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Easy Guide to the Military Retirement System

The military retirement system is complicated. With multiple pay systems and complex calculations used within each one of them, figuring out where you stand in terms of retirement can be challenging. Today we’ll break down how pensions are set in simple terms.

First, look at your Join Date. That largely controls which system you will use for retirement.

MILITARY JOIN DATES AND MATCHING RETIREMENT SYSTEMS

JOIN DATE RETIREMENT SYSTEM

Before Sep. 8, 1980

Final Pay System

Sep. 9, 1980 – Jul. 31, 1986

High 36 Retirement System 

Aug. 1, 1986 – Dec. 31, 2017

High 36 System or REDUX System

After Jan. 1, 2018

Blended Retirement System (BRS)

When the Blended Retirement System (BRS) went into effect in 2018, active service members with twelve or fewer years of service on December 31, 2017 were given the option to stay in their legacy retirement system or migrate to BRS. These decisions were generally required to be made by military members between 2017-2018. 

FINAL PAY SYSTEM

This is the oldest, least flexible retirement system for service members. The breakdown for pensions is based upon two figures: 

  • Monthly base pay at the time of retirement
  • Number of years in service

These figures are then multiplied by 2.5% to determine a Veteran’s pension.

As with other retirement systems, the longer you stay in service, the greater your pension. 

  • If a Veteran retired with 20 years of service, then they are eligible for 50% of their base pay at the time of retirement. 
  • If a Veteran retired with 40 plus years of service, then they are eligible for 100% of their base pay at the time of retirement. 

The military provides a free calculator for the Final Pay System.

HIGH 36 RETIREMENT SYSTEM

This system is very similar to the Final Pay System. They differ in how the base monthly pay is set. Instead of using the base pay at the end of your service, calculations are based upon the average of the highest 36 months of pay during your YOS. Pension is then determined multiplying 2.5% by base pay and YOS.

The military provides an online calculator for this system.

REDUX SYSTEM

Slightly more complicated than Final Pay and High 36, REDUX created clear incentives for lengthier military careers. Payments also differ based upon the age of the recipient.

Prior to age 62:

  • Base % is 2.5% times the number of your years of service minus 1.0% for each year of service less than that of 30 years.
  • Base pay is average of your highest 36 months of basic pay.

At age 62 and after: 

  • Same as the High 36 System. 
  • 2.5% times the number of your years of service times the average of your highest 36 months of your basic pay.

The military provides an online calculator for the REDUX system.

Prior to December 31, 2017, members with 15+ YOS were eligible to choose a one time, Career Status Bonus (CSB) of $30,000. This is no longer an option. 

BLENDED RETIREMENT SYSTEM (BRS)

The Blended Retirement System provides several alternatives for payments, taking into account the duration of service and potential financial needs for Veterans. It provides traditional military benefits, but also ones similar to that of a 401k. Understanding the different forms of payment is key to planning a career in the military and eventual retirement.

The BRS can be broken down into:

  • Defined Benefit
  • Defined Contribution
  • Continuation Pay
  • Lump Sum

DEFINED BENEFIT

This is the simplest of options within the BRS:

  • Applies to individuals with 20+ years of service (YOS)
  • Benefit multiplier of 2%
  • The longer you serve, the higher your benefit
  • Provides full cost of living adjustment (COLA)
  • You may choose traditional monthly payments or a LUMP SUM 

DEFINED CONTRIBUTION

This is the most complex of all the categories with the BRS. It involves contributions to the federal Thrift Savings Plan (TSP), an investment plan similar to a 401k. Here are the basics:

  • A TSP account will be set up for you generally within 60 days of starting service.
  • The military automatically contributes a matching 1% contribution to your TSP account.
  • If you choose to increase your contributions to your TSP account, the military will match up to 4% on those you make.
  • Contributions can be made via your service’s online pay portal.
  • The TSP is a portable retirement account, meaning that upon ending service, it can be transferred to an IRA or a 401k account from a civilian employer.

For more information about the TSP, visit its website.

CONTINUATION PAY

Active service members may select to receive  a one-time, mid career bonus payment called Continuation Pay.

