To calculate military retirement pay, consider tenure, then apply the retired pay base and retired pay multiplier to arrive at the total compensation package. Whether an individual was involved in active duty impacts how his years of tenure are calculated.
- Consider tenure of the service member
Tenure is the first component of a military compensation package, and most programs require a minimum of 20 years of service. Service members who completed active duty and reserves and satisfy the tenure requirements are eligible for payment. In addition, active military members who become disabled may be eligible for payment.
- Calculate retired pay base
There are two methods to calculate retired pay base. The first is the final pay method, which establishes the retired pay base equal to the compensation of the service member in his final year. The second method, known as the high-36 month average method, is calculated as the mean of a service member's salary for the highest 36 months of basic pay.
- Apply the retired pay multiplier
Multiply the retired pay multiplier by the retired pay base to arrive at the final retirement payment. Each year of military service adds 2.5 percent to the retired pay multiplier. However, years of service are defined differently for each service member, depending on whether the service member completed full-time active duty or was in the reserves.