US military retirement is unusually generous compared to most private-sector pensions. For service members staying to retirement (typically 20+ years), the package is substantial. For veterans transitioning out short of retirement, partial benefits and the GI Bill apply.
This page covers the major components.
For service members reaching 20 years of active service:
Pension = 2.5% × years of service × highest 3 years of base pay (High-3).
Example: 20 years × 2.5% = 50% of High-3 base pay.
For 30 years: 75%.
Pension begins immediately upon retirement (no waiting period). Cost-of-living adjustments apply.
Reduced pension multiplier (2% instead of 2.5%) plus matching contributions to TSP (military's 401(k) equivalent).
Pension at 20 years: 40% of High-3. TSP matching: government matches up to 5% of base pay contribution.
Plus: continuation pay bonus at year 12 if you commit to 4 more years.
For most service members, BRS is the current system.
Pension at age 60 (later for some service after 2008). Calculated by points system rather than years.
For citizen soldiers committing 20+ years, valuable but delayed.
For military retirees, Tricare provides healthcare coverage:
Pre-65 retirees. Different cost structures and provider networks.
Costs: low premiums; modest copays; reasonable provider networks.
Compared to civilian retirement healthcare, dramatically cheaper.
Wraps around Medicare for retirees 65+. Very low cost; comprehensive coverage.
Combined with Medicare, military retirees over 65 have excellent healthcare with minimal out-of-pocket.
Spouse and dependents typically covered. Costs vary.
Survivor Benefit Plan (SBP) provides annuity to surviving spouse. See PensionMaximizationStrategies.
The military's 401(k) equivalent. Available to all service members.
The TSP has some of the lowest expense ratios anywhere. For investors, it's an excellent vehicle.
Government matches up to 5% of base pay. Always contribute at least 5% to capture the match.
Upon separation, TSP can be rolled to IRA. Many do this for more investment options. Some keep TSP for the low fees.
For most: roll to IRA for control; some keep TSP for lifetime low costs.
For service members and veterans:
For service after 9/11. Pays:
Significant value: $50K-$100K+ depending on situation.
Service members can transfer GI Bill benefits to spouse or children. Requirements: 6 years of service; commit to 4 more.
For families, this is often the highest-value benefit.
For service-connected disabilities:
10%-100%. Higher rating = higher monthly payment, more benefits.
VA disability payments are not taxed at federal level. Significant after-tax value.
Higher ratings unlock additional benefits: VA healthcare priority; education assistance; housing grants.
For a 20-year retiree:
For a senior NCO retiring at 38 with 20 years: pension might be $35K/year, healthcare via Tricare, TSP balance of $200K+, and ability to start a second career. The combination is powerful.
Service members planning transition:
For 20-year retirement, the math is overwhelming. For 18-19 year separation, the lost benefits (full pension, full Tricare) are substantial. Common: stay to 20 if at all possible.
Below 20 years: fewer benefits but more flexibility. GI Bill, VA benefits, TSP all apply.
Military retirement is generous but not enough by itself for most retirees' lifestyle. Most retire from military and start civilian careers, working another 10-20 years.
This produces unusual retirement readiness — military pension + Social Security + civilian retirement savings + Tricare + Medicare. Very comfortable retirement.
File at separation. Documentation gets harder later. Even minor conditions often qualify.
Some states don't tax military retirement. Some don't tax retirement income generally. Choosing state of residence at retirement matters.
Some retirees receive both military pension and VA disability. Rules complex; varies by retirement type and disability rating.
Provides annuity to surviving spouse. Cost: 6.5% of pension. Election at retirement; locked in.
For most: take SBP. Without it, surviving spouse has no military pension income.
See PensionMaximizationStrategies.
Some retirees from active duty join Reserve/Guard for additional benefits. The points and time accumulate; can boost final pension.
Many military retirees enter defense contracting. Combination of military pension + civilian salary creates strong income; civilian benefits add additional retirement.
Surviving spouse has no income post-retiree-death. Catastrophic for many families.
Lowest-cost retirement account available; under-contributed by many service members.
Children become college-age; GI Bill transferred too late or not at all.
"I'm not really hurt." Five years later, conditions worsen; documentation harder.
Pension taxed at high state rate; could have moved before retiring.
"I have a pension and Tricare; don't need to save more." Lifestyle expansion eats up the pension; civilian savings still needed.
For active service members: