What You Should Know About Military Benefits and Pay in Retirement
The ins and outs of military retirement can seem confusing, but in reality the military has a very linear retirement plan for those that choose to make the military their career. Military retirement does have eligibility requirements, but members that meet them will have benefits that help them as well as their family through a pension, health insurance, and life insurance. Though each person’s situation is different depending on their service and what branch they serve in, there is some general information that will apply to anyone with a military background planning for retirement. Retirement can be a confusing topic and, like all issues service members and their families deal with, it’s important to understand it in order to properly prepare for the future.
Military Retirement Eligibility
The military retirement system is fairly simple in the broad sense: If you stay in the military for 20 year or more, you receive a pension based on your pay. Of course, there are variations in the system based on individual cases. When you retire, what branch you’re in, if you’re disabled, and when you served are all variables that can change how your retirement works within the military.
While all branches of the military have the same benefit systems, National Guard and Reserve service members must have a certain amount of “qualifying” years of service in order to become eligible for retirement pay at the age of 60. For all branches, the types of service that count towards eligibility are: Active service, active duty for training, active duty for special work, temporary tour of active duty, full-time National Guard duty, and active Guard/Reserve time.
Types of Military Retirement
Other than disability determination and National Guard or Reserve service, the time that you joined the military will be the biggest deciding factor on the type of military retirement you’ll fall into. Each plan is a little different and is ultimately based on each service member’s join date. Other than the Thrift Savings Plan created as an aspect of the newest retirement system, these retirement options are only for those that are career military, not those veterans that leave the military before retirement age and pursue a post-military career path. For those that retire absent from their military career, their retirement planning involves different resources and channels meant for veterans, not those that have served in the military for 20 years or more.
- Disability Retirement: Temporary Disability Retirement List (TDRL) and Permanent Disability Retirement List (PDRL) are two types of retirement whose eligibility is based on your disability rating (which varies with each branch) and not the traditional 20 years of service. Though, the type of retirement is still dependent on join date.
- Final Pay: The Final Pay Retirement system is for those that joined the military before September 8, 1980. Under this system, retired pay is decided by multiplying base pay by 2.5 percent for every year of service. You get 50 percent of your final base pay if you retire with 20 years of service and 100 percent if you retire after 40 years.
- High 36: The High 36 Retirement system is for those that joined between September 8, 1980 and July 31, 1986. The only difference between this system and Final Pay is how to decide pay. Through High 36, you use your average base pay for your highest paid 36 months rather than your final base pay for every year of service.
- CSB/REDUX: If you entered the military between August 1, 1986 and December 31, 2017, you are eligible for the CSB/REDUX Retirement system or the High 36 system. Like High 36, your pension is based on your highest 36 months of pay. However, after 15 years you receive a $30K bonus and your base pay percentage is reduced to being about 1 percent of your highest 36 months of pay, not 2.5 percent. If you serve 30 years or longer, the reduction won’t happen. Note that there is also a cost of living adjustment that will happen over the lifetime of your retirement that will also change how much you’re paid.
- Blended (BRS): If you join the military after January 1, 2018, you are eligible for the Blended Retirement system. Anyone with less than 12 years of service also has the option to switch to this system if they would like to. In this system, retired pay will be 2 percent of your highest 36 months of service instead of 2.5 percent. However, you’ll also get a 2.5 percent bonus at 12 years. The military contributes 1 percent of your base pay to a Thrift Savings Plan (TSP) and your base pay is automatically set up to contribute 3 percent of your base pay into this account unless you manually change it. After you’ve been in the military for 2 years, the military will match up to 5 percent of your TSP contributions. When you retire, you can either get your full retirement or get a lump sum. If you choose lump sum, you will get a reduced check until you’re 67.
As you can see, other than those that have the option to choose between High, CSB/REDUX, and BRS, there aren’t many decisions to make between each retirement system — you’re basically locked into one plan depending on the year you joined. Though many of those that join the military don’t end up retiring directly from the service, those that do they are given a lot of retirement perks. However, just like any retirement program, living solely off of its benefits takes a lot of planning and fiscal responsibility.
Spouse and Dependant Benefits
The military has always been generous about including a service member’s family in its benefits systems. In retirement, the same is still true. Spouses and/or dependents are eligible for benefits in a service member’s retirement in forms of survivor benefits and health insurance. Each is different for service members depending on their individual circumstance.
- Survivor Benefit Plan: The Survivor Benefit Plan is designed to aid surviving families when a military retiree passes away. The retiree can elect to cover their spouse, spouse and children, children only, disabled dependent, former spouse, or a person with a natural insurable interest such as a business partner or parent. You will pay a premium and the survivor of your choice will receive a monthly payment of up to 55 percent of the retirees pay for the rest of that person’s life as long as they continue to fit eligibility.
- TRICARE/CHAMPVA/Medicare: TRICARE retiree medical coverage is not as comprehensive as active duty coverage, but it’s still an option for military retirees and their families. At age 65 each retiree and family member will switch from TRICARE to Medicare though there is a supplemental option called TRICARE for Life that can aid in more coverage for both retirees and their spouse/eligible dependants.
Retirement planning is important to consider as early as possible. Luckily, for those who retire in the military, the retirement benefit plans are pretty well laid out for you. Military retirement benefits are ever evolving and working to include military members in a variety of capacities as well as their families. Though the process may seem difficult to maneuver, many VA offices are created in order to help military members and their families understand military benefits, pay, and finances through each stage of their military career.
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Chelsy is a writer from Montana who now lives in Boise, Idaho. She graduated with her journalism degree from the University of Montana in 2012. She enjoys talk radio, cold coffee, and playing Frisbee with her dog, Titan. Follow Chelsy on Twitter @Chelsy5
This post was updated February 28, 2019. It was originally published December 18, 2017.