The following chart summarizes the differences between the four regular and non-regular retirement plans and disability retirement.
| Final Pay | Defined Benefit that equals 2.5% times the number of years of service times the member’s final basic pay on the day of retirement | Primary retirement plan for Reserve members with initial date of entry into service prior to September 8, 1980 |
| High-36 | Defined Benefit that equals 2.5% times the number of years of service times the average of the member’s highest 36 months of basic pay | Primary retirement plan for members with initial date of entry into service on or after September 8, 1980, but before January 1, 2018 |
| REDUX | Career Status Bonus $30,000 lump sum payment at 15th year of service with obligation to serve through 20 years + defined benefit Defined Benefit is (b) At age 62 and after: | Optional retirement plan for active duty members with an initial date of entry into service after July 31, 1986, but before January 1, 2018. Eligibility to elect the Career Status Bonus ended as of December 31, 2017 |
| Blended Retirement System (BRS) | Blended defined benefit and defined contribution plan. Defined Contribution: Defined Benefit: | Only retirement plan for members with initial date of entry into service on or after January 1, 2018 Optional retirement plan for members with an initial date of entry into service on or before December 31, 2017, who: |
| Disability | Retirement plan that equals to: *Retired Pay Base – determined under Final Pay, High-36, or BRS depending on military service date of entry **Multiplier Percentage can be either:
Note that in both cases the multiplier is limited to 75% by law | Determined medically unfit for continued service with a DoD disability rating of at least 30% |
The below chart provides the basic criteria to determine which retirement plan applies:
| Final Pay | Entry before September 8, 1980 |
| High-36 | Entry on or after September 8, 1980, but before August 1, 1986 OR Entered on or after August 1, 1986, and did not choose the Career Status Bonus and REDUX retirement system |
| CSB/REDUX | Entered on or after August 1, 1986, but before January 1, 2003 AND elected to receive the Career Status Bonus |
| Blended Retirement System (BRS) | Entered the Uniformed Services for the first time on or after January 1, 2018 (automatic enrollment), or entered before December 31, 2017 and elected to opt into BRS during the opt-in period |
| Disability | Determined medically unfit for continued service with a DoD disability rating of at least 30% |
All four of the regular and non-regular retirement plans determine initial monthly retired pay by applying a percentage multiplier to the retired pay base.
There are two methods for determining the retired pay base. They are the final pay method and the high-36 month average method. The final pay method, as the name implies, establishes the retired pay base equal to final basic pay. The high-36 method is the average of the highest 36 months of basic pay divided by 36. This is generally the last 3 years of service and is sometimes called high-3. The method used depends upon when the member first entered military service.
The method is determined by DIEMS (Date of Initial Entry to Military Service) or DIEUS (Date of Initial Entry to Uniformed Services). The date a member first entered uniformed service in any capacity establishes DIEMS. This date is fixed---it does not change. Departing the military and rejoining does not affect DIEMS.
Some individuals have unique circumstances that complicate determining their DIEMS. Here are a few examples:
Be aware that pay date (e.g., Pay Entry Base Date) may be different than DIEMS. Also, DIEMS does not determine when creditable service toward retirement is calculated---it only determines which retired pay base method applies.
For both the Final Pay and High-36 retired pay plans, each year of service is worth 2.5% toward the retirement multiplier.
For example, 20 years of service would equal a 50% multiplier. The years of service creditable are computed differently depending upon whether retirement is from full time active duty or from a reserve career. These differences are explained under the Active Duty Retirement and Reserve Retirement pages.
For the REDUX retirement plan, which applies only to certain active duty retirements as described above, the High-36 multiplier is reduced by one percentage point for each year that the member has less than 30 years of service at retirement. For example, 20 years of service would equal a 40% multiplier. This is discussed more fully under the Active Duty Retirement page.
For disability retirement programs, the multiplier will be the higher of (a) the disability percentage assigned by the Service at retirement not to exceed 75%, or (b) the result of multiplying the number of years of service by the applicable retirement plan multiplier (e.g., 2.5% for High-36 or 2.0% for BRS).
