Military Reserve Retirement Pay Overview

You are eligible for military reserve pay if you served in the National Guard or Reserve once you reach age 60. However, not all individual service members will qualify. Your qualification depends on your years of service, type of service and when you served. The formulas for computing how much you may be eligible are complicated. Here is a basic list of the factors the pay is based on.

Years of Service

You must serve at least 20 years prior to becoming eligible for military reserve retirement pay. A qualified year is one in which a service member earned at least 60 active points or 75 inactive points. You are eligible to earn one point for each day of service in the Reserves or National Guard, up to 365. In leap years, you will need to have 366 days per year. At least eight years must be served as a member of the Active Reserve. This was changed in 2002 when the active requirement reduced to only six years. You will additionally only be required to serve six active years if the years of service were between October 5, 1994, and September 30, 2001. 

Early Retirement Options

As of 2009, there is a new early retirement option in place. In this system, you may be able to retire as early as age 50. You can reduce your minimum retirement age. The new provision only applies to new active duty service after the provision was passed; this starts on January 28, 2008. The maximum reduction is 10 years, so you will not be able to retire before the age of 50, regardless of your total number of years of active duty service. Further, just because you receive retirement benefits does not mean you will qualify for health benefits. You must still wait until the age 60 to meet that qualification.

Calculating Retirement Benefits

The military uses a formula to calculate how much you will receive in benefits. The formula can become quite complicated with several provisions now in place, but the basis is still simple. Calculate the total number of years of service you gain credit for by dividing your total retirement credits by 360. There are two basic formulas to calculate your benefits from here. One is called the "Final Basic Pay" formula, and the other is the "High 3 Formula." 

If you entered the service prior to September 8, 1980, use the final basic pay formula to calculate benefits. Multiple your years of service, found in step one, by 2.5 percent. Do this up to a maximum of 75 percent, then multiply the result by the basic pay you were receiving at the end of your career. 

If you entered the service after September 8, 1980, use the High 3 formula. Multiply your years of service, found in step one, by 2.5 percent. Do this up to a maximum of 75 percent, then multiply the result by the average of the highest three years of pay you received while serving. 

Military Reserve Retirement Pay Eligibility

In order to be eligible for military reserve pay, you must have at least 20 years of service to the National Guard or the Reserves. At least eight of these years must be active reserve years. A year of service is any year when you earned at least 60 active duty retirement credits, or 75 inactive duty credits. You earn one credit for each day of service. Once you have accumulated 20 years of credit and are at least 60 years old, you can begin to collect pay. You may be eligible for early retirement based on the year you entered service and how many active duty years you served.

Military Reserve Retirement Pay Systems

Military reserve pay is based on a calculation of the retirement point system. You earn one point per day of service in the military, up to 365 points per year. Your total points earned is divided by 360 at the end of your career to determine how many qualified years you served. Once you know your qualified years, you will use either the final basic pay or high-three system to calculate your pay. Final basic pay is used if you entered the service prior to September 8, 1980. The high three is used afterward. In both scenarios, you multiply your qualified years by 2.5 percent, with a 75 percent max. Then, use this percentage times your end pay. Or, average the highest 36 months pay in order to determine your benefit.

Formulas for Computing Reserve Retired Pay

Reserve retired pay is calculated based on one of two formulas depending on the year you entered service. If you entered prior to September 8, 1980, you will use the final pay formula. If you entered after this day, you will use the High-3 formula. In both options, you first determine your qualified years of service by dividing your total number of retirement credits by 360.Then, multiply this formula by 2.5 percent per year up to 75 percent.

If you are on the final pay formula, multiply the total by either. Or, if you are on the High-3 formula, average of the highest 36 months of your pay.

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