How to Calculate Military Retirement Pay

Everyone who serves in a branch of the United States military long enough and is honorably discharged is eligible for military retirement pay. The minimum service time required is 20 years unless retirement is due to a service-related disability. The process of calculating retirement pay is the same whether you serve in the Army, Navy, Marines, Air Force or Coast Guard.

Basic Pay and Retirement Pay

Calculating military retirement pay starts with your basic pay, which is the monthly salary on active duty. If you first entered military service on or before September 8, 1980, your final basic pay is multiplied by a percentage called a multiplier to determine retirement pay. If your entry date was later, the monthly average basic pay of your 36 months with the highest pay is used. Basic pay rates depend on rank and years of service. For example, a captain in the Navy or Coast Guard or a colonel in the other services is pay grade O-6. If she serves for 30 years, the basic active duty pay rate was $10,952.40 per month in 2015.

Multiplier and Pay Calculation

Upon retirement, active duty personnel get 2.5 percent of basis pay for each year of service up to a maximum of 100 percent. Suppose you retire in 2015 as a colonel after 30 years of active duty.

$10,952.40 Basis * 2.5 percent * 30 years = $8,214.30 monthly retirement pay

This is the initial military retirement pay. Retired service members get a cost of living adjustment each year based on the Consumer Price Index to offset inflation.

The REDUX Option

If you entered military service after July 1986, you might be eligible for the REDUX retirement option. With this retirement plan, you can get a $30,000 bonus upon retirement. However, retirement pay is reduced by 1 percent for each year you retire before the 30-year mark. For example, you would get only 40 percent of basic pay each month instead of 50 percent if you retire after 20 years. The REDUX option is available only to active duty members.

Retirement Due to Disability

A member of the military who becomes disabled as a result of military service receives retirement pay regardless of the length of service. This situation applies with a service-related disability of at least 30 percent. The percentage of disability is a measure of the severity of the impairment. The pay amount is the greater of the following:

  • At least 50 percent of basic pay. If the disability percentage is more than 50 percent, the higher figure determines the percentage of basic pay the service member receives.
  • Years of service multiplied by 2.5 percent of basic pay.

Retirement Pay and Reservist Duty

If you serve in the military reserves or National Guard, you might qualify for military retirement pay after 20 years. Reserve duty is part-time, so the amount is adjusted to compensate. Points are awarded for each day of service, with the total divided by 360. The result is added to any active duty time and then multiplied by 2.5 percent to calculate retirement pay for a member of the reserves.

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