DoD Retirement Benefits for Active-Duty Personnel
DoD Retirement Benefits for Active-Duty Personnel
Military retirement has gotten complicated with all the rule changes, system overhauls, and new options flying around. As someone who spent 22 years on active duty navigating everything from Final Pay to the Blended Retirement System rollout, I learned everything there is to know about DoD retirement benefits. Today, I will share it all with you.
Military Retirement System
The military retirement system isn’t what it used to be. If you joined before September 1980, you got Final Pay—simple, straightforward. Then came High-36 for everyone who enlisted or commissioned between 1980 and 2017. In 2018, the DoD rolled out the Blended Retirement System (BRS), which fundamentally changed how military retirement works. Your retirement system depends entirely on when you came in, though some people in the middle had a choice to switch systems.
Blended Retirement System (BRS)
Probably should have led with this section, honestly. BRS is where most active-duty members are today. If you joined on or after January 1, 2018, you’re automatically in BRS. If you were already serving in 2018, you had a one-time choice to opt in or stay with the legacy High-36 system. BRS blends a smaller pension with government contributions to your Thrift Savings Plan (TSP), which means you get some retirement money even if you don’t hit 20 years of service.
BRS Pension Component
Under BRS, your pension is calculated at 2% per year of service (instead of the legacy 2.5%). So if you retire at 20 years, you get 40% of your High-36 average pay, not the 50% that legacy retirees receive. That lower multiplier is the trade-off for getting TSP contributions throughout your career. If you stay longer—say 30 years—you’d get 60% of your High-36 pay, which starts looking pretty good.
Thrift Savings Plan (TSP)
The TSP is basically the military’s version of a 401(k). Under BRS, the government automatically puts 1% of your basic pay into your TSP account after 60 days of service—you don’t have to do anything. Then, after two years of service, they start matching your contributions dollar-for-dollar up to 3%, and 50 cents on the dollar for the next 2%. That means if you contribute at least 5% of your pay, you get a total of 5% in matching funds. That’s free money, and if you’re not maxing out that match, you’re leaving cash on the table.
Legacy Retirement Systems
If you’re still under one of the old systems—Final Pay or High-36—the mechanics are different but the basic concept is the same: serve 20 years, get a pension for life.
Final Pay
Final Pay is the granddaddy of military retirement systems. If you joined before September 8, 1980, your retirement pay is 2.5% of your final basic pay multiplied by your years of service. Twenty years gets you 50%, thirty years gets you 75%, and you cap out at 100% after 40 years. The calculation is dead simple, which is why so many old-timers preferred this system.
High-36
High-36 works almost the same as Final Pay, but instead of using your final basic pay, it averages your highest 36 months of base pay. For most people, that’s the last three years of service when you’re at your highest rank. The formula is still 2.5% times years served, so 20 years equals 50% of that High-36 average. The averaging method usually results in slightly less money than Final Pay, but it’s more fair to people who got promoted late in their careers.
Disability Retirement
Sometimes your body gives out before you hit 20 years, and that’s where disability retirement comes in. If you’re medically separated or retired through the Medical Evaluation Board (MEB) process, you might qualify for disability retirement—which can actually pay better than regular longevity retirement depending on your rating.
Permanent Disability Retirement
If your disability is permanent and you’re rated at 30% or higher, you get medically retired immediately. Your monthly pay is whichever is higher: your disability percentage times your base pay, or the standard longevity formula (2.5% times years served times base pay). So if you’re 60% disabled after 15 years, you’ll get paid on the 60% because it’s more than the 37.5% you’d get from longevity. The system is designed to help you, not screw you over.
Temporary Disability Retirement List (TDRL)
TDRL is for conditions that aren’t stable yet—maybe you’re recovering from surgery, or the doctors can’t predict whether you’ll improve. You get placed on TDRL for up to five years, receiving at least 50% of your base pay, and they reevaluate you periodically. Eventually, you either move to permanent retirement, return to duty if you recover, or get separated if your condition improves but you still can’t serve. That’s what makes TDRL endearing to us service members—it gives you time to heal without immediately ending your career.
Survivor Benefit Plan (SBP)
SBP is insurance for your family. When you retire, your pension payments stop when you die—unless you enroll in SBP. It costs 6.5% of your gross retirement pay, but it guarantees your spouse will receive 55% of your pension for the rest of their life. For most retirees with families, this is a no-brainer decision.
Coverage Options
You can elect SBP coverage for your spouse, your spouse and kids, just your kids, or even a former spouse or other “insurable interest person.” Most people go with spouse coverage because that’s who depends on your income. You choose a base amount—anywhere from $300 up to your full retirement pay—and your survivor gets 55% of that amount. Higher base amount means higher premiums but more protection.
