Military Retirement System

Your military retirement pay is set by federal law — Title 10 of the U.S. Code — and the system you fall under depends entirely on when you first entered the armed forces. Congress has created three distinct retirement systems over the past five decades: Final Pay for those who joined before September 8, 1980; High-3 for those who joined from 1980 through 2017; and the Blended Retirement System (BRS) for those who joined on or after January 1, 2018 (with a one-time opt-in window for those in service between 2006 and 2018). All three share a core requirement — 20 years of qualifying service for a lifetime pension — but they differ significantly in how your monthly benefit is calculated and what happens if you leave before 20 years.

Current Law (2026)

Legal Authority

• 10 U.S.C. § 1401 — Computation of retired pay: the master formula table governing how each category of retirement is calculated; three formulas cross-referenced by other sections
• 10 U.S.C. § 1401a — CPI adjustments to retired pay: Secretary of Defense must increase retired pay each December 1 to reflect Consumer Price Index changes; BRS members under age 62 receive CPI minus 1%
• 10 U.S.C. § 1402 — Recomputation for later active duty (pre-September 8, 1980 members): if a retired member who joined before 1980 returns to active duty, their pay is recomputed using the Final Pay formula upon release
• 10 U.S.C. § 1402a — Recomputation for later active duty (post-September 7, 1980 members): same process but uses the High-3 average formula for recomputation
• 10 U.S.C. § 1405 — Years of service computation: defines how years of service are counted, including active service plus certain prior credited service, for purposes of the retirement multiplier
• 10 U.S.C. § 1406 — Retired pay base, Final Pay system: the retired pay base for members who joined before September 8, 1980 is the member's final basic pay rate at retirement
• 10 U.S.C. § 1407 — Retired pay base, High-3 system: the retired pay base for members who joined after September 7, 1980 is the average of the highest 36 months of basic pay — the "high-three average"
• 10 U.S.C. § 1408 — Payment in compliance with court orders (Uniformed Services Former Spouses' Protection Act / USFSPA): state courts may treat military retired pay as marital property; DFAS can pay a former spouse's share directly
• 10 U.S.C. § 1409 — Retired pay multiplier: defines the 2.5% per year multiplier (Final Pay / High-3) and the special REDUX calculation for those who took the Career Status Bonus under a mid-1990s election
• 10 U.S.C. § 1410 — Restoral of full retirement at age 62: members who chose the REDUX / Career Status Bonus path (entered service August 1, 1986 or later) have their retired pay recomputed at age 62 to eliminate the reduced multiplier
• 10 U.S.C. § 1413a — Combat-Related Special Compensation (CRSC): separate monthly payment for retirees with combat-related disabilities, equal to VA disability compensation attributable to those injuries; reduces offset otherwise required under concurrent receipt rules

The Three Military Retirement Systems

Final Pay (pre-September 8, 1980 entry). The original military retirement system is the simplest: your monthly retired pay equals 2.5% multiplied by your years of creditable service multiplied by your final basic pay — the pay rate you were receiving on your last day of active duty. A member retiring after exactly 20 years receives 50% of final pay; after 30 years, 75%. The maximum pension under this formula is generally 75% of final basic pay (at 30 years, though longer service is possible). Very few active-duty members today are under Final Pay — it applies primarily to retirees already receiving benefits.

High-3 (September 8, 1980 – December 31, 2017 entry). Congress changed the formula in 1980 in response to concerns that members were gaming the system by seeking promotions just before retirement to inflate the final pay figure. The High-3 system substitutes the average of the highest 36 consecutive months of basic pay — typically the final three years before retirement — for the final pay figure. Otherwise the math is the same: 2.5% per year of service. At 20 years you receive 50% of your high-three average; at 30 years, 75%. For most members retiring at 20–25 years with stable pay, High-3 produces a slightly lower pension than Final Pay would have, because the average includes months of lower pay.

Blended Retirement System (January 1, 2018+ entry; 2006–2017 opt-in). Congress enacted BRS in the National Defense Authorization Act for Fiscal Year 2016. It has two major components:

1. Reduced defined-benefit pension: The multiplier drops from 2.5% to 2.0% per year of service. A 20-year retiree receives 40% of their high-three average — 10 percentage points less than under High-3. This is a deliberate trade-off.