In any case, the longer an individual serves, the higher the multiplier and the higher the retirement pay. For example:
| Final Pay | 50% | 52.5% | 55% | 57.5% | 60% | 62.5% | 75% | 87.5% | 100% | 102.5% |
| High-36 | 50% | 52.5% | 55% | 57.5% | 60% | 62.5% | 75% | 87.5% | 100% | 102.5% |
| REDUX | 40% | 43.5% | 47% | 50.5% | 54% | 57.5% | 75% | 87.5% | 100% | 102.5% |
| BRS | 40% | 42% | 44% | 46% | 48% | 50% | 60% | 70% | 80% | 82% |
All military retirements are protected from inflation by an annual Cost of Living Adjustment (COLA), based on changes in the Consumer Price Index (CPI) as measured by the Department of Labor.
Under the Final Pay, High-36, and BRS retirement plans, the annual COLA is equal to the percentage increase in the CPI year over year. Under REDUX, the COLA is reduced, as described in the table below.
| Final Pay | Annual COLA determined using the Consumer Price Index – Urban Wage Earners, published by U.S. Department of Labor, Bureau of Labor Statistics. |
| High-36 | Annual COLA determined using the Consumer Price Index – Urban Wage Earners, published by U.S. Department of Labor, Bureau of Labor Statistics |
| REDUX | Reduced annual COLA that is normally one percentage point less than the COLA determined for the other retirement plans (but not less than zero). Due to the reduced annual COLA, members participating in REDUX receive a one-time readjustment at age 62 to restore the difference in COLA to what it would have been under High-36. Thereafter, annual COLA reverts back to the lesser amount as above. |
| Blended Retirement System | Annual COLA determined using the Consumer Price Index – Urban Wage Earners, published by U.S. Department of Labor, Bureau of Labor Statistics |
| Disability | Annual COLA determined using the Consumer Price Index – Urban Wage Earners, published by U.S. Department of Labor, Bureau of Labor Statistics |
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That’s a bold headline, especially if you are a retired enlisted military member only bringing in a little over a thousand dollars a month in retirement pay.
But it’s true. Military retirement is worth well over a million bucks. In some cases, it is worth millions of dollars.
Before we get too deep into this, I want to define what I am talking about. I’m talking about two factors – the long-term value regarding how much you will receive in a direct pension over the lifetime of your retirement benefits and the value of the retirement benefits, including healthcare coverage and other benefits. Combined, these benefits are easily worth over a million dollars, even if you don’t have the spending power of a million dollars right now.
Take an example of retirement pay for an average military career. Since military members are eligible for retirement benefits at 20 years, we will use a reasonable rank and service time for our examples.
It is reasonable to assume that the average enlisted member will be able to retire at 20 years, having achieved the rank of E-7, and the average officer should be able to retire at 20 years at the rank of O-5.
Of course, there will be outliers based on when you served, your career field, and other factors, but these ranks and service times should apply to the majority of careers (if anything, I am aiming at the conservative side because many people choose to serve longer than the 20-year mark, earning an extra 2.5%-3.5% on their retirement pay per additional service year, depending on whether they take the high 36 retirement plan or the Redux retirement plan).
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As we mentioned, we will look at a military retiree with 20 years of service at the ranks of E-7 for enlisted and O-5 for officers. The base pay for these ranks in 2009 is:
36Most retirees under the High-36 Plan will receive 50% of their base pay at 20 years, which would equal the following amounts:
Those under the BRS would receive 40% of their base pay at 20 years (2% per year of service), which would be the following amounts:
The next factor to consider is that military retirement pay will be there day in and day out. There are few places in the world that someone can receive a lifetime pension starting at or around age 40.
Many military retirees will receive a monthly cash payment for over 40 years. When you add in the cost of living and inflation adjustments, we’re talking about some serious cash!
