How Is Military Retired Pay Determined?


Quick Answer

Military retirement pay is offered to veterans who serve a minimum of 20 years, and it is calculated by multiplying a retired pay base by one of several percentage multipliers, according to Militarypay.Defense.gov. There are four basic retirement plans, each offering a specific percentage multiplier.

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How Is Military Retired Pay Determined?
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Full Answer

According to the military compensation website, there are four primary retirement plans available to military veterans. These are Final Pay, Redux, Disability and High-36 month average.

The Final Pay and High-36 Month average payment plans work similarly but use a different base pay. The Final Pay plan uses the ending salary as the base pay in the calculation, whereas the High-36 month average plan uses the average salary of the three highest paid years of service, according to Militarypay.Defense.gov. The specific plan is determined by the date of initial service. In these two plans, each year of service equals a 2.5 percent increase in the percentage multiplier for the final retirement formula.

The redux plan works similarly, but it is used when the military serviceman is still active upon reaching retirement age. Instead of a 2.5 percent increase in the percentage multiplier, this plan offers 2 percent. Under the disability plan, the veteran receives either 2.5 percent or an individually assigned disability modifier, whichever is higher.

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