Project Your Military Retirement — High-3 Plus TSP Plus COLA

The number that determines whether a 20-year military retirement is comfortable, tight, or simply not enough isn’t the pension multiplier — it’s the projection 30 years out. A pension that pays $4,200/month at retirement and grows with COLA pays roughly $7,600/month after 30 years of compounding at 3 percent average inflation. The TSP balance you walk into retirement with, invested appropriately, can grow from $400,000 to over $1.5 million across the same period. Get the projection right and retirement planning becomes clear. Get it wrong and you under-save or over-spend.

Most service members do this math poorly. Mental approximations miss the compounding effect of COLA. Spreadsheets miss the BRS-vs-Legacy distinction. Generic retirement calculators don’t know how military pension and TSP interact. Here’s how to do the projection correctly, with the variables that actually move the number.

The High-3 Calculation

Under the Legacy High-3 retirement system, your monthly pension is:

Monthly Pension = 2.5% × Years of Service × Average of Highest 3 Years of Base Pay

For someone retiring at 20 years, that’s 50 percent of the high-3 base. For 24 years, 60 percent. For 30 years, 75 percent.

The “high-3” is calculated using your highest-paid 36 months of base pay, which for most career service members is the last 36 months before retirement (since pay increases over time and with promotions). For a senior NCO promoting to E-9 in the last 18 months of service, the average will include some E-8 months at lower pay — slightly reducing the high-3.

Concrete examples using 2026 base pay tables (E-7 with 22 years, E-9 with 26 years, O-5 with 24 years):

These are starting amounts. The compounding effect of COLA over 30 years of retirement adds meaningfully to lifetime value.

COLA — The Underappreciated Multiplier

Military retirement pay receives annual Cost-of-Living Adjustments tied to CPI-W (the same metric used for Social Security COLA). Historical average since 1976 is approximately 3.5 percent annually, though recent years have ranged from 2.5 percent to 8.7 percent.

Projecting at 3 percent COLA over 30 years, a starting pension of $5,000/month compounds to $12,136/month — a 142 percent nominal increase. That’s the inflation-protection value of a defined-benefit pension that civilians rarely have access to.

Two implications for retirement planning:

1. Don’t measure retirement income only by starting pension. A retiree starting at $5,000/month and another at $4,800/month will have very different lifetime totals because of the compounding. A 4 percent difference in starting pension compounds into 4 percent more dollars every year for 30 years — meaningful lifetime difference.

2. Plan as if your pension will roughly double in purchasing power over a long retirement. Actually it stays roughly constant in purchasing power if COLA matches inflation exactly, which it usually does within 1-2 percentage points. The doubling is nominal dollars, not purchasing power. But for budgeting in current-dollar terms when planning expenses 25 years out, the nominal number is what matters.

BRS vs Legacy — How the Projection Differs

Under the Blended Retirement System (post-2018 entrants and 2018-window opt-ins), the pension multiplier is 2.0 percent per year instead of 2.5 percent. But BRS adds:

• 4 percent TSP match on employee contributions up to 5 percent
• 1 percent automatic agency TSP contribution
• Continuation pay at year 12 (2.5x to 13x monthly base pay, taxable lump sum)
• Lump sum retirement option (25 percent or 50 percent of pension as lump sum at retirement, reduced monthly until age 67)

The projection comparison: Legacy delivers about 25 percent more in defined-benefit pension. BRS delivers a TSP component with government matching that, invested appropriately over 20-30 years, often exceeds the pension shortfall.

For the BRS-vs-Legacy decision math at specific career lengths, see the BRS vs Legacy career-length analysis.

TSP Growth Projection — The Variable That Compounds

The TSP balance at retirement is the lever that distinguishes good from great retirement outcomes. A 20-year career contributing 5 percent of base pay with full BRS match, invested 80/20 stocks/bonds, can produce approximately $300,000-$500,000 at retirement depending on rank progression and timing.

Post-retirement, that balance continues to grow if you don’t withdraw it immediately. Standard retirement withdrawal rate is 4 percent annually. With proper allocation, the balance grows roughly 5-7 percent annually before withdrawal (depending on stocks/bonds mix), meaning a balance starting at $400,000 can sustain $16,000/year of withdrawals indefinitely while preserving principal.

