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Updated May 20, 2024
Defense Primer: Military Retirement
The military retirement system is a government-funded
active duty, the pay base at the time of retirement, and a
system that provides a defined benefit to all retirees and
multiplier as defined by statute. Changes in law have
matching government contributions to the Thrift Savings
created four distinct systems for calculating retired pay: (1)
Plan (TSP) for eligible servicemembers. It has historically
Final Basic Pay, (2) High-Three, (3) Redux, and (4)
been viewed as a significant retention incentive for military
Blended Retirement System (BRS). The pay base is either
personnel. The system includes monthly compensation for
the final pay at retirement or average of the highest three
qualified active and reserve retirees, disability benefits for
years of basic pay. The multiplier for retirees in the Final
those deemed medically unfit to serve, and a survivor
Basic Pay or High-Three system is 2.5%. See Table 1 for
annuity program for the eligible survivors of deceased
the Redux formula. For those entering service on or after
retirees. The amount of compensation depends on years of
January 1, 2018, the multiplier is 2.0%.
service (YOS), basic pay at retirement, and annual Cost-of-
The basic formula for calculating retired pay is
Living-Adjustments (COLAs).
YOS x multiplier x retired pay base
What is the Purpose of the Military
Retirement System?
How is Disability Retired Pay Calculated?
The non-disability military retirement system for active-
A servicemember retired for disability may select one of
duty members has evolved since the late 1800s to meet four
two options for calculating their monthly retired pay;
main goals.
(1) the longevity formula for regular retirement:
• To keep the military forces of the United States young
and vigorous and ensure promotion opportunities for
YOS x multiplier x retired pay base, or
younger members.
•
(2) the disability formula:
To enable the Armed Forces to remain competitive with
private-sector employers and the federal Civil Service.
DOD disability percentage x retired pay base.
• To provide a reserve pool of experienced military
The maximum retired disability pay may not exceed 75% of
manpower as a “retired reserve” that can be recalled to
the pay base.
active duty in time of war or national emergency.
•
Figure 1. Retirement System Eligibility
To provide economic security for former members of
the Armed Forces during their old age.
Who is Eligible for Retired Pay?
Eligibility for non-disability retired pay depends on years of
service (YOS). To be vested in the defined benefit, a
member must complete 20 years of qualifying service. For
active component members this is one calendar year, and
for reserve component members, it is a year in which the
member earns at least 50 retirement points, typically
through weekend drill. Servicemembers determined to be
unfit for continued service and who have a permanent and
stable disqualifying physical condition may qualify for
disability retirement, commonly referred to as a Chapter 61
retirement. Eligibility is based on having a permanent and
stable disability of 30% or more that was not noted at the
time of entrance on active duty. As a result, these members
might retire without having reached the 20-year mark.
How is Regular Retired Pay Calculated?
Retirement pay calculations for active-duty personnel are
Source: CRS Report RL34751, Military Retirement: Background and
based on the date when the servicemember first entered on
Recent Developments, by Kristy N. Kamarck
https://crsreports.congress.gov
Defense Primer: Military Retirement
Table 1. Comparison of Benefits under the Military Retirement Systems
Category
Final Basic Pay
High Three
Redux
BRS
Defined Benefit
Yes, 20 or more YOS
Yes, 20 or more YOS
Yes, 20 or more YOS
Yes, 20 or more YOS
Defined Benefit
2.5% per YOS
2.5% per YOS
2.5% per YOS, less 1%
2.0% per YOS
Multiplier
for each year of
service less than 30
Annuity at 20 YOS
50% of final basic pay
50% of high-3 average
40% of high-3 average
40% of high-3 average
Defined Govt.
No
No
No
Yes, 1% automatic, plus up to 4%
Contribution
matching, starting at 2 YOS
Continuation
No
No
Yes, at 15 years
Yes, between 8 to 12 YOS with
Incentive
w/5-year obligation
3-year obligation
Lump Sum Option
No
No
No
Yes
Sources: Adapted by CRS from Military Compensation Background Papers, Eighth Edition, July 2018, p. 583, and FY2016 NDAA (P.L. 114-92).
How is it Funded?
on the first business day of the month following their
retirement. Reserve retirees are generally not eligible to
Congress appropriates the funds required to pay future
receive retired pay until they reach age 60. The age
retirees in the annual defense appropriations bill. This
requirement may be reduced for members of the Ready
money is transferred to the Military Retirement Fund
Reserve who were recalled to active duty or were called to
(MRF), from which current retirees are paid. Under this
certain active service after January 28, 2008. Reserve
accounting method, legislation that affects future retirees
retirees who have accumulated enough qualifying years of
has present-day budget implications. A DOD Board of
service to be eligible for retired pay, but are not yet
Actuaries determines the amount of appropriations required
receiving retired pay are sometimes called gray area
based on economic and demographic projections.
retirees.
Contributions to the MRF are made by the services and the
Treasury (to cover the unfunded liability).
Retired pay is taxable, and DFAS withholds appropriate
What Are Differences Under the
taxes as well as deductions for retired pay waived in offset
Blended Retirement System?
of veteran disability benefits, and survivor benefit program
premiums.
The National Defense Authorization Act for FY2016 (P.L.
114-92) made significant changes to the military retirement
Relevant Statute
system for those entering the service on or after January 1,
2018. All other servicemembers are grandfathered into the
Title 10, U.S. Code, Chapters 61-73, and Chapter 1223
current system. Those with less than 12 years of service
prior to January 1, 2018, were offered the opportunity to opt
into the new system.
CRS Products
CRS Report RL34751, Military Retirement: Background and
The main change in the blended system is that it includes
Recent Developments, by Kristy N. Kamarck
defined contributions from the government in addition to
CRS Report R40589, Concurrent Receipt of Military Retired Pay
defined benefits. While the 20 YOS requirement for the
and Veteran Disability: Background and Issues for Congress, by
defined annuity remains in the new system, the multiplier
Kristy N. Kamarck and Mainon A. Schwartz
for this benefit is reduced from 2.5% to 2%. In the new
system, the government will make automatic 1%
CRS Report R45325, Military Survivor Benefit Plan: Background
contributions to a servicemember’s individual Thrift
and Issues for Congress, by Kristy N. Kamarck and Barbara
Savings Plan and up to an additional 4% matching
Salazar Torreon
contributions.
The BRS also includes a continuation payment as a
Other Resources
retention incentive at the member’s mid-career point (8-12
Statistical Report of the Military Retirement System, DOD
YOS). Calculations for this benefit differ for active and
Office of the Actuary
reserve component members and the law provides some
Valuation of the Military Retirement System, DOD Office of
flexibility to vary the payment amount based on the
the Actuary
Services’ manpower needs. Acceptance of the continuation
benefit incurs an additional three-year minimum obligation
of service.
Kristy N. Kamarck, Specialist in Military Manpower
How is Retired Pay Distributed?
IF10483
Active-duty retirees begin receiving their monthly annuity
from the Defense Finance and Accounting Service (DFAS)
https://crsreports.congress.gov
Defense Primer: Military Retirement
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
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