In recognition of their service to the country, men and women who have served in the United States armed forces for at least 20 years are eligible to receive retirement pay. Military retirement pay offers several advantages: it is guaranteed for life, adjusted for inflation annually and payable once a service member retires, according to USAA.
Retirement Pay
Retired military officers with 20 years of service are eligible to receive a percentage of their basic pay as retirement pay. Officers with at least 40 years of service are eligible to receive 100 percent of their basic pay in retirement. There are three basic plans in which service members may be eligible to participate, depending on when they begin service. Each plan calculates basic pay differently and can provide very different financial results.
Final Pay
Retired military officers that entered the service before September 8, 1980 are only eligible to participate in the Final Pay plan. Under the final pay plan, an officer's monthly retirement payment is equal to the pay received on the final month of service, plus a multiplier of 2.5 percent of the base pay for each year of service. A cost of living adjustment is calculated each year based on the Consumer Price Index.
High-36
Military personnel who entered service between September 8, 1980 and July 31, 1986 are eligible for the High-36, or High-3, plan. Under the High-36 plan, retirement pay is based on an average of the highest 36 months of basic pay. Like the Final Pay plan, the High-36 plan combines the average base pay plus a multiplier of 2.5 percent of the base pay for each year of service. The High-36 plan also includes a cost of living adjustment based on the Consumer Price Index.
CSB/Redux
Service members that entered the armed forces from August 1, 1986 have the option of choosing the High-36 plan or the Career Status Bonus/Redux plan, or CSB/Redux. The monthly retirement pay is calculated in the same manner as the High-36 plan. However, with the CBS/Redux plan, a retiree is paid a multiplier of two percent for the first 20 years of service, with the multiplier increasing to 3.5 percent for each year of service over 20. Military personnel are required to choose their preferred plan when they have reached the 15th year of service. Those who select the CSB/Redux plan receive a cash bonus of $30,000, but are required to serve at least 20 years. This plan does include a cost of living adjustment, but unlike the other plans it is calculated by subtracting one percent from the Consumer Price Index.
