Military Careers, Retirement - Marine Corps Times

20-Year Retirement

Eligibility

Twenty years on active duty — or equivalent time spent in what is known as “qualifying service” as a reservist — is the basic eligibility requirement for military retirement. Service members who reach 20 years of active or qualifying reserve service can receive retired pay that increases each year through a cost-of-living adjustment.

But retirees never completely sever their responsibilities to the military. Technically, they still are subject to the Uniform Code of Military Justice, and most can be recalled to active duty after they retire.

Features

The fundamental features of the military retirement system include:

• Everyone with 20 years of active or qualifying reserve service, including those picked by selective early retirement boards, qualifies for retirement.

Under a major military compensation change effective April 1, 2007, the basic pay table is extended to 40 years, and additional longevity raises kicked in for senior personnel in the enlisted, warrant officer and commissioned officer ranks.

This brought commensurate changes in military retired pay. Previously, the maximum amount of retired pay was 75 percent of basic pay for 30 years of service; under the new pay table, service members who stay in for 40 years will be eligible for 100 percent of their basic pay at retirement. However, defense officials say they will be selective about who will be allowed to serve for 40 years, so the number of people retiring with full basic pay is likely to be small.

• After retirement, retired pay increases when a cost-of-living adjustment is granted, usually late in the year, with the increase first appearing in January paychecks.

• Retirement pay is tied solely to basic pay. Bonuses and allowances are not factored in.

• Retirement pay for active duty begins immediately after separation. Eligible reservists must wait until their 60th birthday to start collecting pay, even though they may accrue the required 20 creditable years of service much earlier. Reservists who have retired from service but have not reached age 60 are known as “gray-area retirees.”

Formulas

There are three formulas for computing 20-year military retirement pay. Each applies to a specific group of retirees, based on the dates they became service members. For most, it is the date they came on active duty.

Some people incur a legal obligation to the military before they come on active duty. These are mostly reservists, those who attended a military academy, ROTC cadets, midshipmen and others who enlisted under a delayed-entry program. They are eligible for the retirement system in effect at the time they first entered the armed services (i.e., the reserve, academy or delayed-entry program).

Retirement based on a disability has its own rules (see “Disability Retirement” below).

The formulas are:

• Retirees who became members of the military before Sept. 8, 1980, collect monthly retirement checks based on rank and the number of years they served on active duty. Those who separate at the 20-year mark receive half their final basic pay.

The figure for basic pay is determined by the pay rate for the member’s retired grade and length of service as of the date the service member was transferred to the retired rolls. For each year of service beyond 20, retired pay increases by 2.5 percent of basic pay, up to a maximum of 100 percent of basic pay for 40 years of service.

• For individuals who entered military service after Sept. 8, 1980, but before Aug. 1, 1986, retirement pay is based on average basic pay over their three highest earning years in uniform, almost always the last three, a system known as “High-3.” That average is multiplied by 2.5 percent for each year in uniform to determine retired pay. Thus, for 20 years of service, the High-3 formula offers retirement pay equal to 50 percent of average basic pay over the member’s last three earning years.

• Those who entered military service after Aug. 1, 1986, can elect to receive retirement pay under the High-3 system or can choose another option known as the Career Status Bonus/Redux plan.

Under this plan, a service member at 14 years and six months of service who agrees to stay in uniform until reaching at least 20 years of service may elect to receive a $30,000 bonus, either as a lump sum or in annual installments, at the 15th year of service.

But retired pay for 20 years of service is lower — only 40 percent of average basic pay over the three highest-earning years.

The legal formula for computing retired pay up to 30 years for Redux members is 2.5 percentage points for each year of service, reduced by 1 percentage point for each year of service short of 30 years. For example, a service member under Redux with 20 years of service would multiply 20 by 2.5, then subtract 10 (one point for each year of service short of 30), which yields 40.

Thus, retired pay for a Redux member with 20 years of service would be 40 percent of average basic pay over their three highest earning years.

Similarly, Redux members with 25 years of service would multiply 25 by 2.5, then subtract five; their retired pay would be 57.5 percent of their average basic pay over their three highest earning years. At 30 years, retired pay would be 75 percent of average basic pay over the three highest earning years.

After 30 years of service, however, the formula for Redux members changes — they get a straight 2.5 percentage points per year. For 40 years of service, this would give Redux members 100 percent of their average basic pay over their three highest earning years.

Annual cost-of-living increases under Redux are one percentage point lower than under the other two retirement plans. A one-time catch-up adjustment is made at age 62 that brings the value of retired pay under Redux back in line with the other plans, but after that, the annual increases again begin to lag by one percentage point per year.