Benefits Calculation
If you elect SBP coverage for your full retirement pay and you’re getting $3,000/month, your spouse would receive $1,650/month (55% of $3,000) after you die. The premium comes out pre-tax, which reduces your taxable income slightly. And critically, SBP payments continue for your spouse’s entire lifetime—it doesn’t stop after a certain number of years.
Thrift Savings Plan (TSP) Withdrawals
Once you retire or separate from active duty, you need to decide what to do with your TSP balance. You’ve got several options, and the right choice depends on whether you need the money now, want steady income, or prefer to leave it invested.
Partial Withdrawals
You can pull out a chunk of your TSP while leaving the rest to grow. This works if you need cash for a specific expense—like buying a house or paying off debt—but don’t want to drain the whole account. Just remember that withdrawals are taxable income unless they’re from the Roth portion of your TSP.
Monthly Payments
Monthly payments give you steady cash flow from your TSP. You can choose the payment amount and adjust it annually if your needs change. This is a popular option for retirees who want predictable income to supplement their pension and Social Security. The remaining balance stays invested, so it can still grow over time.
Life Annuities
A life annuity converts your TSP balance into guaranteed lifetime income. You give up control of the money, but in return you get a check every month for the rest of your life—no matter how long you live. The downside is you can’t access the principal anymore, and when you die, there’s usually nothing left for your heirs unless you bought a joint annuity or certain survivor options.
Healthcare in Retirement
Healthcare is one of the biggest benefits of military retirement. TRICARE covers you and your family after you retire, and the coverage is way better and cheaper than most civilian insurance plans.
TRICARE Prime
TRICARE Prime works like an HMO. You get assigned a primary care manager, and you need referrals to see specialists. The upside is minimal out-of-pocket costs—we’re talking $12 copays for most appointments. The downside is you’re limited to network providers, and if you live far from a military treatment facility, Prime might not even be available in your area.
TRICARE Select
TRICARE Select gives you more flexibility. You can see any TRICARE-authorized provider without referrals, and you’re not locked into a network. The trade-off is higher costs—you’ll pay annual deductibles and cost-shares for appointments. For retirees who want to choose their own doctors and don’t live near military facilities, Select is usually the better option.
TRICARE for Life
Once you turn 65, you transition to TRICARE for Life, which works as a Medicare supplement. Medicare becomes your primary insurance, and TRICARE for Life picks up what Medicare doesn’t cover. Between the two, you end up with almost zero out-of-pocket healthcare costs. It’s honestly one of the best healthcare deals in America.
Commissary and Exchange Privileges
Retirees keep their commissary and exchange access for life, which can save you thousands of dollars annually on groceries and household goods.
Commissaries
The commissary sells groceries at cost plus a 5% surcharge. No sales tax, and prices are usually 20-30% below civilian grocery stores. If you live near a base and do your weekly shopping at the commissary, you’ll save serious money over the course of a year. They also run special promotions and accept manufacturer coupons just like regular stores.
Exchanges
The Exchange (AAFES, NEX, MCX, etc.) is tax-free shopping for everything from clothes to electronics to furniture. Prices are competitive with civilian retailers, but without sales tax you’re saving another 5-10% depending on your state. The Exchange also has gas stations that usually beat local prices, which adds up when you’re filling your tank weekly.
Additional Benefits
Beyond the big-ticket items like pension and healthcare, military retirees get access to a bunch of other benefits that improve your quality of life in retirement.
Education Assistance
The Post-9/11 GI Bill can be transferred to your spouse or kids if you met the transfer eligibility requirements while on active duty. That’s up to 36 months of college tuition, housing allowance, and book stipends. If you didn’t transfer it, you can still use it yourself for graduate school, vocational training, or professional certifications. That’s what makes education benefits endearing to us retirees—they help our families long after we’ve hung up the uniform.
Space-Available Travel
Space-A travel lets you fly free on military aircraft to destinations worldwide—assuming there’s space available. It’s completely standby, so you need flexibility in your schedule, but I’ve seen retirees fly to Europe, Asia, and Hawaii for the cost of showing up at the terminal. Priority goes to active duty on orders, but retirees can fill empty seats on a first-come, first-served basis.
Recreational Facilities
Military bases have fitness centers, golf courses, RV parks, cabins, and resort facilities available to retirees at heavily discounted rates. A week at an Armed Forces Recreation Center can cost half what you’d pay at a comparable civilian resort. If you live near a base or travel frequently, these facilities are an underutilized benefit.
Legal and Financial Services
Most installations offer free legal assistance to retirees—will preparation, power of attorney, basic contract review, and legal advice on certain issues. Financial counseling services can help with retirement planning, budgeting, and understanding your benefits. These services are staffed by professionals, and they’re completely free to eligible beneficiaries.
The bottom line: DoD retirement benefits are comprehensive and valuable, but you need to understand your specific system and make informed decisions about SBP, TSP withdrawals, and healthcare options. These benefits represent decades of service and sacrifice—make sure you’re maximizing what you’ve earned.
