How long does it take to retire from military?

One of the biggest draws of joining the military is the potential to earn military retirement pay for life. Traditionally, military retirement was created for service members who served in active duty or reserves for at least two decades. However, the military has made changes to its retirement plan to make military service more appealing to younger people who are looking for career flexibility and mobility.

You need at least 20 years of service to qualify for a full military pension. Under the High-36 plan, you must have 20 years of service to receive a retirement pension that is equivalent to 50% of your average highest 36 months of pay plus 2.5% more for each additional year. Retirees with 40 years of service under the High-36 plan can receive 100% of their base pay.

Military retirement rules

You can retire voluntarily from the military once you hit the time-in-service minimum, or you can continue serving for as long as your branch of military service will allow after you hit the time-in-service requirement. Typically, 20 years is the minimum years of service you must complete to be eligible for military retirement pay.

However, not all military service counts towards the time-in-service requirement. The main services that count include active service, active duty for training, active duty for special work, temporary active duty, full-time National Guard duty, and Active Guard/Reserve time.

Apart from voluntary retirement, there may be involuntary and medical retirement, which are known as disability retirement. If you have a temporary disability rating, you will be placed on retirement rolls by the member's Branch of Service for up to 5 years. However, if you have a permanent disability rating, you will be placed on the retirement rolls by the member’s branch service.

Types of active duty military retirement plans

Active duty service members may be covered under either of two pension plans i.e. High 36 or the Blended Retirement System.

High 36

High 36, also known as "High 3" is the legacy pension plan for service members who started military service from September 8, 1980, to January 1, 2018, and have at least 20 years of service. Service members had the option to remain in the legacy plan or switch to the Blended Retirement System.

Service members with 20 years of service or more receive military retirement pay equal to 50% of their base salary as a pension. The base salary is the average of the highest 36 months of basic pay. For additional years of service, service members receive 2.5% more each year toward their retirement. If a member reaches 40 years of service, they will be eligible to receive 100% of their base salary as a pension.

Under the High 36 Plan, the government does not contribute to the member’s Thrift Savings Plan. Hence, any contributions made to TSP are solely up to the service member.

Blended retirement system (BRS)

BRS combines elements of the legacy plan with benefits similar to those available in 401(k) plans. It is the only retirement plan for service members who joined military service on or after January 1, 2018. Members who joined military service on or before December 31, 2017, with 12 years of service or less, had an opt-in period when they could switch to the BRS.

Under the BRS plan, military retirement pay is calculated based on the last 36 months of pay. If you retire with at least 20 years of service, your pension will be 40% of the base pay, lower than the 50% rate under the High 36 plan. Also, for each additional year of service, members get 2% more in retirement.

To make up for the reduced pension, the federal government makes 1% automatic contributions of members' base salary to their TSP account each month. After two years of service, members get up to 4% matching contributions into their TSP for as long as they contribute at least 4% of their income to the plan. Service members get to keep the full TSP contributions, even if they leave federal service before the 20 years lapse and miss out on a pension.

What is the average military retirement pay?

The amount you can expect to receive from military retirement pay depends on your military status and plan. Typically, military retirees with at least 20% of service can expect to receive 40% to 50% of their base pay upon retirement, depending on whether they are covered under High 36 or BRS.

A typical enlisted person can expect to receive about $30,000 to $35,000 per year, while a typical officer can receive $60,000 to $70,000 per year. If you are retiring from the reserve, your retirement pay will be based on your grade, tenure, and total points earned for years worked. If you want an estimate of how much retirement pay you will receive, you can use the calculators provided on the Department of Defense website.

Can you live off military retirement pay?

Living off military retirement pay alone is possible, but it takes a lot more planning to make it work. Typically, if you have 20 years of service when you retire, your pension will be equivalent to 40% to 50% of your base salary, which will be insufficient to maintain your current lifestyle.

You will need to stay in a High 36 plan until you reach 40 years of service to get 100% of your base pay. However, if you have a mortgage, credit card debts, student loan debts, and other payments, it will be difficult to live off military retirement alone. You can pay off as many debts and loans as possible before you officially retire so that you can use the money for other expenses like living expenses and vacation.

Since most service members retire from the military in their 40s, they can transition to a civilian career and earn additional retirement benefits. If you become a federal service employee, you will be eligible for FERS retirement, which includes a pension benefit, Social Security, and TSP. If you transition to the private sector, you can build retirement savings using a 401(k), IRA, and still be eligible for Social Security benefits. The additional income will help supplement your military pension.