Military Retirement Benefits

The US Military Retirement System is one of the most generous retirement systems in the world, providing you survive your tours of duty.  To determine your Military Retirement benefit (if any) in today's dollars, see your Military Personnel Office.  Generally, Military Retirement pay has no minimum age for retirement, and assuming you enlisted at age 17, could potentially retire at age 37 with no penalty for early retirement.. 

You must have a minimum of 20 years of military service, which gets you a retirement benefit of 50% of your last year's base pay, or the last three years average, depending on the retirement system in place when you enlisted, or chose, if you were in the transition years between systems. From 20 years of service to 40 years of service, the military retirement benefit increases proportionately from 50% to 100% of the last year's base pay, at the rate of 2.5% additional benefit for each year served.  There are some variations to this theme, so check with your personnel office. 

Military retirement benefits, once begun, are adjusted annually for inflation. 

Thrift Savings plan

The military also allows its members to participate in a taxed-deferred thrift savings plan.  The thrift savings account should be treated as part of your supplemental retirement plan port folio, and not as part of your inflation-adjusted military retirement benefit.  

Military retirement and Social Security

US Military Retirement benefits will not affect Social Security retirement benefits.  If you retired with a Military Retirement pension, and later started a civilian career under Social Security for a minimum of 10 years, you will get both your Military pension and Social Security retirement benefits without any reduction in either.  

EXAMPLE:
Suppose you enlisted in the US Military at age 17, and retired twenty years later at age 37.  You can draw your Military Retirement pension immediately on retiring, without any penalty.  Your Military pension, at 50% of your final year base pay, will then be adjusted each year to match inflation. 

Suppose that after you retired from the US military, you began a civilian career as an employee subject to Social Security.  withholding.  If you worked until age 67, and then retired under Social Security, you will get all your Social Security benefits, plus your Military retirement. 

However, your military service years will not count for Social Security purposes.  From age 37 to age 67 is only 30 years under Social Security, and in averaging your FICA-subject income, Social Security will add five years of zero earnings in order to average over the best 35 years.

Each subsequent year that amount would be adjusted upward by  a Cost-of-Living-Adjustment (COLA) calculated from the Consumer Price Index , which is the same calculation used to estimate the annual rate of inflation.

If we assume you will need 80% of your income today (.80 x $90,000), or $72,000,  to sustain the same quality of life, and you will have no other inflation-adjusted retirement income, then you supplemental retirement income need would be calculated as follows:

        R_O = R_T - R_SS - R_M  = $72,000 - 0 - $50,625 = $21,375 per year

©2008, Simon Revere Mouer III
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