How to Calculate Military Retirement Pay
When a member of the military retires, they are granted retirement pay. Calculating this pay requires knowledge of the retirement category the individual falls into and the number of years she served. There are three retirement categories a military member can retire under depending on when they began their career. These systems are Final Pay, High-3, and Career Status Bonus/Redux. Below is an outline of each system, who qualifies, and how to calculate retirement benefits for each.
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Instructions
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Determine if the date you entered military service was before September 8,1980. If so, you fall under the category of Final Pay. Calculate your retirement pay by dividing your final standard pay in half. For each year of service past twenty, add 2.5 percent of standard pay up to a maximum of 40 years of service.
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Compare your years of service to this chart. Your retirement pay builds as your years of service increase. For example: 25 years of service yields 62.5% of standard pay; 30 years of service yields 75% of standard pay; 35 years of service yields 87.5% of standard pay; 40 years of service yields 100% of standard pay.
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Calculate your pay under the High-3 System (with a service start date between Sept. 8, 1980 and Aug. 1) by first determining the 3-year period when your pay rate was the highest. Take the pay from each year and divide it by 3 which will give you an estimate of the average.
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Multiply the years of service by 2.5. The result is the percentage of pay you will receive for retirement. For example: 20 years of service (20 multiplied by 2.5) equals 50% of average pay; 30 years of service (30 multiplied by 2.5) equals 75% of average pay; 40 years of service (40 multiplied by 2.5) equals 100% of average pay.
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Individuals who began military careers after August 1, 1986 can choose the High-3 system or the Career Status Bonus and Redux plan.
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Obtain records to verify you registered for, and received a Career Status Bonus. This occurs during your 14th year of service. If you chose to remain on duty for an additional five years, you received a $30,000 bonus during your 15th year of service. Retirement pay is then reduced to 40% of average pay during the three highest years for twenty years of service.
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Determine Redux pay for between 20 and 30 years of service by multiplying the years of service by 2.5, then subtracting the number of years short of 30. For example, an individual serving 25 years would multiply that time by 2.5 to yield 62.5. Next, subtract the number of years served short of 30, which would be 5. The result is 57.5, the percentage of pay that will be received.
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Using the chart below, multiply the percentage by your average pay to obtain retirement pay. For example: 20 years of service yields 40% of average pay; 25 years of service yields 57.5% of average pay; 30 years of service yields 75% of average pay.
Beyond 30 years of service, is an additional 2.5% per year of service up to the maximum of 40 years of service yielding 100% of average pay.
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Tips & Warnings
Each year, a cost of living adjustment is made to retirement pay. This is determined by adding the percentage dictated by the national Consumer Price Index Those under the Redux plan subtract 1 percent from the Consumer Price Index when determining cost of living adjustments.
