Educational Article
Military Retirement Benefits
The military offers great retirement benefits, including the Thrift Savings Plan (TSP) and a pension if you serve long enough. The benefits you may receive depend on how long you serve and how your investments perform.
There are two main military retirement systems. Read on to learn about the components each one includes.
Definitions
The Legacy “High-3” Retirement System
Covers Service members who first entered active duty after September 8, 1980, but before January 1, 2018.
The Blended Retirement System
Covers Service members who first entered active duty after January 1, 2018, or opted in.
Legacy “High-3” Retirement System
Thrift Savings Plan
The military’s defined contribution plan is like a civilian 401(k). Contributions can be made with pretax (Traditional) or after-tax (Roth) dollars and can be invested in a variety of funds. Visit TSP for more information.
Military Retired Pay
A monthly payment earned after completing 20 qualifying years of service. It’s equal to 2.5% times years served times your retired base pay. You can see in the chart below how serving longer can increase your monthly payment.
| Example 1 | Example 2 | |
|---|---|---|
| Multiplier | 2.5% | 2.5% |
| Years Served | 20 | 25 |
| Retired Base Pay | $5,000 | $5,000 |
| Monthly Pension Amount | $2,500 | $3,125 |
Blended Retirement System
Thrift Savings Plan
The military’s defined contribution plan is like a civilian 401(k). Contributions can be made with pretax (Traditional) or after-tax (Roth) dollars and can be invested in a variety of funds.
Your branch of service automatically contributes the equivalent of 1% of your basic pay to your thrift savings plan account each pay period beginning after 60 days of service. Matching contributions are also available (see chart).
| Roth and/or Traditional |
Automatic contribution (Traditional) |
Matching contribution (Traditional) |
Total contribution |
|---|---|---|---|
| 0% | 1% | 0% | 1% |
| 1% | 1% | 1% | 3% |
| 2% | 1% | 2% | 5% |
| 3% | 1% | 3% | 7% |
| 4% | 1% | 3.5% | 8.5% |
| 5% | 1% | 4% | 10% |
| More than 5% | 1% | 4% | Your Contribution + 5% |
Service members covered under the Blended Retirement System, or BRS, should contribute as much as they’re able. If you can aim to contribute at least 5% of your basic pay, you’ll maximize the amount you get from matching.
Military Retired Pay
A monthly payment earned after completing 20 qualifying years of service. It’s equal to 2.0% times years served times your retired base pay. You can see in the chart below how serving longer can increase your monthly payment.
| Example 1 | Example 2 | |
|---|---|---|
| Multiplier | 2.0% | 2.0% |
| Years served | 20 | 25 |
| Retired base pay | $5,000 | $5,000 |
| Monthly pension amount | $2,000 | $2,500 |
Continuation pay
A one-time, mid-career payment in exchange for additional service. Depending on the needs of your branch of service, Continuation Pay can be 2.5 to 13 times your monthly basic pay for active duty or 0.5 to 6 times your monthly basic pay (as if on active duty) for Reserve members. This one-time payment is in addition to any other career field-specific incentives or retention bonuses.
Lump-sum options
An option Service members have at retirement to reduce their military pension by 25% or 50% in exchange for a lump-sum payment. Your pension reverts back to the pre-reduced amount at your full Social Security retirement age retirement, which for most is 67.