Military Service Retirement & Pension Calculator
Calculate your military retirement pension, project lifetime military pay, and compare retirement systems. Understand survivor benefits and tax implications.
Understanding Military Retirement & Pension Systems
Introduction: Military Retirement Benefit
Military retirement is one of the most valuable employee benefits available in the United States. Unlike most civilian workers, military personnel can retire with a pension after 20 years of service, regardless of age. This calculator helps you understand your retirement benefits, project lifetime earnings, and make informed decisions about survivor options.
The military uses different retirement systems depending on when service began. Understanding which system applies to you is crucial for accurate planning.
Military Retirement Systems
High-3 System (Pre-2018 Service Members)
Most military personnel who entered service before January 1, 2018, are in the High-3 system.
Key components:
- High-3 Average: Average basic pay over the highest 36 months (highest 3 years) of service
- Years of Service: Total creditable years on active duty
- Accrual Rate: 2.5% per year of service (20 years = 50% of High-3)
Example: 20 years of service, High-3 of $5,000/month
Pension = $5,000 × (20/30) × 100% = $3,333/month for life
BLENDED System (2018+ with 10+ Years Pre-2018)
Service members with at least 10 years of service before January 1, 2018, who entered service between 2018 and 2019, are automatically in the BLENDED system. Others can elect to join.
BLENDED combines:
- High-3 pension component: 40% of what High-3 would pay (same formula, scaled)
- TSP contribution: Government matches up to 5% of salary
TSP-Only System (2018+ with Less Than 10 Years Pre-2018)
Service members who entered after January 1, 2018, with less than 10 years pre-2018 service receive:
- No defined pension: Only Thrift Savings Plan (401k-equivalent) contributions
- Government match: Up to 5% of basic pay
- Vesting: 100% immediately (unlike civilian 401k)
FERS (Federal Employees Retirement System)
Civilian federal employees use FERS, which provides:
- Defined benefit pension: 1% of high-3 × years of service
- Social Security benefits (civilian employees covered)
- TSP matching up to 5%
High-3 Pension Calculation in Detail
Step 1: Calculate High-3 Average
Take your basic monthly pay for the highest 36 months of your career and average it. This is your "High-3."
Step 2: Apply Accrual Rate
Military uses 2.5% per year of service (called "accrual rate"). This means:
- 20 years = 50% of High-3
- 25 years = 62.5% of High-3
- 30 years = 75% of High-3
Step 3: Multiply for Monthly Pension
- 20-year retiree with $5,000 High-3: $5,000 × 50% = $2,500/month
- 25-year retiree with $5,000 High-3: $5,000 × 62.5% = $3,125/month
- 30-year retiree with $5,000 High-3: $5,000 × 75% = $3,750/month
Survivor Benefit Plan (SBP)
SBP is optional insurance that continues paying your pension to a beneficiary after your death.
SBP Costs
- Cost: Approximately 6.5% of your monthly pension
- Deducted: From your retirement pay each month
- Coverage options:
- Spouse only
- Spouse and children
- Children only
SBP Benefits
- Spouse receives: Lifetime annuity (typically 55% of your pension)
- Children receive: Until age 22 (or 23 if full-time student)
- Guaranteed: Regardless of your age at death
Worked Example: Military Pension Calculation
Scenario: E-6 (Petty Officer 1st Class) Retiring After 24 Years
Information:
- Rank at retirement: E-6
- Years of service: 24
- Entered service: 2000 (High-3 system applies)
- High-3 average (last 36 months): $5,200/month
Calculation:
- Accrual rate: 24 years × 2.5% per year = 60%
- Monthly pension: $5,200 × 60% = $3,120/month
- Annual pension: $3,120 × 12 = $37,440/year
With SBP (Spouse Only):
- SBP cost: $3,120 × 6.5% = $203/month
- Net pension: $3,120 - $203 = $2,917/month
- Spouse receives: 55% of $3,120 = $1,716/month for life if member dies
Lifetime Value (to age 85):
- Years receiving pension: 85 - 42 (retirement age) = 43 years
- Assuming 2% annual COLA increase:
- Total lifetime pension: ~$1,920,000 (not accounting for present value)
Military Rank and Pay Comparison
| Rank (E-Series) | Typical Final Basic Pay | 20-Year Pension (50% High-3) | Lifetime Value (Age 62-85) |
|---|---|---|---|
| E-5 (Petty Officer 2nd Class) | $3,800-4,200 | $1,900-2,100 | $1.2M-1.4M |
| E-6 (Petty Officer 1st Class) | $4,600-5,200 | $2,300-2,600 | $1.5M-1.7M |
| E-7 (Chief Petty Officer) | $5,500-6,200 | $2,750-3,100 | $1.8M-2.0M |
| O-3 (Lieutenant/Captain) | $5,800-6,500 | $2,900-3,250 | $1.9M-2.1M |
| O-4 (Commander/Major) | $7,200-8,000 | $3,600-4,000 | $2.3M-2.6M |
Key Decisions & Considerations
1. Should You Elect Survivor Benefit Plan (SBP)?
Pros:
- Guarantees family financial security if you die
- Cost is relatively low (6.5%) for lifetime coverage
- Inflation adjustments continue for survivor
Cons:
- Reduces your pension 6.5% for the rest of your life
- You must live to breakeven (~15 years)
Recommendation: If you have dependents or spouse, SBP is usually worthwhile. The cost is lower than commercial life insurance would be.
2. BLENDED vs. TSP-Only Comparison
For service members with choice between systems:
- BLENDED: Guaranteed pension (40% of High-3) + TSP matching
- TSP-Only: No guaranteed pension, just TSP matching
BLENDED is generally more valuable because it guarantees a pension regardless of market performance.
3. Career Length Impact
- 20 years: 50% of High-3 (minimum for military retirement)
- 25 years: 62.5% of High-3 (gain 2.5% per additional year)
- 30 years: 75% of High-3 (max for enlisted)
Tax Implications
- Military retirement pay is fully taxable as ordinary income
- Federal income tax withholding applied by DFAS
- State tax treatment varies (many states don't tax military pensions)
- No Medicare deduction (covered by Tricare or VA)
Limitations and Assumptions
- Pay calculations are estimates: Actual High-3 may differ from rank estimates
- COLA increases assumed constant: Actual COLA varies yearly
- SBP rates approximate: Exact rates set by military each year
- Doesn't include: BAH (housing), BAS (food), allowances, survivor benefits taxes
- System changes possible: Military retirement rules can change Congress
- Rank progression assumed: Actual career progression may differ
Conclusion
Military retirement provides exceptional financial security compared to most civilian employment. A 20-year retiree can receive pension payments for 40+ years, totaling over $1-2 million in lifetime benefits. Understanding your retirement system, High-3 calculation, and survivor options is essential for making informed decisions about your military career and financial future.