 20 years of active service. This 20-year benchmark is a requirement across all branches of the U.S. military. Once this service time is met, active duty personnel are eligible to begin receiving their pension payments immediately upon retirement, regardless of their age. Years of service credited for retirement calculation include various forms of active duty.

Reserve component members, including those in the National Guard and Reserves, have different eligibility requirements for retirement. They must also accumulate 20 years of qualifying service, but their eligibility is based on a points system. A “qualifying year” for reservists means earning a minimum of 50 retirement points within their anniversary year. These points are accrued through inactive duty for training, active duty for training, and active duty periods.

Unlike active duty retirees, reserve component members do not begin receiving retirement pay until they reach age 60. However, this age can be reduced by three months for every cumulative 90 days of active duty performed in a fiscal year after January 28, 2008, potentially lowering the retirement age to as early as 50. A Lieutenant Colonel in the active component often serves beyond 20 years to qualify for retirement. Reserve officers also follow a similar career progression to meet the 20-year service requirement.

Another pathway to military retirement is through medical retirement. Service members deemed medically unfit for duty due to a service-connected disability may qualify, even if they have not completed 20 years of service. To be medically retired, a service member must have a combined military disability rating of 30% or greater, determined by the Department of Defense (DoD). This process involves evaluation by a medical examination board and a physical evaluation board. Medically retired service members receive monthly payments and access to benefits similar to those who retire with 20 years of service.

Understanding Military Retirement Pay Calculation Methods

The method used to calculate military retirement pay depends on when a service member initially entered the military. This date determines which of the three main retirement systems applies: the High-3 System or the Blended Retirement System (BRS).

The High-3 System is the most common for service members who entered between September 8, 1980, and December 31, 2017, and did not opt into the REDUX system. Under this system, retirement pay is calculated by taking the average of the highest 36 months of basic pay and multiplying it by 2.5% for each year of creditable service. For instance, a Lieutenant Colonel (O-5) with 22 years of service and an average high-3 basic pay of $9,000 would have a multiplier of 55% (22 years 2.5%). Their monthly retirement pay would then be $4,950 ($9,000 0.55).

The REDUX System was an option for service members who entered service on or after August 1, 1986, and who elected to receive a Career Status Bonus (CSB) at their 15-year mark. If a Lieutenant Colonel opted into REDUX, their retirement pay also uses the High-3 basic pay average, but the multiplier is reduced. For a 20-year retiree, the REDUX multiplier is 2.0% per year of service, rather than 2.5%. This means a 20-year retiree under REDUX would receive 40% of their High-3 average basic pay (20 years 2.0%), compared to 50% under the High-3 System.

The Blended Retirement System (BRS) is the default for service members who entered the military on or after January 1, 2018, and was an option for those who entered between January 1, 2006, and December 31, 2017. BRS combines a reduced defined benefit pension with a defined contribution component through the Thrift Savings Plan (TSP). The defined benefit portion of BRS is calculated similarly to the High-3 system, using the average of the highest 36 months of basic pay, but the multiplier is 2.0% for each year of service, instead of 2.5%.

For example, a Lieutenant Colonel under BRS with 22 years of service and a high-3 average basic pay of $9,000 would have a multiplier of 44% (22 years 2.0%). Their monthly defined benefit retirement pay would be $3,960 ($9,000 0.44). In addition to this pension, BRS includes government contributions to the service member’s TSP account, with automatic 1% contributions and matching contributions up to an additional 4% of basic pay. BRS also provides a “continuation pay” bonus between the 8th and 12th year of service for those who commit to serving additional years.

Factors Influencing Retirement Pay Amount

Several elements can modify the actual amount of military retirement pay a Lieutenant Colonel receives. These adjustments occur after the base retirement pay is determined and can either increase or decrease the monthly payment.

Cost of Living Adjustments (COLAs) are applied annually to military retirement pay to help maintain purchasing power against inflation. For retirees under the High-3 system, COLAs match the annual increase in the Consumer Price Index (CPI). Under the REDUX system, COLAs are 1% less than the CPI. For those under the Blended Retirement System, COLAs are 1% less than the CPI until age 62, after which they receive full CPI-based adjustments, and then revert to CPI minus 1% after age 62.

The Survivor Benefit Plan (SBP) allows military retirees to provide a continuous income stream to their eligible beneficiaries after their death. If a Lieutenant Colonel elects to participate in SBP, a portion of their gross retirement pay is deducted to cover the premium. This deduction ensures that chosen beneficiaries, such as a spouse or dependent children, receive a percentage of the retiree’s pay.

Disability retirement can impact the amount of retirement pay, particularly when a service member has service-connected disabilities. If a Lieutenant Colonel is medically retired with a disability rating of 30% or more, they receive disability retirement pay. This pay is calculated based on either their years of service or their disability rating, whichever results in a higher amount. A retiree cannot receive both military retired pay and Department of Veterans Affairs (VA) disability compensation concurrently.

To mitigate this offset, two programs exist: Concurrent Retirement and Disability Pay (CRDP) and Combat-Related Special Compensation (CRSC). CRDP allows eligible retirees to receive both their full military retirement pay and their VA disability compensation, effectively eliminating the VA offset. Eligibility for CRDP requires a 20-year retirement and a VA disability rating of 50% or higher. CRSC provides tax-free payments to retirees with combat-related disabilities, also offsetting the VA waiver of retired pay. A Lieutenant Colonel who qualifies for CRSC can receive both their full retired pay and the CRSC payment.

The total years of service also influences the retirement pay amount. In all military retirement systems, the percentage multiplier applied to the basic pay average increases with each additional year of creditable service. For instance, under the High-3 system, each year adds 2.5% to the multiplier, meaning a Lieutenant Colonel with 24 years of service would receive 60% of their High-3 average basic pay, compared to 50% for 20 years of service.

Taxation of Military Retirement Pay

Military retirement pay is subject to federal income tax, treated as taxable income similar to other pension benefits. Retirees can elect to have federal income tax withheld from their monthly payments.

State-level taxation of military retirement pay varies across the United States. Many states offer full exemptions for military retirement pay. Other states provide partial exemptions or tax credits. Some states tax military retirement pay fully. Retirees should consult their state’s department of revenue or a tax professional to understand the specific tax laws applicable to their state of residence.

Lump-sum payments received as part of military retirement, such as the Career Status Bonus under the REDUX system or continuation pay under the Blended Retirement System, are also subject to federal income tax in the year they are received. These payments can push a retiree into a higher tax bracket for that specific tax year. Any one-time bonuses or payments must be considered for their immediate tax implications.