How to Determine Your Military Retirement Pay
The Department of Defense maintains a retirement system for military retirees. Military members who serve at least 20 years can earn military retirement pay for life. Congress has periodically changed the retirement system. The amount of retirement pay differs based on a number of personal and economic factors and the system that applies to the service member. DOD provides online calculators for each system that allow service members to calculate their retirement pay.
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Instructions
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Figure out which military retirement system applies to the service member. The Final Pay system is the sole option for members who enlisted before Sept. 8, 1980. The High-3 system is the only option for those who enlisted after Sept. 7, 1980, but before Aug. 1, 1986. Members may choose either the High-3 system or the Career Status Bonus/Redux system if they enlisted after July 31, 1986.
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Choose the military retirement calculator that pertains to the service member's enlistment date at http://militarypay.defense.gov/retirement/calc/index.html. The additional Retirement Choice calculator compares the High-3 and Career Status Bonus/Redux systems. Service members who have the choice between those two systems can calculate both at one time.
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Estimate the year of retirement, pay grade at the time of retirement and the number of years in service at retirement. Current service members must estimate these figures because future events may change their current plans. DOD estimates such economic factors as the inflation rate and pay raises. Those who choose the Career Status Bonus/Redux system must also decide how to allocate the bonus. Service members can contribute the $30,000 in bonus money to either a savings or investment plan.
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Enter all the details into the applicable calculator and determine retirement pay by clicking the "Calculate" button. Look at the "Summary Results Table" at the bottom to see the initial monthly retirement pay. Read the graph for monthly pay to estimate the monthly pay corresponding to each year after retirement. Look at the graph for cumulative pay to see the estimated running total of retirement pay.
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Tips & Warnings
Choose the Career Status Bonus/Redux system only if the service member intends to invest the bonus money. The retirement pay will be lower than the High-3 system, so the service member will need to invest the money to make up the difference.
Avoid getting into debt by overestimating retirement pay. Determine a range of possible pay grades and other personal factors at the time of retirement. Arrange personal finances so that the lowest estimated pay will suffice to handle expenses.
