Military Retirement System Basics

Discussion in 'Active Duty' started by knewheart, Mar 1, 2006.

  1. knewheart

    knewheart Active Member

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    (Source: RAO bulletin update, 1 March 2006)

    MILITARY RETIREMENT SYSTEM BASICS: The military retirement system used to be easy to understand: You put in 20 years, and you got 50% of your base pay immediately upon retirement. You put in more than 20 years and you got 2.5% more for each year of active duty after 20 years up to 75%. Then, Congress decided military retirement was an area that could be tweaked to reduce annual Defense expenditures. Congress started with small changes, moving the annual COLA to 1 JAN instead of 1 OCT, but then got serious and made some major changes. Here are some basics of the current military retirement system that you should be aware of:

    1.) For Navy and Marine Corps members, you are considered to be a "retired member" for classification purposes if you are an enlisted member with over 30 years service, or a warrant or commissioned officer.
    Those with less than 30 years service are transferred to the Fleet Reserve/Fleet Marine Corps Reserve and their pay is referred to as "retainer pay". Air Force and Army members with over 20 years service are all classified as retired, and receive retired pay.
    2.) When a USN or USMC member completes 30 years, including time on the retired rolls in receipt of retainer pay, the Fleet Reserve status is changed to retired status, and they begin receiving retired pay.
    3.) The law treats retired pay and retainer pay exactly the same way.
    4.) There is no "vesting" in the military retirement system. You either qualify for retirement by honorably serving over 20years in the military, or you do not other with the exception of a few "early retirement" programs, which were designed to reduce the size of the armed forces.
    5.) A retired military member can be recalled to active duty without the member's consent at any time to perform duties deemed necessary in the interests of national defense. A retired member may not be
    involuntarily ordered to active duty solely for obtaining court-martial jurisdiction over the member.
    6.) Retired pay amounts are determined by multiplying your service factor by your active duty base pay at the time of retirement for those who entered active duty or on prior to 8 SEP 80,
    7.) Base pay is the average of the highest 36 months of active duty base pay received for those who entered active duty after 8 SEP 80. Additionally, the first COLA adjustment will be reduced by 1%.
    8.) If you are a commissioned officer or an enlisted with prior commissioned service, you must have at least 10 years of commissioned service to retire at your commissioned rank. If you have less than 10 years of commissioned service, and voluntarily retire, you retire at your enlisted rank, and only the highest 36 months of active duty enlisted base pay counts for retirement computation. The Service Secretary can waive this to 8 years.
    9.) Those who joined the military on or after 1 AUG 86 are required to make a decision at the 15-year point of their career whether or not to remain in the aforementioned retirement program or to receive an immediate monetary bonus ($30,000), and elect the "REDUX" system. Those who elect "REDUX" will have their annual COLA reduced by 1% until age 62 when those percentage points are added back to
    the retired pay.
    10.) For all plans, years of service include credit for each full month of service as one-twelfth of a year and retirement pay is rounded down to the nearest dollar.
    11.) IAW the Tower Amendment your eligibility date is usually the day prior to the effective date of an
    active duty pay increase and pay is computed by utilizing the active duty pay rates in effect on that date,
    your rank/rate on that date, total service accumulated on that date, and all applicable COLA increases.
    12.) If you have less than 20 years of service and have been found to be physically unfit for further military service and meet certain standards specified by law, you will be granted a disability retirement. If your disability is rated by the DoD disability evaluation system (not VA) at 20% or lower, you can be discharged with severance pay, unless the condition existed prior to service and was not permanently aggravated by service or misconduct.
    13.) If you receive a disability retirement with a rating of above 30%, and other conditions are met, your disability retirement may be temporary or permanent. If temporary, your status should be resolved within a five-year period during which you will receive a minimum of 50% and a maximum of 75% of base pay.
    14.) Those separated for Military disability may be eligible for monthly disability compensation from
    the Veterans Administration (VA) but not both.
    15.) Military retirement pay is taxable. VA disability pay is not. Military disability pay is taxable unless you joined prior to 24 SEP 75 or it is combat related.
    [Source: Guide to U.S. Military Feb 06]

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