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Military retired pay: an overview

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Military retired pay: an overview
Wadena Minnesota 314 S. Jefferson 56482

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, which starts 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.

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Note: The Reserve Component retirement pay system is somewhat different from the active duty.

There are many factors that determine exactly how much your pension will be. Over the past 25 years, the government has made some significant changes to the military retirement system.

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 due to service in excess of 30 years of total active service will receive credit for service more than 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.

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.

The second area is for Army and Air Force enlisted service members 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, Defense Finance Accounting Service can compute their pay ignoring the EH, and then exceed the 75 percent.

Determining Your Retirement Payment Rate

If you entered the service:

• Prior to September 1980 you are eligible for the Final Pay retirement system.

• Between Sept. 8, 1980 and August 1986 you are eligible for the High 36 system.

• After August 1986, you are eligible to choose either the High 36 retirement system, or the Career Status Bonus/REDUX (CSB) retirement system. If you decline to make a choice you will automatically receive the High 36 retirement plan

Please see your local county veterans service officer if you have any questions. You can contact your local VSO at (218) 631-7617 or by e-mail at david.anderson@co.wadena.mn.us. As always, have a great week.

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