Retirement Pay:
An officer’s retired grade is governed by statutory regulations, in which certain responsibilities are delegated to Service Secretaries.
Federal Law
10 U.S. Code Chapter 71: Service members who retire have several retirement pay options. The options are summarized in the following table:
Table 1.1: General Rules of Estimating Retired Pay (From DoD Financial Management Regulation)
Retirement Plan | Eligible | Pay Formula | Cost of Living Adjustments (COLA) |
Final Basic Pay | Entered Active Duty prior to 8 Sep 1980 | 2.5% times the years of service times basic pay | Full inflation protection based on Consumer Price Index (CPI) |
High-3 | Entered service between 8 Sep 80 and 31 Jul 1986 | 2.5% times the years of service times the average of the highest 36 months of base pay | Full inflation protection based on CPI |
High-3 or $30K Career Status Bonus (CSB)/ REDUX* | Entered service after 31 Jul 1986 | ||
High-3 Option | ” | Same as High-3, above | Same as High-3, above |
CSB/REDUX Option* | ” | CSB/REDUX option: Each of the 1st 20 years of service is worth 2% toward the retirement multiplier. Each year after the 20th is worth 3.5%. A 30-year career is computed by 2% times 3.5% for the 10 years beyond 20, resulting in a maximum of 75%. The multiplier is applied to the average of the member’s highest 36 months of basic pay. | CSB/REDUX option: Annual COLAs of CPI minus 1% are given based upon the CPI of the High-3. Retired pay is recomputed at age 62 so that REDUX and High-3 retirement salaries are equal but REDUX COLAs for later years will continue to be CPI minus 1%. |
Instead of retiring under High-3, these members may choose to receive a $30K Service Bonus at 15 years of service in exchange for agreeing to serve a minimum of another five years and then retiring under the less generous REDUX plan. Every month of service is counted as 1/12th of a year.
10 U.S. Code § 12733: Total years of service for the purpose of determining retired pay for reserve members is calculated by dividing by 360 the sum of the following:
- Days of active service
- Days of full-time service while performing training duty or attending instruction at a service school
- 15 days plus days spent in attendance at a drill or instruction, with the following limits:
- 60 days for such service before Sept 23, 1996
- 75 days for such service before Oct 30, 2000
- 90 days for such service before Oct 30, 2007
- 130 days for such service after Oct 30, 2007- Days in which funeral honors duty was performed
- One day for each point earned for funeral duty
10 U.S. Code § 14706: In calculating a reserve officer’s year of service for retirement pay calculation, the following shall be counted:
- Time spent serving as a warrant officer
- Constructive credit awarded
- Service after appointment as commissioned officer that was spent obtaining required advanced education
DoD Policy
Follows U.S. law.
DoD Financial Management Regulations (FMR) summarized payment options for retirees.
Air Force Policy (AF Community of Practice Wiki)
Implements U.S. Law and DoD Policy. See Table 1.1 above.
Army Policy (Army Community of Practice Wiki)
Implements U.S. Law and DoD Policy. See Table 1.1 above.
Navy Policy (Navy Community of Practice Wiki)
Implements U.S. Law and DoD Policy. See Table 1.1 above.
Marine Corps Policy (USMC Community of Practice Wiki)
Implements U.S. Law and DoD Policy. See Table 1.1 above.