The compound effect over 30 years of retirement: a $400,000 TSP balance with 4 percent withdrawal and 6 percent growth ends roughly the same value 30 years later in real terms. That’s the magic of the 4 percent rule — withdrawals roughly match real growth, leaving principal intact for legacy planning or unexpected needs.

The Three-Source Retirement Stack

A military retiree’s monthly income typically consists of three sources, each with different projection characteristics:

Military pension — defined, COLA-protected, lifetime guaranteed. Most predictable of the three.

TSP withdrawals — variable, depends on contribution history, market performance, withdrawal strategy. Most upside but most variability.

Social Security retirement — defined formula based on lifetime earnings. Starts at age 62-70 depending on claim date. Independent of military pension.

For a representative E-8 retiring at 22 years with 5 percent TSP throughout career, age 65 financial picture might be:

• Military pension: $4,200/month (COLA-adjusted from retirement)
• TSP withdrawal at 4 percent: $1,500/month from $450K balance
• Social Security retirement: $2,400/month (FRA, based on military + post-military earnings)
• Total: $8,100/month, mostly inflation-protected

For a similar O-5 retiring at 24 years:

• Military pension: $9,500/month (COLA-adjusted from retirement)
• TSP withdrawal at 4 percent: $2,200/month from $650K balance
• Social Security retirement: $3,200/month (FRA)
• Total: $14,900/month, mostly inflation-protected

These figures depend on dozens of variables — promotion timing, TSP allocation, market performance, post-retirement civilian earnings (which affect Social Security calculations). The point is the framework: project all three sources together, not separately, to see the actual retirement picture.

The Decision Points That Move the Number

Service members can influence the projection through several decision points:

1. Push to 22-24 years vs retire at 20. Each additional year adds 2.5 percent to your Legacy multiplier (2.0 percent for BRS), plus high-3 typically increases as you serve longer at higher pay. For an O-5 considering 20 vs 24 years, the difference in lifetime pension can exceed $400,000.

2. Maximize TSP contribution rate, not just minimum. 5 percent captures the full match. 10-15 percent compounds substantially more. The opportunity cost of contributing 5 percent vs 15 percent over a 20-year career can be $300,000+ in TSP balance at retirement.

3. TSP allocation in C/S/I funds vs G fund. Discussed at length in TSP-specific resources. The G-fund trap costs hundreds of thousands.

4. Continuation Pay reinvestment (BRS only). The year-12 lump sum is taxable income. Roll a portion directly to TSP to defer taxes and capture compounding.

5. Lump sum at retirement (BRS). The 25 percent or 50 percent lump sum option is rarely optimal due to unfavorable discount rate, but evaluate it specifically for your situation. Some scenarios (paying off high-interest debt, business capital) justify it.

6. Social Security claiming age. Each year delayed from 62 to 70 increases monthly benefit. Delaying to FRA (67) and beyond is generally optimal for service members planning long retirements, given the COLA-protected nature of Social Security and longer average military-retiree lifespan.

What the Calculator Adds

The advantage of dedicated retirement calculation software over mental math:

1. Accuracy on the pension multiplier and high-3 math. Hand-calculation introduces errors. The calculator references current pay tables and applies the correct multiplier.

2. COLA projection. Compounding annual increases over 30 years is mathematically straightforward but error-prone in mental math. The calculator does it correctly every time.

3. TSP growth modeling. Projecting future TSP balance requires assumptions about contribution rate, allocation, and average returns. The calculator runs these scenarios automatically.

4. Inflation-adjusted projections. Showing both nominal (future dollars) and real (today’s purchasing power) helps with planning.

5. Scenario comparison. Running 20-year vs 24-year vs 30-year scenarios side-by-side is the kind of comparison that informs the career decision.

Action This Year

For service members at any career stage:

Under 10 years: Establish baseline projections at 20, 24, and 30-year retirement marks. Confirm TSP contribution rate is at least 5 percent (full match) and allocation is not 100 percent G fund. Decisions made early have the longest compounding window.

10-15 years: Run the BRS vs Legacy comparison if you had the 2018 option. Verify your projected high-3 trajectory makes sense. Begin thinking about specific retirement scenarios.

15-19 years: Refine the projection annually. Update for any promotion timing changes. Confirm TSP allocation is glide-path appropriate.

Past the 20-year mark: Each additional year is now a discretionary decision. Run the 20-vs-21-vs-22 year scenarios specifically to inform when to actually retire.