Active Duty to Retirement: Pay Issues

The move from active duty to retirement is a big, with all sorts of issues, but the biggest issue is pay.  Not only will your retired pay be significantly lower than your active duty pay, but the time of transition can be a little unsettled.  The last active duty pay can be held up to 60 days, and the first retired pay doesn’t arrive until a month after retirement.  Education and preparation are key to making sure this time isn’t more challenging than necessary.

Calculating your retired pay is relatively simple.  First, you need to know which retirement pay plan you have:  High Three or Career Status Bonus/Redux*.  Both plans work off the average of the highest 36 months of active duty pay that you have received.  This is called your “base pay.”  Retirement is calculated under the High Three plan unless you selected the Redux plan.

For high three retirees, calculate your retired pay by taking your total years of service and multiplying by 2.5.  The result is the percentage of your base pay that you will receive in retired pay.

If you selected the Redux plan and received the Career Status Bonus, then you calculate your percentage by starting with 40% for 20 years of service and adding 3.5% for each additional year of service.

Knowing how much money to expect, and when to expect it, is a huge step in working through the transition from active duty to retirement.  Congratulations!




*Folks who entered the service prior to September 8, 1980, use a slightly different calculation.

About the Author

Kate Horrell
Kate Horrell is a military financial coach, mom of four teens, and Navy spouse. She has a background in taxes and mortgage banking, and a trove of experience helping other military families with their money. Follow her on twitter @realKateHorrell.
  • Dan d’Errico

    Nice that retirees get a two plan option for calculating their retirement pay. I don’t remember thse plans twentyone years ago when I retired. Don’t forget to figure in income taxes on retired pay, along with alimony, and social security. And keep up with your address changes, so you’ll keep getting those deposits on time! And any injurys that you may have inccurred during your twenty plus years will count for VA bennies too! Have pplenty of documentation for the VA too!

    • Nick

      My MOS allowed me to walk right into a civilian job. I just wanted to go fishing. Instead due to Tax’s spent extra time working overtime and my retirement pay went to IRS . Plan ahead recommended.

  • Col J

    Obama will hurt retirees given the opportunity. And this is one. He must go.

    • nukeman

      And you think Romney will not?

    • Zaira

      I would not be so quick to predict… know what you have…you don’t know what you’re going to get….Obama has stood tall by our troops during the ” pay freeze ” fiasco and other times……4 years is only time to figure out the problems…the other 4 is to rectify them….stop being a pessimist and give the man enough time to act on his words….his position was one of tremendous challenges and he handled it all rather gracefully…..and…he does not use pre-written or pre-meditated words to express the math here sir, with all due respect.

  • marvin mobley

    I retired in 1970 before the changes made to determine your retired pay. I received 50% of my last “BASIC” pay, no housing, rations etc. just basic. As an E-7 with 20 years my first retirement check was for $300……I did not attend my retirement ……I had taken my last 30 days on leave and already working at my first post retirement job…….. Whole Chicken at the off base grocer 15 cents per lab…………What I draw now with COL increases, the ratio for my 15 cent chicken is about the same……..When I retired for disability at age 62 I had not a penny in savings, (Everyone must have a savings plan, is what everyone tells ya…..)What I want to express, my living style has not changed much over the years) I live within my income and enjoy all 79 years so far, shooting for 95 at the least,,,,, 105 at the most………….

    • Chuck Stevenson

      Hi, Moe,

      I’m glad to see you’re still kicking and apparently are well.

      It’s funny how often I think of Landsberg. It keeps getting better all the time. And what a great bunch of guys.



    Yes times sure have changed and not all for the better. I retired in 1978 and not only had a job but thank god for miracles I have never missed a check and no mistakes. Miracles do happen. AIRBORNE! GERONIMO!!

  • hkc

    and yet our congress gets full pay for any service when they leave congress. Why dont we get full pay after twenty or thirty years of service. our jobs are much more dangerous and more technical than a politician.. I am sick of it all…..

    • mcgregoram

      Ahhh, not true, hkc! According to the Congressional Research Service, as of October 1, 2010, 443 retired Members of Congress were receiving federal pensions based fully or in part on their congressional service. Of this number, 262 had retired under the old Civil Service Retirement System (CSRS) and 181 has retired under (the current) Federal Employee Retirement System (FERS). Members who had retired under CSRS had an average annual annuity of $69,420. Those who had retired under FERS had an average annual annuity of $38,460. Vesting under both systems requires a minimum of 5 years of service, with retirement payable beginning at age 62 (exception – CSRS Members with 10 years of service in Congress are eligible for an immediate pension at age 60).

  • madraider6

    Retired from FT.Lewis in 98, went through ACAP paid attention never missed a check knew what I was going to be paid in retirement saved my leave, worked at a job while still drawing active duty pay for over a month, it was a good year!

  • Cornelius Boone

    Did anyone notice a significant decrease in there retirement pay for May 2013. I’m looking at my pay to be posted and I’m a little more than $525.00 less for this month. Do anyone know why this might have happened?

    • KateKashman

      Cornelius, have you checked your Retiree Account Statement on the MyPay system? It should give you a complete breakdown of the parts of your deposit. I’m sure you will find the answer there! Hope that helps.

  • Cornelius Boone

    Or do anyone know where I can address this loss of pay?