Computing Retired Military Pay

Military.com

Published July 30, 2011

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.

FORMULAS for Computing Retirement Pay

Several factors determine your military retirement pay. The following formulas should help you understand how your military retirement pay is calculated.

If you entered prior to September 1980 you are eligible for the Final Pay retirement system. Under this system, your retirement pay is your final base pay times 2.5% for every year of active duty. Under this system, if you retire at 20 years you get 50% of your final base pay. If you retire at 30 years you get 75% of your final base pay.
If you entered between September 8th, 1980 and August 1986 you are eligible for the High 36 system. Under this system your retirement pay is the average of your highest 36 months of base pay times 2.5% for every year of active duty. Under this system, if you retire at 20 years you get 50% of the average of your highest 3 years base pay. If you retire at 30 years you get 75% of your highest average 3 years base pay.
If you entered after August 1986 you are under the REDUX system, which means you have the option to choose either the High 36 retirement system above, or the Career Status Bonus/REDUX (CSB) retirement system. The CSB/REDUX system pays a $30,000 bonus on the 15th year of active service, but it also reduces the retirement pay to 40% of the average of your highest 3 years of base pay. If you retire at 30 years you would get 75% of your highest 3 years base pay.
If you join after January 1, 2018 you get The Blended Retirement System (BRS). See our Blended Retirement System detail page for calculation instructions.

Since retirement pay can be very complicated and vary between individuals, you should visit DOD's Retirement Pay Calculator to get a personalized estimate.

Annual Cost of Living Adjustments (COLA)

Your retired pay may adjust each year based on the Consumer Price Index (CPI). The adjustments can affect gross monthly pay, federal withholding tax, SBP costs and annuities. However, if the CPI drops in a given year, military retirement "Cost of Living Adjustment" (COLA) will remain at zero in the following year. Your retirement pay is never reduced due to a negative CPI.

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 adjustment (COLA) thereafter for members meeting the above conditions will be unreduced. Cost-of-living adjustments for retired members who entered the Armed Forces on or after August 1, 1986, are reduced by 1%.