How to Calculate Military Retirement

A soldier on active duty may retire well before the typical retirement age and still receive a competitive pension.

Changes in the military retirement system mean that young people may retire with a competitive pension. For all branches of the military there are three main retirement plans, and the one you qualify for depends on your date of entry into service. If you entered the military before Sept. 8, 1980, you'll enroll in the Final Pay plan. For those who entered after that date, you are eligible for High 3. If you entered after Aug. 1, 1986, and served on active duty, you may be eligible for CSB/REDUX.

Things You'll Need

• Calculator

Instructions

Final Pay Plan

1. Find your qualifying years of work by adding your active-duty and credited reserve points, then divide them by 360.

2. Multiply your qualifying years of work by 2.5 percent. This percentage is your "retirement multiplier."

3. Write down your monthly income at the end of service.

4. Multiply the income by your retirement multiplier percentage to find your monthly retirement income.

High 3 Plan

1. Find your qualifying years of work by adding your active-duty and credited reserve points, then divide them by 360.

2. Multiply the qualifying years of work by 2.5 percent. This percentage is your retirement multiplier.

3. Add up your total income over your highest-paid three years of service.

4. Divide this number by 36. This is your average basic pay.

5. Multiply your average basic pay by your retirement multiplier percentage to find your monthly retirement income.

CSB/REDUX Plan

1. Find your qualifying years of work by adding your active-duty points and dividing them by 360.

2. Multiply your qualifying years of work (up to your 20th year) by 2 percent. This is your retirement multiplier if you've worked on active duty for 20 years or less. If you've worked on active duty for more than 20 years, multiply your qualifying years of work by 3.5 instead to find your retirement multiplier.

3. Add up your total income over your highest-paid three years of service.

4. Divide this number by 36. This is your average basic pay.

5. Multiply your average basic pay by your retirement multiplier percentage to find your monthly retirement income.

Tips & Warnings

• CSB/REDUX is a unique plan for active-duty military. You must elect it at your 15th anniversary of work; otherwise you'll be automatically enrolled in the High 3 plan. Should you elect CSB/REDUX, you'll receive a $30,000 bonus to be used for anything you'd like, but you must sign a contract to stay on active duty for at least 20 total qualifying years. You can continue working as long as you'd like after your 20th year. Reservists cannot make more than 75 percent of their salary in retirement, but there is no limit on how much an active-duty retiree can make.

References

• U.S. Department of Defense: Active-Duty Retirement
• U.S. Department of Defense: CSB/REDUX Plan Details
• Association of the U.S. Navy: About Reserve Retirement
• Military.com: Military Retired Pay Overview