4 Military Retirement Plans
Compare the best plans based on service entry date and choices
Congress has authorized four retired pay plans. Below you will find a brief explanation of each plan. Although each retirement plan is unique, the service dates that must be used in the retired pay computations remain the same. Primary service dates used include the Date of Initial Entry into Military Service (DIEMS) and Title 10, United States Code, Section 1405 service date (1405 service). For complete details, see Understanding Military Retirement Pay.
Date of Initial Entry Into Military Service (DIEMS) is the initial date of acceptance of a commission or enlistment in any Reserve or Regular component of any United States Armed Force. It includes:
- Enlistment as a Reserve member in the ROTC program
- Enlistment in any active component's delayed entry/enlistment program
- Entrance as a cadet or midshipman at a service academy
- Entry into an academy preparatory school
The DIEMS date is a fixed date and is not subject to adjustment because of a break in service and it is used to determine which of the retirement plans military members fall under.
Blended Retirement System: Personnel Entering Active Duty After December 31, 2017
You get 40% of your base pay after 20 years. In addition, you get a bonus at 12 years of 2.5% of your annual base pay. Your multiplier for each year of service is 2%. You can continue to increase your retirement rate above 100%, which would be achieved at 40 years of service. You earn matching funds into your TSP account from the government. You can't draw your retirement until you are 60 to 65 years of age. You can roll it into a private retirement account. You can take your retirement money with you if you leave service prior to the 20-year mark.
You also have a choice to join the Blended Retirement System if you entered service between December 31, 2005, and January 1, 2018, or to remain enrolled in the CBS/REDUX system.
CBS/REDUX: Personnel Entering Active Duty on or After 1 Aug 86 Until December 31, 2017
If a member's DIEMS is on or after 1 Aug 86, retired pay is calculated by using the average of the member's highest 36 months basic pay, times 2 ½ percent of the member's years of service (based on the 1405 service date) minus a 1 percent reduction for every year of service less than 30 years. Retired pay for 20 years would be calculated at 40 percent. This reduction is restored permanently at age 62. This pay calculation is normally referred to as the "High 36/40 Percent Plan." Here is the calculated example using the MSgt from the previous examples:
- 61.25% multiplier - 5.5% = 55.75%
- $2531 (average basic pay) X 55.75% = $1411 (estimated retired pay)
With continued service, you add on to a maximum of 100% at 40 years of service. The cost of living adjustment is the Consumer Price Index minus one percent until age 62 when it is readjusted.
CBS/REDUX system requires a choice at your fifteenth year.
- You can take a $30,000 cash bonus, which is about $21,000 after taxes and your pension check will be 40 percent when you retire with 20 years of service.
- You can elect the High 36 retirement system with no bonus and a 50 percent retirement check when you retire with 20 years of service.
High-36: Personnel Entering Active Duty 8 Sep 80 - 31 Jul 86
If a member's DIEMS is on or after 8 Sep 80 through 31 Jul 86, retired pay is calculated by using an average of a member's highest 36 months of active duty basic pay, times 2 ½ percent of the member's years of service (based on the 1405 service date). This will result in a smaller monthly active duty pay base. This is what is normally referred to as the "High 36/50 Percent Plan." Here is an example:
- $2778 Basic pay for a MSgt over 24 years of active duty in 1999
- $2555 Basic pay for a MSgt over 22 years of active duty in 1998
- $2485 Basic pay for a MSgt over 22 years of active duty in 1997
- $2329 Basic pay for a MSgt over 20 years of active duty in 1997
- $2531 Average Monthly Basic Pay
- $2531 (average basic pay) X 61.25% = $ $1550 (estimated retired pay)
There is no bonus or readjustment. Cost of living increases is based on the Consumer Price Index.
Final Pay System: Personnel Entering Active Duty Before 8 Sep 80
If a member's DIEMS is before 8 Sep 80, retired pay is calculated by multiplying the member's monthly basic pay, times 2 ½ percent of the member's years of service (based on the 1405 service date). For example, estimated retired pay for a Master Sergeant (E-7) with 24 years 6 months service will be calculated as follows, using the 1999 pay scale:
- 24 ½ years = 24.5 X 2 ½% = 61.25% (multiplier)
- $2778.90 (base pay) X 61.25% = $1702 (estimated retired pay)
With the Final Pay system, there is no bonus or readjustment. Cost of living increases are based on the Consumer Price Index.