  • You are eligible for it when you complete between eight, but no greater than twelve years of service (YOS). 
  • Continuation Pay is 2.5 to 13 times your regular pay.
  • How the rate of pay is set is service specific.

Also, note that:

  • Opting for Continuation Pay incurs an additional service obligation of three years or greater, depending on your Service. 
  • Continuation Pay is taxable income. It may change your tax bracket.

LUMP SUM

You may opt to receive 25-50% of your total retired pay up front.

There are currently two options:

  • One lump sum
  • Four equal payments distributed over four years

If you choose either of the lump sum payments, your monthly retirement pay will then be reduced by either 75-50% until you reach full Social Security age.

If you choose to receive any of the lump sum options, you must officially file for it at least 90 days prior to the end of your service.  

For Veterans in need of a larger amount of cash, this may be a good option. However, it may also raise your tax bracket, as it is taxable income.

The military provides an online calculator to help determine possible payments under the BRS.

For more information, visit: https://militarypay.defense.gov/BlendedRetirement/

WHAT’S NEXT?

Pension payments are only one component to post-service life.

SAVI is here every step of the way to help you transition from service-member to thriving Veteran retiree. Our retirement track can provide additional resources and coaching for that purpose. 

https://savivets.org

The military retirement system is complicated. With multiple pay systems and complex calculations used within each one of them, figuring out where you stand in terms of retirement can be challenging. Today we’ll break down how pensions are set in simple terms.

First, look at your Join Date. That largely controls which system you will use for retirement.

MILITARY JOIN DATES AND MATCHING RETIREMENT SYSTEMS

JOIN DATE RETIREMENT SYSTEM

Before Sep. 8, 1980

Final Pay System

Sep. 9, 1980 – Jul. 31, 1986

High 36 Retirement System 

Aug. 1, 1986 – Dec. 31, 2017

High 36 System or REDUX System

After Jan. 1, 2018

Blended Retirement System (BRS)

When the Blended Retirement System (BRS) went into effect in 2018, active service members with twelve or fewer years of service on December 31, 2017 were given the option to stay in their legacy retirement system or migrate to BRS. These decisions were generally required to be made by military members between 2017-2018. 

FINAL PAY SYSTEM

This is the oldest, least flexible retirement system for service members. The breakdown for pensions is based upon two figures: 

  • Monthly base pay at the time of retirement
  • Number of years in service

These figures are then multiplied by 2.5% to determine a Veteran’s pension.

As with other retirement systems, the longer you stay in service, the greater your pension. 

  • If a Veteran retired with 20 years of service, then they are eligible for 50% of their base pay at the time of retirement. 
  • If a Veteran retired with 40 plus years of service, then they are eligible for 100% of their base pay at the time of retirement. 

The military provides a free calculator for the Final Pay System.

HIGH 36 RETIREMENT SYSTEM

This system is very similar to the Final Pay System. They differ in how the base monthly pay is set. Instead of using the base pay at the end of your service, calculations are based upon the average of the highest 36 months of pay during your YOS. Pension is then determined multiplying 2.5% by base pay and YOS.

The military provides an online calculator for this system.

REDUX SYSTEM

Slightly more complicated than Final Pay and High 36, REDUX created clear incentives for lengthier military careers. Payments also differ based upon the age of the recipient.

Prior to age 62:

  • Base % is 2.5% times the number of your years of service minus 1.0% for each year of service less than that of 30 years.
  • Base pay is average of your highest 36 months of basic pay.

At age 62 and after: 

  • Same as the High 36 System. 
  • 2.5% times the number of your years of service times the average of your highest 36 months of your basic pay.

The military provides an online calculator for the REDUX system.

Prior to December 31, 2017, members with 15+ YOS were eligible to choose a one time, Career Status Bonus (CSB) of $30,000. This is no longer an option. 

BLENDED RETIREMENT SYSTEM (BRS)

The Blended Retirement System provides several alternatives for payments, taking into account the duration of service and potential financial needs for Veterans. It provides traditional military benefits, but also ones similar to that of a 401k. Understanding the different forms of payment is key to planning a career in the military and eventual retirement.