Using the numbers above from a recently retired E-7 or O-5, we get the following lifetime payments (note: these military retirement pay numbers are not adjusted for inflation and do not include any COLA increases; this is not a planning tool, but for illustration purposes only. Your specific retirement benefits will vary based on your situation):
20Even without COLA or other inflation adjustments, we can see that we are reaching some serious numbers. Each additional year you serve before you retire can add another 2.5% to your monthly and annual pay, and each higher pay grade you achieve can add hundreds or even thousands of dollars per year. As previously mentioned, the numbers used in this article are meant to be a conservative estimate.
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OK, there is a minimal TriCare payment, but compared to what civilians pay, it is basically a non-issue. Benefits for retired military members are also guaranteed – they won’t drop you after you have required expensive procedures or for pre-existing conditions. Guaranteed medical coverage is a massive blessing in today’s American society. Here is a little more information about the kinds of insurance available to civilians: comparing individual and group health insurance. Hopefully, that will help you better understand the value of military retiree medical benefits!
Military-sponsored medical benefits are incredibly valuable, especially as you get older and when they cover your spouse. There are very few civilian plans that are similar to this. Most people spend several thousand dollars per year for basic medical coverage, which doesn’t include out-of-pocket expenses for doctor visits, medical procedures, prescription medication, or other associated costs.
It would not be unreasonable to place a value of $15,000-$20,000 per year on military retiree medical benefits, even for a healthy individual. Add a spouse to the benefits, guaranteed coverage, and little to no out-of-pocket expenses for complex medical procedures. Other factors and the medical benefits alone can be worth hundreds of thousands of dollars or more throughout a lifetime (and sometimes into the millions of dollars for people who receive complex medical care over a long-term period).
I won’t even try to assign a value to these benefits because they don’t apply to all military retirees equally. Some people may practically live on base, visiting the base clubs, shopping at the exchanges, using the gyms, auto hobby shops, etc., and others may not live near a base. They may not be able to take advantage of any of these benefits. So this category falls in the “good deal if you can get it” benefit but is not a core part of the equation.
But it is worth mentioning because many retirees save a lot of money each year by shopping on base.
One challenge to the analysis is that the military pension includes a cost of living adjustment, so the amount of the income stream has to rise every year by the rate of inflation.
Another problem is that no one knows how long the pensioner will live, so it’s difficult to predict how long the pension will be paid out.
Finally, the calculated lump sum must be invested in a safe and stable asset to ensure it survives for decades. Unfortunately, the safe and stable assets have a very low yield, so it takes a larger lump sum to produce an income stream big enough to pay the pension.
The answer to these puzzles involves the mathematical process of “discounting”.
Accountants and actuaries devote their entire careers to studying asset yields, human longevity, and other risks. They calculate the statistical probability that a specific lump sum can pay a particular pension for the necessary number of years.
The good news for pension recipients is that the calculations are much more accurate when the analysis is simultaneously applied to hundreds of thousands of pensions as a group. Even better, the Department of Defense can rely on the number-crunching skills of another giant bureaucracy of inflation-adjusted payments: Social Security.
The mathematical details of discounting an inflation-adjusted annuity are well beyond the scope of this post. There’s not an easy formula to convert that $100/day pension to a precise lump sum. However, a few more straightforward estimates are reasonably close to the more complicated methods.
The easiest estimate assumes that a military pension keeps up with inflation. This eliminates the more complicated factors of correcting future dollars for inflation. If a military pension keeps up with inflation then the pension’s value in today’s dollars stays constant. The lump-sum value of the pension is the total amount to be received during the rest of the veteran’s life:
A 38-year-old veteran receiving $3000/month with a COLA might reasonably look forward to 35 more years of life.
The estimate of the present value of their pension would be
The life-expectancy estimate ignores other discounting factors in favor of simplicity and speed. Its main advantage is that veterans can quickly estimate a lump sum for their expected lifespan. Veterans in good health with long-lived ancestors may decide that they have 40 or even 50 years of retirement, raising the current value of their pension.