2. Government TSP contributions: In exchange for the reduced pension, the government now contributes to the Thrift Savings Plan for all members. Every service member gets an automatic 1% government contribution from day one regardless of their own contribution. Members who contribute their own money receive matching contributions up to 4% (1% on the first 1% contributed, 1% for the next 4%), for a maximum government match of 5% of basic pay per year. TSP contributions vest after two years of service.

The BRS also includes Continuation Pay — a one-time cash bonus paid at 8 to 12 years of service, when the government's retention needs are greatest. Officers receive 2.5 to 13 times monthly basic pay; enlisted members receive similar multiples. In exchange for Continuation Pay, the member agrees to serve an additional 3–4 years. Members who decline Continuation Pay are not penalized.

The COLA adjustment differs under BRS: before age 62, BRS retirees receive annual cost-of-living increases equal to CPI minus 1 percentage point. At age 62, a one-time catch-up resets their pension to what it would have been under full CPI, and they continue with full CPI adjustments thereafter. High-3 and Final Pay retirees receive full CPI each December 1.

The BRS Opt-In Decision

Service members who were serving between January 1, 2006 and December 31, 2017 had a one-time irrevocable window (calendar year 2018) to opt into BRS. The decision was financially complex: staying in High-3 meant retaining the higher 2.5% multiplier but receiving no TSP matching going forward. Switching to BRS meant a lower multiplier but gaining TSP matching for remaining years of service plus Continuation Pay eligibility. The Defense Department provided mandatory financial counseling and online calculators. Members with fewer than 12 years served and who were confident of reaching 20 years generally found BRS less attractive; members with significant uncertainty about reaching 20 years often found BRS better because the TSP matching gave them something regardless of when they departed.

Combat-Related Special Compensation (CRSC)

Military retirees with combat-related disabilities face a historic offset problem: VA disability compensation and military retired pay both replace lost income, so federal law has historically required a dollar-for-dollar offset (retired pay is reduced by the amount of VA disability compensation received). Congress created CRSC in 10 U.S.C. § 1413a to provide additional payment specifically for combat-related disability portions. CRSC is tax-free and is paid separately from retired pay by the respective service. Eligibility requires: (1) military retirement, (2) VA disability rating of at least 10% for a combat-related condition, and (3) a formal CRSC application to the appropriate service branch.

Separately, Concurrent Retirement and Disability Pay (CRDP) phases out the offset for retirees with a VA rating of at least 50%, allowing full receipt of both retired pay and VA compensation. CRSC and CRDP cannot both be received simultaneously — the retiree chooses which is more advantageous.

Former Spouse Protections (USFSPA)

Under 10 U.S.C. § 1408, military retired pay can be divided as marital property in divorce proceedings under state law. A former spouse with a qualifying court order can receive direct payment from the Defense Finance and Accounting Service (DFAS) — up to 50% of disposable retired pay. The "10/10 rule" is commonly misunderstood: DFAS direct payment is available when the couple had at least 10 years of marriage overlapping with at least 10 years of military service, but state courts can award a share of military retirement regardless of the length of marriage. SBP (Survivor Benefit Plan) coverage for former spouses must be explicitly ordered or elected within one year of the divorce.

How It Affects You

State Variations

Pending Legislation

• No major pending legislation proposing fundamental changes to the BRS structure as of early 2026; the system has been in effect for eight years and is considered settled policy
• Annual National Defense Authorization Acts routinely include targeted modifications to CRSC eligibility, survivor benefit rules, and reserve component retirement point calculations
• Ongoing congressional attention to military retirement pay parity for reservists who deploy frequently to active-duty-equivalent service

Recent Developments

• BRS has now been in effect for eight years (2018–2026); the military has invested heavily in financial literacy programs to ensure members maximize TSP matching
• TSP contribution rates among BRS-covered service members have improved substantially since initial implementation, though studies indicate a meaningful share still do not capture the full 5% government match
• CRSC awards have increased as the VA has expanded disability ratings for combat-related conditions; service branches process thousands of CRSC applications annually
• Survivor Benefit Plan (SBP) reform was addressed in recent NDAAs — premiums and survivor payouts have been incrementally adjusted
• The interaction between VA disability ratings and military retirement pay (concurrent receipt rules) remains an active area of policy debate, with advocates pushing for full concurrent receipt for all retirees regardless of years of service