The BRS can be broken down into:

  • Defined Benefit
  • Defined Contribution
  • Continuation Pay
  • Lump Sum

DEFINED BENEFIT

This is the simplest of options within the BRS:

  • Applies to individuals with 20+ years of service (YOS)
  • Benefit multiplier of 2%
  • The longer you serve, the higher your benefit
  • Provides full cost of living adjustment (COLA)
  • You may choose traditional monthly payments or a LUMP SUM 

DEFINED CONTRIBUTION

This is the most complex of all the categories with the BRS. It involves contributions to the federal Thrift Savings Plan (TSP), an investment plan similar to a 401k. Here are the basics:

  • A TSP account will be set up for you generally within 60 days of starting service.
  • The military automatically contributes a matching 1% contribution to your TSP account.
  • If you choose to increase your contributions to your TSP account, the military will match up to 4% on those you make.
  • Contributions can be made via your service’s online pay portal.
  • The TSP is a portable retirement account, meaning that upon ending service, it can be transferred to an IRA or a 401k account from a civilian employer.

For more information about the TSP, visit its website.

CONTINUATION PAY

Active service members may select to receive  a one-time, mid career bonus payment called Continuation Pay.

  • You are eligible for it when you complete between eight, but no greater than twelve years of service (YOS). 
  • Continuation Pay is 2.5 to 13 times your regular pay.
  • How the rate of pay is set is service specific.

Also, note that:

  • Opting for Continuation Pay incurs an additional service obligation of three years or greater, depending on your Service. 
  • Continuation Pay is taxable income. It may change your tax bracket.

LUMP SUM

You may opt to receive 25-50% of your total retired pay up front.

There are currently two options:

  • One lump sum
  • Four equal payments distributed over four years

If you choose either of the lump sum payments, your monthly retirement pay will then be reduced by either 75-50% until you reach full Social Security age.

If you choose to receive any of the lump sum options, you must officially file for it at least 90 days prior to the end of your service.  

For Veterans in need of a larger amount of cash, this may be a good option. However, it may also raise your tax bracket, as it is taxable income.

The military provides an online calculator to help determine possible payments under the BRS.

For more information, visit: https://militarypay.defense.gov/BlendedRetirement/

WHAT’S NEXT?

Pension payments are only one component to post-service life.

SAVI is here every step of the way to help you transition from service-member to thriving Veteran retiree. Our retirement track can provide additional resources and coaching for that purpose. 

https://savivets.org

Contact Us

Have a question about your Veteran benefits? You can email us today! If you are within one-year pre to post-military separation, you can enroll in our FREE program by setting up a call with one of our transition coaches.

Healthcare Options For Veteran Retirees

With the coronavirus pandemic affecting every country on the planet, maintaining quality healthcare is on most people’s minds. This is especially true for Veterans, who may also face life-long treatment for service-connected disabilities. Luckily, there are many healthcare options for retirees to fit a variety of needs. 

Healthcare for Veterans generally falls under two options: VA Healthcare and TRICARE Prime. We’ll walk through each of them and provide links to additional resources to help you gain access to healthcare as you retire from service. 

TRICARE PRIME

Upon retiring, Veterans have the option of continuing to use TRICARE Prime. If you wish to stay with the same team of healthcare providers, this may be a good option for you and your family. Retired service members and their family members will no longer receive zero out of pocket coverage and will be faced with enrollment costs and co-pays. When retired service members and their families become eligible for Medicare based upon age, they are no longer eligible for TRICARE Prime.

TRICARE Prime is divided into two geographical regions. Visit this page to determine whether you should enroll in the regional plans. 

VA HEALTHCARE

You may also choose to transition to VA Healthcare. Coverage within this program is dependent upon each Veteran’s specific healthcare needs. Baseline services are extended if you require care specific to injuries or disabilities sustained during service.

Visit this page for information about making the switch from TRICARE Prime during active-service to VA Healthcare upon retirement. 