Another quick estimate is to assume that the pension is the income stream from a lump sum of Treasury Inflation-Protected Securities (TIPS). TIPS are an extremely safe and stable asset with built-in inflation protection. The market for buying and selling TIPS is huge and liquid, so their prices are reasonably accurate.
One flaw of this estimate is that, unlike a military pension, when the pensioner dies, there’s still a lump sum of TIPS generating a stream of income.
Another drawback is that a TIPS’ maturity (now a maximum of 30 years) is usually less than the pensioner’s remaining life expectancy.
The advantage of this estimate is simplicity and speed:
A January 2009 Treasury auction sold 20-year TIPS at an inflation-adjusted annual percentage yield of 2.5%. So for that $3000/month pension,
Another estimate of the lump-sum value of an inflation-adjusted pension is a commercial annuity. The annuity market is generally regarded as liquid because insurance companies compete to offer the “best” price without losing money. However, they still charge more than the actual value of the annuity to make their profit.
Insurance companies could be unable to make annuity payments or even go bankrupt and should be considered a riskier source of annuity payments than TIPS or other government bonds.
One of the “less risky” annuities comes from an agency sponsored by the federal government– the Thrift Savings Plan. TSP annuities are purchased from an insurance company. The federal government does not guarantee them, but the insurance company is presumably charging a smaller fee (to sell a large volume of annuities), and the annuity’s cost would be closer to its value.
TSP annuities are priced monthly and do not offer complete protection against inflation. The advantage of estimating a pension’s lump-sum value from a TSP annuity is its lower price and the TSP website’s calculator. Assuming that the $3000/month pension is paid to a 38-year-old veteran and limited to 3% annual inflation:
$1.4 million is the price that a veteran would pay in the market to buy a TIPS portfolio or an annuity that would yield their inflation-adjusted pension of $3000/month for the rest of their life.
Other research analyzes the theoretical cost of annuities and discounted values– only the cost and not its market price. (This includes a research paper on military pensions– the citation is in the book.)
These estimates range from about $1 million to $1.2 million. They’re only theoretical estimates. These annuities can’t actually be purchased like the assets of the other estimates, but they’re a more conservative estimate of the probabilities of longevity and other risk factors.
Let’s get back to the veteran who’s just finished 10 years of service and is wondering if it’s worth staying in the military for another decade. After analyzing the pension’s present value, which sounds more compelling now: $100/day, or lifetime income of over $1 million?
Thousands of dollars coming in regularly quickly add up over the years. Add in increases for inflation, essentially free health care, and other benefits, and you can see how a military retirement can quickly be worth millions of dollars over a lifetime.
I didn’t stay in long enough to qualify for military retirement benefits – I separated from the USAF with an Honorable discharge after 6.5 years of service. Part of me looks at the military retirement system with a bit of longing. It is an excellent system for those who qualify, and I would love to be able to receive military retirement benefits for the rest of my life. However, separating from the military was the best move for me at the time, and I have no regrets regarding my separation or my military service. I am proud to have served, and the military is a large part of who I am today.
*disclaimer about this article: The calculations are for illustrative purposes only and do not reflect the exact retirement benefits you will receive. This is a simplified look at military retirement benefits and does not take many factors into consideration, including taxes, disability benefits, inflation, COLA, and other factors.
Ryan Guina is The Military Wallet’s founder.
He is a writer, small business owner, and entrepreneur. He served over six years on active duty in the USAF and is a current member of the Illinois Air National Guard.
Ryan started The Military Wallet in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then.
Featured In: Ryan’s writing has been featured in the following publications: Forbes, Military.com, US News & World Report, Yahoo Finance, Reserve & National Guard Magazine (print and online editions), Military Influencer Magazine, Cash Money Life, The Military Guide, USAA, Go Banking Rates, and many other publications.
