Military Retirement

There are four types of military retirements: Final Pay, High-36, REDUX, and disability. This section will outline the first three types, considered “non-disability” retirements. The third tab on this page covers disability retirement.

Final Pay: Most current retirees retired under the final basic pay system, which provides 2.5 percent of final basic pay per year of service (e.g., 50 percent of basic pay after 20 years), with annual COLAs tied to the rise in the Consumer Price Index (CPI) during the previous year (the same COLA system used for Social Security).

High-36: For the majority of currently serving members (those who entered service after Sept. 8, 1980), retired pay is based on 2.5 percent of their highest 36 months’ average basic pay per year of service, also with annual CPI or CPI-based COLAs. This system yields about 8 percent less lifetime retired pay than the final basic pay system.

REDUX: The REDUX system was enacted in 1986 and applied to people who entered service on or after Aug. 1, 1986. It provides 2.5 percent times high-36-month basic pay per year of service, except 1 percent is subtracted for each year of service less than 30 (e.g., 40 percent of high-36-months’ basic pay after 20 years of service). Further, REDUX retiree COLAs are adjusted annually at a rate 1 percent less than the CPI (CPI-1-percent). Under the REDUX law, retired pay is recomputed on a one-time basis when the retired servicemember turns 62. At that point, retired pay is recomputed to the amount that would have been payable under the high-36-month average system. After age 62, CPI-1-percent COLAs continue for life. The REDUX system further reduced lifetime retired pay value by up to 27 percent.

REDUX was repealed as the default system for post-1986 entrants in 2000 after the Joint Chiefs of Staff complained it was undermining career retention and readiness. At the time, the REDUX system was the most frequently mentioned specific reason for leaving service among separating personnel.

Under current law, the high-36-month retired pay system is the default option, but servicemembers have the option at the 15-year point of electing the REDUX option in return for a one-time, $30,000 taxable career-retention bonus.

Find additional information and retirement pay calculators on the DoD website for the four military retirement systems.

Information can be found in our Military Separation section.

Members going through a disability retirement or separation receive a disability percentage assigned by the Physical Evaluation Board. This rating determines whether the servicemember’s disability qualifies for a retirement (and all the related benefits) or a separation. The rules are:

  • If he or she has less than 20 years of active service and a disability rating of 30 percent or higher, the servicemember qualifies for retirement. A disability rating below 30 percent will result in separation.
  • If he or she has 20 or more years of active service, retirement will be recommended regardless of his or her disability rating.

The servicemember will be placed on the either the Temporary Disability Retired List (TDRL) or the Permanent Disability Retired List (PDRL).

Either way, members of the TDRL or the PDRL are retired members and entitled to all rights and privileges of military retirees. For pay purposes, these rights and privilege might include:

  • Participation in Survivor Benefit Plan
  • Voluntary/involuntary allotments from retired pay
  • Disability compensation from the VA

Retired pay is calculated differently by law based on the type of retirement. If your servicemember is placed on the TDRL, his or her retired pay is computed using one of two methods:

  • The member’s disability percentage (using a minimum of 50 percent for payment purposes while on the TDRL), or
  • His or her years of active service.

The member’s retired pay is computed whichever way provides the greater benefit. For a disability retirement, the formula used to determine a servicemember’s retired pay is a multiplier that is the higher of 2½ percent for each year of service or the disability percentage assigned by the service at retirement.

Basic Pay X [(Years of Service X 2.5%) or (disability percentage)] = Retired Pay

While on the TDRL, a physical examination is required at least once every 18 months. If the servicemember fails to report for the physical examination, his or her service will remove him or her from the TDRL and retired pay will be suspended until the examination has been completed.

A member can remain on the TDRL for up to five years, providing his or her condition does not change. If at any time he or she is found fit for duty, he or she might be removed from the TDRL and returned to active duty.

If the servicemember’s condition stabilizes and is rated at 30 percent or higher at the time of reevaluation, he or she is transferred to the Permanent Disability Retired List. If the disability stabilizes and is rated at less than 30 percent and the member has less than 20 years of service, he or she is discharged from the TDRL with severance pay.