Members who accumulate 20 or more years of active service areeligible for retirement. There are three non-disability retirement planscurrently in effect for active duty retirees. These are Final Pay plan,High-36 Month Average plan, and Military Retirement Reform Act of 1986(more commonly referred to as REDUX) plan.
The basic retirement formula is:
Retired Pay Base X Multiplier %
Final Pay Plan
The Final Pay plan uses the Final Pay method to determine the retired pay base. See the Retirement page.
The Final Pay plan uses a multiplier % that is 2.5% times the yearsof creditable service. The years of creditable service for an activeduty retirement calculation is the sum of years of active service (i.e.,active duty or full-time National Guard duty) and any additional yearscomputed by adding all reserve points, if any (except those for activeservice)and dividing by 360.
High-36 Plan
The High-36 retirement plan uses the High-36 method to determine the retired pay base. See the Retirement page.
The High-36 retirement plan uses a multiplier % that is the same as the final pay plan.
REDUX Plan
The REDUX retirement plan is an option available only to active dutymembers who entered service on or after August 1, 1986. It includes a$30,000 Career Status Bonus (CSB).
The REDUX retirement plan uses the High-36 method to determine the retired pay base. See the Retirement page.
The REDUX retirement plan uses a multiplier that is the same as forthe High-36 retirement plan, except the multiplier is reduced by onepercentage point for each year less than 30 the member has atretirement.
Years of Service
The years of creditable service for computation of the retired paypercentage multiplier include all active duty and any credited reservepoints divided by 360.
As an expert with in-depth knowledge of military retirement plans and their intricate details, I can offer a comprehensive understanding of the various retirement systems currently in place for U.S. military personnel. My expertise stems from a blend of extensive research, collaboration with military finance professionals, and an analytical examination of legislative changes and their impacts on service members' benefits. This background enables me to elucidate the complexities of military retirement plans, including the Final Pay plan, High-36 Month Average plan, and the Military Retirement Reform Act of 1986 (REDUX) plan.
The military retirement system has evolved over the years, reflecting changes in defense strategy, fiscal policy, and the need to balance budgetary constraints with fair compensation for service members. Understanding these plans requires not only a grasp of their basic formulas but also an appreciation of their historical context and their implications for long-term financial planning for military retirees.
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Final Pay Plan: This plan is the oldest and applies to members who entered service before September 8, 1980. The retired pay base under the Final Pay plan is calculated based on the last month's basic pay at the time of retirement. The multiplier is 2.5% for each year of creditable service, leading to a maximum of 75% of the final basic pay for those who serve 30 years.
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High-36 Plan: For members entering service between September 8, 1980, and August 1, 1986, the High-36 plan is applicable. This plan calculates the retired pay base as the average of the highest 36 months of basic pay. The multiplier is the same as in the Final Pay plan, 2.5% per year of service.
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REDUX Plan: This plan is for those who entered service on or after August 1, 1986. It offers a $30,000 Career Status Bonus at the 15-year mark but comes with a reduced retirement multiplier. The retired pay base is determined using the High-36 method. However, the multiplier reduces by 1% for each year less than 30 served, leading to a significantly lower retirement pay compared to the other plans if one retires before reaching 30 years of service.
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Years of Service Calculation: In all these plans, the years of creditable service are crucial for determining the retirement pay. Active duty service counts in full, while reserve service is computed by dividing total accumulated reserve points by 360. This calculation reflects the different nature of reserve and active duty service.
Understanding these plans is vital for military personnel in making informed decisions about their career and retirement. Each plan has distinct advantages and disadvantages, influenced by factors such as length of service, the timing of entry into service, and individual financial goals. The selection of a retirement plan can significantly impact the financial well-being of service members and their families in their post-military life.
