Retirement Systems

Military retirement pay is unlike civilian retirement pay systems. First and foremost, there is no "vesting" in the military retirement system. There is no special retirement accounts, no matching funds provision, no interest. You either qualify for retirement by honorably serving over 20 years in the military, or you do not. If you are discharged from the military with 19 years, 11 months, and 27 days of service, for example, you do not qualify for retirement pay (other than a few "early retirement" programs, which were designed to reduce the size of the armed forces). Another fundamental difference between military retirement, and civilian retirement, is that a retired military member can be recalled to active duty. According to Department of Defense (DOD) Directive 1352.1:

Active Duty Retirement Systems

Members who remain on active duty for twenty or more years are eligible for retirement. There are three non-disability retirement systems currently in effect. These are Final Pay, High-3 Year Average, and Military Retirement Reform Act of 1986 (more commonly referred to as REDUX). REDUX was revised by the FY2000 National Defense Authorization Act -- a $30,000 Career Status Bonus (CSB) was added for those who accept the REDUX system retirement. Individuals formerly under REDUX may now choose between the High-3 and CSB/REDUX systems. The date you initially entered the service, determines which retirement system applies to you and whether you have the option to choose your retirement system.


The Military Reform Act of 1986 created the REDUX retirement system. This system applied to all members who joined on or after August 1, 1986. The National Defense Authorization Act (NDAA) for Fiscal Year 2000 amended this system. The act made two major changes: 1) it allows those in this group to choose between the High-3 retirement system and the REDUX retirement system and 2) it added a $30,000 Career Status Bonus as part of the REDUX retirement system.

The CSB/REDUX retirement system applies to those who entered the military on or after August 1, 1986, and who elected to receive the $30,000 Career Status Bonus at their 15th year of service.

The REDUX retirement system and Career Status Bonus is a "package deal." The combination of these two items can be beneficial to personnel. The REDUX portion determines retirement income (the longer your career, the higher the income). And the $30,000 Career Status Bonus provides current cash - available for investing, major purchases, or setting up a small business after retirement

-REDUX System Details

The REDUX multiplier calculation and annual cost of living adjustments differ from the other systems. Also, REDUX has a catch-up increase at age 62 that brings the REDUX retired pay back to the same amount paid under the High-3 System. REDUX is the only retirement system with a readjustment feature. Each of the first 20 years of service is worth 2.0% toward the retirement multiplier. But each year after the 20th is worth 3.5%. For example, 2.0% x 20 years = 40%. But a 30-year career is computed by 2.0% times the first 20 years plus 3.5% for the 10 years beyond 20, resulting in the maximum of 75%. The table below summarizes the initial multiplier at various years of service under REDUX.

Under REDUX, the longer the service member stays on active duty, the closer the multiplier is to what it would have been under High-3 up to the 30-year point where the multipliers are equal.

In precisely the same way as High-3, this multiplier is applied against the average basic pay for the highest 36 months of the service member's basic pay. This usually, but not always, equals the average basic pay for the final three years of service.

Cost of Living Adjustments (COLAs) for retired pay are given annually based on the increase in the Consumer Price Index (CPI), a measure of inflation.

Under REDUX, the COLA is equal to CPI minus 1%. A distinctive feature of REDUX is a recomputation of retirement pay at age 62. Two adjustments are made. The first adjusts the multiplier to what it would have been under High-3. For example, a 20-year retiree's new multiplier would become 50%, a 24-year retiree's multiplier would become 60% but a 30-year retiree's would remain 75%. This new multiplier is applied against the service member's original average basic pay for their highest 36 months. Then the second adjustment is done. Full CPI for every retirement year is applied to this amount to compute a new base retirement salary. At age 62, the REDUX and High-3 retirement salaries are equal. But, REDUX COLAs for later years will again be set at CPI minus 1%.

Military Leave

Regarding Military Leave, each state has a different plan according to Military Leave and each of the 7 Military units have different plans. For questions related to your individual situation, please contact our Human Resource Specialist, Arnie Bok, at 1-800-997-8434.

Retirement Due to Disability

DC Plan, 403(b)

Plan,457(b) Plan

Title 10, U.S.C., chapter 61, provides the Secretaries of the Military Departments with authority to retire or separate members when the Secretary finds that they are unfit to perform their military duties because of physical disability. DoD Directive 1332.18, SEPARATION OR RETIREMENT FOR PHYSICAL DISABILITY, DoD Instruction 1332.38, PHYSICAL DISABILITY EVALUATION, and DoD Instruction 1332.39, APPLICATION OF THE VETERANS ADMINISTRATION SCHEDULE FOR RATING DISABILITIES, set forth the policies and procedures implementing the statute. *Please note this retirement savings program and other savings options apply to the state of California as an example. Each state has a unique plan. For questions related to your individual situation, please call our Human Resource Specialist, Arnie, at 1-800-997-8434


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