TRICARE PRIME AND VA HEALTHCARE, COMPARED:

OPTION TRICARE PRIME VA HEALTHCARE
Geographic availability Available in Prime Service Areas  1200 locations across the United States
Available for family members YES Case dependent for surviving spouses through the VA Civilian Health and Medical Program (CHAMPVA)
Co-Pay YES Dependent upon economic assessment
Works with other healthcare plans (Medicare, Medicaid, private insurance) NO YES
Mental health services to treat PTSD, MST, depression, and substance use problems Referral based and case contingent YES
Covers assisted-living or at home care NO Partial coverage
Vision Coverage Routine eye exams every two years

Routine eye exams 

Additional coverage for glasses, case contingent. 

Dental coverage

NO 

(Discontinued after retirement)

Certain cases
Coverage for caregivers NO Possibly. Case contingent
Application assistance 

YES

 

East Region: 

1-800-444-5445 

West Region: 1-844-866-9378

YES 

 

All regions:

877-222-8387

WHAT’S NEXT? 

 

If you do not enroll in either program and are not the recipient of private health insurance through a job, you or your dependents may still enroll in health care coverage provided by the Affordable Care Act ACA. Visit your state healthcare exchange to enroll in programs.

 

SAVI is here to help counsel Veterans as you make important choices regarding the future of your healthcare. Visit https://savivets.org/veterans-transition-assistance to learn about coaching services for creating your best post-service life. 

Contact Us

Have a question about your Veteran benefits? You can email us today! If you are within one-year pre to post-military separation, you can enroll in our FREE program by setting up a call with one of our transition coaches.

Understanding Retired Pay and VA Compensation and CRPD

Understanding Retired Pay and VA Compensation and CRPD

Retirement options can be complicated and difficult to understand. Today we’ll break down the options so that you can make the best choices for your future. The three main options are:

  • Retired Pay
  • VA Compensation
  • Concurrent Retirement and Disability Pay (CRDP) 

RETIRED PAY

Retired Pay is the pension you receive after retiring from the military. There are a variety of retirement plans which have different methods of determining monthly pay. To find out more about them in detail, visit here. No matter which retirement program you are enrolled in, your Retired Pay is considered taxable income. 

The Veterans Administration provides benefits separate from Retired Pay.

VA COMPENSATION

VA Compensation is a tax-free payment separate from your pension. The Veterans Administration provides benefits to most Veterans (or their dependents) with service-related disabilities. (Veterans with dishonorable discharges are ineligible for the benefits.) VA benefits for Veterans generally fall under one of two categories:

  • Disability Compensation
  • Special Monthly Compensation (SMC)

DISABILITY COMPENSATION

Disability compensation is a tax-free benefit paid to retirees who suffered injuries or illness during their military service. They are designed to compensate Veterans for a resulting lack of employment or diminished working time. They are paid to:

  • Veterans with disabilities resulting from a disease or injury sustained or aggravated during active military service.
  • Veterans with post-service disabilities that are considered related or secondary to disabilities occurring in service and for disabilities presumed to be related to circumstances of military service, even if they may develop after service.
  • Certain Veterans disabled from VA health care.

Regional offices are currently closed due to the coronavirus pandemic, but you can apply online for VA disability compensation here. The standard wait is four months to hear back about a claim. However, there are ways in which you may expedite a claim.

SPECIAL MONTHLY COMPENSATION (SMC)

SMC is a benefit that can be paid to Veterans, Veteran spouses, surviving spouses, and Veteran parents. The amount of the SMC is determined by the circumstances of the recipient.

Veterans may receive a higher rate of compensation due to special circumstances such as the need of aid and attendance by another person or a specific disability (e.g. the loss of a limb).

Spouses and surviving spouses may receive compensation based upon the need to aid and attendance by another person. This benefit is often referred to as “aid and attendance.” 

CONCURRENT RETIREMENT AND DISABILITY PAY (CRDP)

CRDP allows military retirees to receive both retired pay and Veterans Affairs (VA) compensation at the same time. It’s designed to offset VA disability payments. This option was prohibited for many years and was completely phased in during 2014. It is provided by the Defense Finance and Accounting Service (DFAS). 

