If you’re a service member thinking about retirement, four military retirement pay systems come into play: the Blended Retirement System, the legacy High-3 system, the Final Pay system, and the CSB/REDUX system.
Let’s point you toward the right military retirement calculators you can use to estimate your retirement pay.
Retirement plans for service members
Your retirement pension starts the day you retire and grows each year with a cost of living adjustment. If family members outlive you, they can benefit from your pension as well.
The following retirement plans for service members all have one thing in common: They guarantee you a pension calculated from a percentage of your basic pay.
The Blended Retirement System (BRS)
If you joined active duty on or after Jan. 1, 2018, you qualify to receive retirement benefits under the BRS retirement pay system. You’ll receive a monthly annuity for life after 20 years of service.
The pay amount is 2% times the number of years you served — if you served for 35 years, your annuity pay will equal 70% of your base pay.
In addition, while you’re employed by the military, you will receive matching contributions from your employer to your Thrift Savings Plan (TSPs), a 401(k)-type retirement account run by the government. Click here to use a military retirement calculator to estimate your retirement pay under the BRS.
The legacy High-3 (High-36) system
If you joined active duty between Sept. 9, 1980, and July 31, 1986, you qualify to receive retirement benefits under the High-36 system.
As long as you have served for 20 or more years by the time you retire, you will receive a lifetime monthly annuity equal to 2.5% times your highest three years, or 36 months, of basic pay.
Unlike the BRS, under this system, you will not receive matching contributions to your TSP from your employer. Click here to use a military retirement calculator to estimate your retirement pay under the High-3 system.
The Final Pay system
If you joined active duty on or before Sept. 8, 1980, you qualify to receive retirement benefits under the Final Pay system. Under this system, your pension will equal 2.5% of your final base pay times the number of years you served.
If you retired after 20 years of service, your pension will be 50 percent of your final base pay. After 40 years, it will be 100 percent of your final base pay.
Click here to use a military retirement calculator to estimate your retirement pay under the Final Pay system.
The CSB/REDUX system
If you joined active duty between Aug. 1, 1986, and Dec. 31, 2017, you qualify to receive retirement benefits under the CBS/REDUX or legacy High-3 systems.
Similar to the legacy High-3 system, your retirement pension will be calculated from the average of your highest three years, or 36 months, of basic pay.
Under this system, you’ll receive a career status bonus (CSB) of $30,000 before tax at 15 years of service, followed by a reduction of the regular 2.5% per-year multiplier. The reduction is equal to 1% for each year of service less than 30 years.
Here’s how the reduction works. Under the High-3 system, at 20 years, you’ll receive 50 percent of your highest three years of base pay. Under the CSB/REDUX system, since you’re 10 years shy of 30 years, your pension is reduced by 10 percent, or 1 percent for each year under 30. So instead of receiving 50 percent, you’ll receive 40 percent of your highest three years of base pay.
Click here to use a military retirement calculator to estimate your retirement pay under the CBS/REDUX system.
The bottom line
Don’t forget that each year a cost of living adjustment is added to your pension. If you’d like to learn more about retirement savings vehicles and how to use other retirement calculators, check out this article.