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Amendments to the legislation have been introduced to the State Duma, which propose that military pensioners who resumed service during the period of counter-terrorist and other military operations conducted by the Russian Armed Forces receive pensions corresponding to higher positions.
The authors of the draft law are Chairman of the State Duma Vyacheslav Volodin nine0005 Volodin
Vyacheslav Viktorovich Chairman of the State Duma of the Federal Assembly of the Russian Federation of the eighth convocation. Elected in constituency No. 163 (Saratov - Saratov region) , chairmen of defense committees Andrey Kartapolov Kartapolov
Andrey Valerievich Deputy of the State Duma elected as part of the federal list of candidates nominated by the All-Russian political party "UNITED RUSSIA" , Security and Anti-Corruption Vasily Piskarev nine0005 Piskarev
Vasily Ivanovich Deputy of the State Duma elected as part of the federal list of candidates nominated by the All-Russian political party "UNITED RUSSIA" , for Labour, Social Policy and Veterans Affairs Yaroslav Nilov Nilov
Yaroslav Evgenievich Deputy of the State Duma was elected as part of the federal list of candidates put forward by the Political Party of the LDPR - the Liberal Democratic Party of Russia and other deputies of the State Duma.
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As noted in the document, the service pension guarantees the maintenance of a certain level of material support, taking into account the positions held on the day of dismissal and military rank.
At the same time, among military pensioners there are citizens who are ready to serve in the period of counter-terrorism and other operations in positions with a salary lower than those on the basis of which their pension was calculated. However, according to the current legislation, after the end of their service, when payments are resumed, the calculation of the pension will be based on a lower salary and its size will be lower. nine0003
“It appears that the said legal regulation does not meet principle of social justice," the explanatory note emphasizes.
In connection with this draft law, it is proposed to establish that when resuming the payment of a pension to persons from among those indicated, for whom it was suspended upon entering the military service during special operations by the Armed Forces, salaries corresponding to military positions and ranks and used to calculate pensions up to suspension of payment.
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A selection of the most important documents upon request Assignment of an insurance pension to military pensioners (legal acts, forms, articles, expert advice and much more). nine0003
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Compilation of judgments for 2020: Termination and restoration of federal pensions On insurance pensions"
(LLC law firm "YURINFORM VM") Having established that, on the basis of the application, the defendant was awarded an old-age insurance pension to the plaintiff; at present, the plaintiff has been notified of the suspension of the payment of the insurance old-age pension, and the need to file a new application for establishing the insurance pension was explained to him, the court, pointing out that the plaintiff did not provide evidence of a violation of his rights by the defendant by stopping the payment of the pension, taking into account its repeated appointment in accordance with the procedure established by law, rightfully refused to recognize as illegal the notice of suspension of the payment of the insurance old-age pension, since, as follows from the materials of the plaintiff's pension case, due to an error made in the establishment (payment) of the pension, the defendant established the unlawful appointment of the insurance part to the plaintiff military pension, while the applicant holds the position of a civil servant, and a decision was made to terminate the payment of a pension to the plaintiff in accordance with Article 25 of Federal Law No.
400-FZ of December 25, 2013 "On Insurance Pensions". nine0003
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Selection of court decisions for 2022: the preservation of the right to insurance early retirement 32 "Article 32 "Federal Law "On Insurance Pensions" "In turn, the Federal Law "On Insurance Pensions", fixing in clause 3 of part 1 of Article 32 the conditions for granting an insurance old-age pension to disabled people due to military injury, establishes for these persons a preferential procedure for exercising the right to a pension provision that implies the appointment of an old-age insurance pension before reaching the generally established retirement age: the specified pension is assigned to men belonging to this category of citizens upon reaching the age of 55 years, to women - 50 years if they have an insurance record of at least 25 and 20 years, respectively (if any values to an individual al pension coefficient in the amount of at least 30).
0% times the number of years of service times the member’s highest 36 months of basic pay
5% or 2.0% (Based on whether the member was a participant in one of the legacy retirement programs or the Blended Retirement System prior to the disability)
