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Military Retired Pay Overview

A retirement plan from active duty U.S. military is unlike most corporate retirement plans. For starters, most retirement plans do not offer a pension with benefits that start Day 1 of your retirement regardless of your retirement age. Nor do most other corporations offer a pension check that can grow with a cost of living adjustment each year.

This article is intended to provide an overview of military retirement, and not to be treated as financial advice. Consult the JAG Office or a private attorney for legal guidance.

A number of factors contribute to the exact amount of your pension, one of which is the date you entered the service. Depending on your entrance date, you will be eligible for one of three systems.

If you entered the service:

  • Prior to September 1980 you are eligible for the Final Pay retirement system.
  • Between September 8th, 1980 and August 1986 you are eligible for the High 36 system.
  • After August 1986 you can choose from either the High 36 retirement system or the Career Status Bonus/REDUX (CSB) retirement system. If you decline to make a choice you will automatically receive the High 36 retirement plan.

Like the private sector, the military retirement system has seen a number of changes during the past 25 years. The National Defense Authorization Act for Fiscal Year 2007 instituted a significant change by lifting the 75 percent cap used to calculate eligible members’ retirement pay. What this means is that a service member who retired after January 1, 2007 with more than 30 years of total active service receives credit for that service.

In the majority of cases, there is no longer a cap on the percentage multiplier used to calculate retired pay, but there are exclusions. Two categories have been excluded: the first is for a member retired due to a disability. These service members are still capped at the 75 percent. The second category is for Army and Air Force enlisted members cited for Extraordinary Heroism. If these members include the Extraordinary Heroism citation, they are limited to 75 percent. However, if they have more than 30 years of service, DFAS can compute their retired pay and ignore the EH, which will enable them to exceed the 75 percent cap.

It is worth noting that this applies only to service members who retired after January 1, 2007 with more than 30 years of service. In addition, the Reserve Component retirement pay system differs from the active duty system.

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