Military Retirement Pay Calculator
Calculate military retirement pension under different retirement systems
Understanding Military Retirement Systems
The Problem
Military service members face critical career decisions regarding retirement benefits, particularly after 2018 when the military transitioned from the Legacy system to the Blended Retirement System (BRS). Understanding how these systems calculate benefits—and how they compare—is essential for financial planning. Service members need to evaluate pension income, TSP contributions, and total lifetime earnings to make informed decisions about when to retire and how to structure their post-service finances.
Two Retirement Systems
Legacy System (High-36): Used for those who entered military service before January 1, 2018. Provides an immediate pension upon retirement at 20 years of service, calculated as 2.5% of High-36 (average of highest 36 months of base pay) times years of service.
Blended Retirement System (BRS): Implemented for those entering after January 1, 2018. Combines three components: a reduced pension (2% instead of 2.5% multiplier), mandatory TSP contributions from military (1% automatic plus up to 5% matching), and a lump sum continuation incentive option.
The Mathematics
Legacy System monthly pension:
BRS monthly pension (after 20 years):
Total monthly income (BRS with TSP):
(Using 4% annual withdrawal equals TSP Balance divided by 300 monthly)
Worked Example
A service member with 22 years of service and $6,000 monthly base pay (High-36 average):
Legacy System:
- Monthly Pension = $6,000 × 0.025 × 22 = $3,300 per month
- Annual Pension = $39,600
- 20-year lifetime (age 40-60) = $792,000
- 30-year lifetime (age 40-70) = $1,188,000
BRS System (with $400,000 TSP balance):
- Monthly Pension = $6,000 × 0.02 × 22 = $2,640 per month
- Monthly TSP Withdrawal (4%) = $400,000 ÷ 300 = $1,333 per month
- Total Monthly = $2,640 + $1,333 = $3,973 per month
- Total Annual (Year 1) = $47,676
- 20-year lifetime = $948,720
- 30-year lifetime = $1,423,080
Comparison: Legacy vs. BRS
| Factor | Legacy (High-36) | BRS |
|---|---|---|
| Pension Multiplier (per year) | 2.5% | 2.0% |
| Immediate Vesting | Yes, at 20 years | Yes, at 20 years (2% only; full benefit after 30 years) |
| Military TSP Contribution | None | 1% automatic plus up to 5% matching |
| Service Member Control | Lower, pension-focused | Higher, personal investment control |
| Lump Sum Option | No | Yes, up to 50% of expected benefits if retained |
| Vesting at 30 Years | Pension = 75% of High-36 | Pension = 60% of High-36 plus larger TSP |
Key Differences
- Pension Reduction: BRS reduces immediate pension by 20% (2.0% vs 2.5% multiplier), but TSP contributions compensate over time through investment growth.
- Investment Control: Legacy service members receive guaranteed income; BRS members bear market risk but have potential for higher returns if markets perform well.
- Portability: Legacy pensions are not portable to new employers; TSP in BRS can be rolled to IRAs or new employer plans.
- Survivor Benefits: Both systems offer Survivor Benefit Plan (SBP) elections, which reduce monthly pay slightly in exchange for continued benefits to survivors.
Limitations and Assumptions
- High-36 Assumption: This calculator uses your input as the High-36 average. Actual High-36 may differ if pay fluctuates significantly in final 3 years.
- TSP Growth Not Modeled: BRS calculation uses current TSP balance without projecting future growth or contributions after retirement.
- No Cost of Living Adjustment (COLA): Military pensions receive annual COLA adjustments (typically 2-3% annually). Calculator shows Year 1 values only.
- Survivor Benefit Plan (SBP): Many service members elect SBP coverage, which reduces monthly pension by approximately 6.5-10% depending on coverage level.
- Tax Liability: Military pension income is fully taxable as ordinary income. Tax rates not calculated here.
- 20-Percent Rule: The BRS 20% reduction assumes no additional service beyond the initial 20 years. Each additional year increases the BRS multiplier toward the Legacy level.
- TSP Investment Returns: Future TSP withdrawal amounts depend entirely on market performance and investment allocation choices.