Active Duty to Retirement: Pay Issues


The move from active duty to retirement is a big, with all sorts of issues, but the biggest issue is pay.  Not only will your retired pay be significantly lower than your active duty pay, but the time of transition can be a little unsettled.  The last active duty pay can be held up to 60 days, and the first retired pay doesn't arrive until a month after retirement.  Education and preparation are key to making sure this time isn't more challenging than necessary.

Calculating your retired pay is relatively simple.  First, you need to know which retirement pay plan you have:  High Three or Career Status Bonus/Redux*.  Both plans work off the average of the highest 36 months of active duty pay that you have received.  This is called your "base pay."  Retirement is calculated under the High Three plan unless you selected the Redux plan.

For high three retirees, calculate your retired pay by taking your total years of service and multiplying by 2.5.  The result is the percentage of your base pay that you will receive in retired pay.

If you selected the Redux plan and received the Career Status Bonus, then you calculate your percentage by starting with 40% for 20 years of service and adding 3.5% for each additional year of service.

Knowing how much money to expect, and when to expect it, is a huge step in working through the transition from active duty to retirement.  Congratulations!




*Folks who entered the service prior to September 8, 1980, use a slightly different calculation.

Show Full Article
PayCheck Chronicles