Retirement

Welcome to Retirement

Military Retirement Pay

Life used to be simple when it came to retirement pay - you put in 20 years, and you got 50 percent of your base pay immediately upon retirement. What's more, if you put in more than 20 years, it got better. You were entitled to 2.5 percent more for each year of active duty after 20 years (up to 75 percent).

However, the modern world, with its financial crises, ageing population, and retiring baby boomers to worry about, is significantly less generous.

For Navy and Marine Corps personnel, you are currently considered to be a "retired member" for classification purposes if you have over 30 years service as an enlisted member, or if you are a warrant officer or commissioned officer. Note, though, that if you are a commissioned officer, you must have at least 10 years of commissioned service to retire at your commissioned rank. Air Force and Army personnel with over 20 years service are uniformly classified as retired.

Enlisted Navy and Marine Corps members with less than 30 years service are transferred to the Fleet Reserve/Fleet Marine Corps Reserve and their pay is referred to as "retainer pay". The law treats retired pay and retainer pay exactly the same way.

Military retirement pay is unlike civilian retirement benefits. You do not accumulate retirement benefits over your time in the military. You either qualify for retirement by honorably serving over 20 years in the military, or you do not.

Retirement Pay Computation

For personnel who entered active duty or on prior to 8 September 1980, retired pay levels are calculated by multiplying your service factor (normally referred to as your "multiplier") by your active duty base pay at the time of your retirement.

If you entered active duty between 8 September 1980 and 30 July 1986, the base pay used for the calculation is the average of the highest 36 months of active duty base pay received during service.

The "multiplier" for the above two plans is 2.5% per year of active service above 20 years(up to a maximum of 75%).

There is a third retirement system for individuals who joined the military on or after August 1, 1986.

These individuals are required to make a decision at the 15-year point of their career. They can elect to participate in the same retirement program above, or they can choose to receive an immediate monetary bonus ($30,000), and elect the "REDUX" system.

The "REDUX" system reduces the level of retirement pay between the time the individual voluntarily retires, and the time the individual reaches the age of 62, if the individual retires with less than 30 years of active service.

Taxation Of Retirement Pay

In most cases, retired pay is fully taxable. The amount deducted from your pay for federal withholding tax is based on the number of exemptions you indicate on either your pay data form or your W-4 after retirement.

Retired/retainer pay is not subject to FICA (Social Security) deductions, nor is your retired pay reduced when you become entitled to social security payments.