There are various provisions of law under which the computation may be made, but retired pay is generally computed either on length of service or on a percentage of disability. If you are retired for disability, you may elect to have your pay computed by either method. The following is a summary of what you need to know about computing retired pay:

Formulas for Computing Retired Pay

  • If you first entered a uniformed service* before September 8, 1980:
    Compute your retired pay based on length of service by multiplying the basic monthly pay for your retired grade at the time of retirement by the years of creditable active federal service at the rate of 2.5 percent for each whole year of service. This is called the "Final Pay" retirement system. That means you get 50% for 20 years of service up to a maximum of 100% for 40 years.**
  • If you first entered a uniformed service* between September 8, 1980 and July 31, 1986:
    Compute your retired pay using the same formula as the Final Pay system above, except you use the average basic pay for your three highest paid years (36 months) rather than final basic pay. This is called the High 36. Under the High 36 system you you get 50% for 20 years of service up to a maximum of 100% for 40 years.**
  • If you first entered a uniformed service* on or after August 1, 1986 you have the option to take either the High 36 or CSB/Redux Retirement:

    • High 36 Option: Compute your retired pay using the same formula as the Final Pay system above, except you use the average basic pay for your three highest paid years (36 months) rather than final basic pay. This is called the High 36. Under the High 36 system you you get 50% for 20 years of service up to a maximum of 100% for 40 years. **
    • CSB/Redux Option: Compute your retired pay by multiplying your High 36 by 2% per year for the first 20 years, and then 3.5% for each additional year passed 20. That means you get 40% of your High 36 for 20 years, but up to a maximum of 100% for 40 years.**

* Uniformed services include the National Oceanic and Atmospheric Administration (NOAA) and the U. S. Public Health Service (USPHS).

**Note: Recent changes now allow retirement pay to reach up to 100 percent of the basic monthly pay for those who serve 40 years.

Servicemembers on the Temporary Disability Retired List will receive no less than 50 percent of their basic pay or average high three earnings years. A servicemember may not receive temporary disability retired pay for longer than 5 years from the date they was placed on the TDRL.

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Annual Increases in Retired Pay

Your retired pay increases every year. These increases reflect rises in the Consumer Price Index (CPI). The increases affect the amounts of gross monthly pay, federal withholding tax, SBP costs and annuities.


Note: Retired members who entered the Armed Forces on or after September 8, 1980 and who became entitled to retired pay on or after January 1, 1996 receive an initial cost-of-living increase computed, using the quarter of the retirement date, minus 1%. Cost-of-living increases thereafter for members meeting the above conditions will be unreduced. Cost-of-living increases for retired members who entered the Armed Forces on or after August 1, 1986, are reduced by 1%.

Common Retiree Pay Topics

Below are the most common Retiree pay topics.