The military pension is a “cliff vesting” pension. A service member is not eligible to receive retired pay until the service member has served at least 20 creditable years of service. If the service member serves less than 20 years, he or she receives no military retired pay. It is an all or nothing proposition for service members, and thus called a “cliff vesting” pension.

For active component service members, the service member will begin receiving military retired pay on the first day of the first month following his or her retirement from active military service. On the other hand, a reserve component service member will not receive military retired pay until the first month following his or her 60th birthday. Thus, even though a reserve service member may retire in his or her forties, he or she will not receive military retired pay until he or she turns age 60. However, with the passage of the National Defense Authorization Act of 2008, for every 90 days that a service member serves on active duty in a combat theater of operations after January 28, 2008, the reserve service member will receive his or her military retired pay 90 days earlier than his or her 60th birthday.

The most common method of calculating military retired pay is the “High 36” method. If the service member entered the service after September 7, 1980, then his or her retirement pay is calculated using the High 36 or High 3 system. Retired pay is calculated using the average basic pay for the three highest paid years (36 months) rather than final basic pay. The formula looks like this:

Average High 36 X 2.5% X Years of Service = Monthly Retired Pay

For those service members who have elected into the new Blended Retirement System, the multiplier in the above formula is reduced from 2.5% to 2.0%.

For those members in the National Guard and Reserve who have completed a minimum of 20 “qualifying” years of service, their retired pay is calculated based on retirement points instead of years of service:
Average High-36 x 2.5% x Retirement Points/360 = Monthly Retired Pay
A reserve component service member accrues points in the following ways:

• One point for each day of active service (active duty or active duty for training).

• 15 points for each year of membership in a Reserve Component (Guard and Reserve).

• One point for each unit training assembly, which is typically one-half of a day during a “drill weekend.”

• One point for each day in which a member is in a funeral honors duty status.

• Satisfactory completion of accredited correspondence courses at one point for each three credit hours earned.

Military retired pay will also be subject to cost of living adjustments (COLAs) as determined by Congress.