Military Retirement Benefits Explained

Military retirement benefits have gotten complicated with all the different systems and changes flying around. As someone who’s helped service members and their families navigate these decisions for years, I learned everything there is to know about what actually matters when you’re planning your transition. Today, I will share it all with you.

That’s what makes military retirement planning endearing to those of us who’ve been through it — once you understand the options, you can actually make informed decisions instead of just accepting defaults.

Types of Military Retirement

Probably should have led with this section, honestly. Your retirement system depends entirely on when you joined:

• Final Pay: Joined before September 8, 1980. Retirement pay based on your final basic pay. Simple math, good deal if you expect promotions late in career.
• High-3: Joined between September 8, 1980, and December 31, 2017. Averages your highest three years of basic pay. