The military (active duty) retirement system is arguably the best retirement deal around. Unlike most retirement plans, the Armed Forces offer a pension (technically a "reduced compensation for reduced services.") with benefits, that start the day you retire, no matter how old you are. That means you could start collecting a regular retirement pension as early as 37 years old. What's more, that pension check can grow with a cost of living adjustment each year.
Note: The Reserve Component retirement pay system is somewhat different from the active duty. Go to the Military Reserve Component Retirement Pay Overview to learn more.
One of the more significant changes made by the National Defense Authorization Act for Fiscal Year 2007 was the lifting of the 75 percent cap used in the calculation of retired pay for members eligible for service retirements.
Anyone retiring after January 1, 2007 with more than 30 years of total active service will receive credit for service over 30 years. For example, a member who served 32 years will receive 80 percent of their retired pay base and a member who has served 42 years will receive 105 percent of their retired pay base. In most cases, there is no longer a cap on the percentage multiplier to be utilized in the computation of retired pay.
Cap Lift Exclusions
There are two categories that have been excluded from the lifting of the percentage cap. The first is for a member retired by reason of disability. Such members are still capped at the 75 percent by law. A member with 30 or more years of service must be retired based on service, not disability, in order to have the retired pay computed using a percentage greater then 75 percent.
Note: This applies only to those who retired after January 1, 2007 with over 30 years of service.
The second area is for Army and Air Force enlisted servicemembers who have been cited for Extraordinary Heroism (EH). The laws that provide the additional 10 percent of retired pay for extraordinary heroism for Army and Air Force members contains language that limits their computations to not exceed 75 percent. The new law did not change that language. Therefore, if their computation includes the additional 10 percent for the EH, they are limited to 75 percent. If the member has over 30 years of service, DFAS can compute their pay ignoring the EH, and then exceed the 75 percent.
Determining Your Retirement Payment Rate
If you entered the service:
Click here to learn more about the different retirement plans that are currently available.