There are specific requirements needed to be met for eligibility. You may be eligible for CRDP is you are a:

  • Regular retiree with a VA disability rating of 50% or higher.
  • Reserve retiree with 20 qualifying years of service, with a VA disability rating of 50% or higher, who has reached the set retirement age for your specific service.  
  • Retired under the Temporary Early Retirement Act (TERA) and have a VA disability rating of 50 percent or greater.
  • Disability retiree who earned entitlement to retired pay under any provision of law other than solely by disability, and you have a VA disability rating of 50% or higher. You might become eligible for CRDP at the time you would have become eligible for retired pay.

However, you do not need to enroll in CRDP. If you are eligible, you will be automatically enrolled. 

In some cases, such as if the VA determines that your disability makes you unemployable, then you may receive not just offset payment, but full payment of retired pay and VA compensation at the same time.

If you have any questions regarding your CRDP payments, call DFAS at: 800-321-1080

CONCLUSION

For all applications, regardless of category, you will be asked to provide documentation regarding the disability. The VA requires a clear connection between a condition and a service-related injury. If the application seems overwhelming, you are entitled to FREE representation through an accredited claims agent or a Veteran Service Organization (VSO) to help you prepare and submit your claim for benefits. 

Contact Us

Have a question about your Veteran benefits? You can email us today! If you are within one-year pre to post-military separation, you can enroll in our FREE program by setting up a call with one of our transition coaches.

Giving Back

One of the challenges of transitioning to civilian life is renewing your sense of purpose. From bootcamp and onward, you spent years working to uphold the US Constitution and protect your country. Many Veterans experience feelings of loss and aimlessness when returning to relatively mundane civilian life. One way to combat those feelings is by performing another kind of service– this one for your community.

A community may be geographic in nature, but you can also be defined by a group of people with a common interest, purpose, or way of life.

Various Communities:

  • Veteran-centered organizations (like SAVI) 
  • Religious organizations affiliated with your church, temple, or mosque
  • LGBTQIA organizations
  • Educational  organizations
  • Organizations that help the homeless 

Additional Benefits of Volunteering

Just because you’re helping out your community, doesn’t mean you don’t have to receive benefits in return. Volunteering may give you a new purpose during your transition to civilian life, but there are other benefits you may find in it.

Benefit one: Meeting New People

A great way to make new friends is to engage an activity that you enjoy with like-minded people. Volunteering can provide openings for new friendships, strengthen existing relationships, and overall increase your support network. 

Benefit Two: Increase Your Social Skills

If you’re an introvert or someone who tends to be shy, volunteering can be a way for you to hone your social skills. Engaging in conversations with strangers is a lot easier if you have a central topic to talk about. (With the added bonus that you won’t have to resort to talking about the weather.) The more practice you have, the easier it will be for you to talk to strangers in non-volunteering situations.  

Benefit Three: Better Your Mental Health

Volunteerism may have a positive impact upon your mental health by reducing negative feelings. Connecting with other people and giving yourself tasks to focus on that are outside of your normal life are ways to reduce stress, anger, and anxiety, 

Conversely, volunteering may also increase certain positive feelings. Accomplishing goals for a community organization may give you a sense of pride and increase your self-confidence. This may in turn have a ripple effect, leading to an overall positive outlook on life. 

Benefit Four: Career Advancement

Volunteering is a great way to test drive a new career field without actually quitting your job. It can also give you valuable experience to add to your resume and provide opportunities to meet other professionals in the field. Volunteering can also increase your professional skills, depending on the type of training you are provided for your role.  

If you’re not considering a new career, changing careers, volunteering can provide opportunities for you to hone skills that are valuable in your given profession. Interacting with people outside your workplace, you can try out new approaches to teamwork, project management, and problem solving. Once you feel more confident in your skills, you can take what you’ve learned and apply it to your job. 

Benefit Five: R & R

Just because you’re helping out with your community, doesn’t mean you can’t have fun at the same time! 

If your volunteerism follows your personal interests, then it can provide a needed outlet outside of work and family commitments. If you enjoy being creative, then volunteer with an arts organization. If spending time outside brings you happiness and relaxes you, then consider participating in a local garbage clean-up service or non-profit that plants trees. If nothing calms you like petting a dog or cat, then volunteer with a local animal shelter. 

With many states involved in some form of lockdown during the pandemic, volunteering for an organization geared toward your personal or creative interests might be able to recharge you in much needed ways.

