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How Military Retirement Pay is Computed


Calculation

For Navy and Marine Corps members, you are considered to be a retired member for classification purposes if you are an enlisted member with over 30 years service, or a warrant or commissioned officer. Enlisted Navy and Marine Corps members with less than 30 years service are transferred to the Fleet Reserve/Fleet Marine Corps Reserve and their pay is referred to as "retainer pay". Air Force and Army members with over 20 years service are all classified as retired. When a Navy or Marine Corps member completes 30 years, including time on the retired rolls in receipt of retainer pay, the Fleet Reserve status is changed to retired status. Retired pay amounts are determined by multiplying your service factor (normally referred to as your "multiplier") by your active duty base pay at the time of retirement. By law, the gross retired pay must be rounded down to a whole dollar amount.

Service Factor (Multiple)

If you are a retiree with 30 or more years of service, your multiple is 75 percent. If you are a retiree/Fleet Reservist with less than 30 years, this factor is determined by taking 2 1/2 percent times your years of service. Years of service include credit for each full month of service as one-twelfth of a year. "Years of service" for officers includes all active service, periods of inactive reserve service prior to June 1, 1958, ROTC active duty time prior to October 13, 1964, constructive service credit for Medical and Dental Corps, and drills performed while in the inactive reserve after May 31, 1958. "Years of service" for Fleet Reservists and all other enlisted retirements include all active service, active duty for training performed after August 9, 1956, any constructive service earned for a minority or short-term enlistment completed prior to December 31,1977, and includes drills performed while in the Active Reserves.

Base Pay at Time of Retirement

If you entered the service before September 8, 1980, your base pay for retirement is the same as your last active duty pay. (Remember, your allowances are not considered). An example of this type of retired pay calculations is as follows.

  • A Navy or Marine E-8 is transferring to Fleet Reserve on July 31, 2000 with 22 years, 8 months service. The member’s pay would be computed as follows:

    2 1/2% x 22.67 years = 56.68%

    56.68% x $3161.10 (July 1, 2000 Active duty rate for an E-8 over 22 years) =$1791.71 or $1,791.00

  • For those who entered the Armed Forces on or after September 8, 1980 the base pay is the average of the highest 36 months of active duty base pay received. The base pay for members having less than three years service is the average monthly active duty basic pay during their period of service. For certain retirees who entered the Armed Forces on or after September 8, 1980, the initial cost-of-living increase is reduced.

  • For those who entered the Armed Forces on or after August 1, 1986, the base pay is computed in the same way as it is computed for retirees identified in the section above titled “Base Pay at Time of Retirement”. However, there are differences in how cost-of-living increases are computed.

Tower Amendment

In addition to the computation explained previously, your pay will be computed according to provisions of the Tower Amendment if it applies to your situation. The Tower Amendment was enacted to ensure that you will not receive a lesser amount of retired pay than you would have received if you had retired on a prior date. The Tower eligibility date is usually the day prior to the effective date of an active duty pay increase. Tower pay is computed by utilizing the active duty pay rates in effect on that date, your rank/rate on that date, total service accumulated on that date, and all applicable cost-of-living increases.

  1. Using the previous example, the member was an E-8 and had 22 years, 1 month, service on December 31, 1999. The member's pay would be computed as follows: 

    2 1/2% x 22.08 years = 55.20%

    55.20% x $3,119.40 (January 1, 1998 Active duty rate for an E-8 over 22 years) =$1,721.90 + 2.8% (COL Increase) = $1,769.00

  2. Since the E-8 was eligible to transfer to the Fleet Reserve on December 31, 1998, we would also compute the entitlement as of that date. The E-8 has 21 years, 1 month service. The pay would be computed as follows:

    2 1/2 % x 21.08 = 52.70%

    52.70% x $2,976.60 (1/1/99 active duty rate for an E-8 over 21 years) = $1,568.00+ 1.3% (COL Increase) = $1,588.00+ 2.8% (COL Increase) = $1,632.00

  3. In this situation therefore, this Fleet Reservist would receive monthly retainer pay of $1,796.00 since the Tower Amendment computations are not more beneficial than the current pay computation.

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