What If I Don’t Know Where to Start?

If you’re unsure of where to volunteer or find the prospect of approaching an organization to be daunting, we suggest using a service that will match you with organizations in need of individuals like you. The skills you acquired while serving in the military may seem niche in nature, but you’ll be surprised to discover the wide variety of skill sets and tasks needed by non-profits. This is particularly true now, during the coronavirus pandemic, when so many people are in need to aid. 

Services that connect volunteers with organizations also have numerous work from home opportunities. So if you’re disabled or want to stay home due to concerns about contracting coronavirus, there are still many ways that you may volunteer from the comfort of your living room.

SAVI recommends the following services for connecting with volunteering opportunities:

Every little bit may help your community, but also give you a reason to get out of bed or get out the door.

I Want to Help, But…

There is a possibility that you already care about a community, but there are currently few to no organizations assisting it. That’s where your leadership skills from the military kick in. SAVI’s founder, Adrianne Phillips, started SAVI because she saw a need for coaching to help service members transitioning from the military. 

You, too, can start a new initiative. It doesn’t have to be a herculean task that you take on in entirety. It can start simply with coffee between a few like minded people.

Contact Us

Have a question about your Veteran benefits? You can email us today! If you are within one-year pre to post-military separation, you can enroll in our FREE program by setting up a call with one of our transition coaches.

Are You Engaging Your Veteran Constituents In Ways That Inspire Them to Give?

Are You Engaging Your Veteran Constituents In Ways That Inspire Them to Give?

Are You Engaging Your Veteran Constituents In Ways That Inspire Them to GiveOne of the best ways we can feel connected to our local communities and to the world around us is through engagement. This can take many different forms, including doing some volunteer work and making donations or other charitable contributions to causes which matter to us. Spending the time, energy, and funds to do these things truly helps us stay linked to others, but often we get tied up in our own daily lives and lose sight of that fact.

This often happens with military Veterans. Many Veterans constituents who’ve transitioned out of the military face unique social challenges. Studies have shown they are at risk of experiencing isolation and disconnection from the “civilian world” at times. This can lead to undesirable effects on their personal morale and welfare, even leading in some cases to depression. So it’s especially important for Veterans to take part in giving efforts, but how can you engage and inspire them to do so?

Doing great things such as giving back to others has a positive effect on our well being, so one way to inspire others to give is to demonstrate that effect! If there is a charity or cause you’d like to raise participation in, advertise it through flyers, emails, and social media. Explain the problem and the impact that donations have on funding solutions to address it. Show infographics or, when possible, videos featuring the people or places which derive benefit from the help given.

Veterans are highly trained in following procedures and processes. They feel most at ease when they have an understanding of how things work and what the end goal is. So if you’re seeking their involvement in a charitable project, it’s important to take the time to explain clearly what’s going on.

The fastest way to make a Veteran lose interest is to leave details hazy. The U.S. Equal Employment Opportunity Commission recognized this fact when they wrote their Veterans and the Americans with Disabilities Act (ADA): A Guide for Employers. In it, they specify how “breaking complex assignments into smaller, separate tasks” can assist with comprehension in many cases.

So—do that. Walk them through the mission phases of giving:

who it’s for;
what it’s about;
where the impact will be;
when things will change or improve (or whatever is the objective);
why to do it;
how exactly to do it.

Let’s take a look at an example. Say you want your Veteran constituents to consider giving to a local branch of Habitat for Humanity. You might want to start by talking about Veterans Build, which is one of their initiatives tailored specifically towards helping Veterans, service members, their families. That’s the “who.”

Next, explain “what” Habitat for Humanity does for such persons, such as building “safe, decent, affordable housing” as well as repairing existing homes.

If there’s a specific home or area being focused on, tell “where” that’ll be so they know the impact location. Then give a timeline of “when” things will occur, from start to projected finish.

After that, explain “why” the Veteran’s help is needed and then close with a Call to Action telling them “how” they can get involved right away!

Contact Us

Have a question about your Veteran benefits? You can email us today! If you are within one-year pre to post-military separation, you can enroll in our FREE program by setting up a call with one of our transition coaches.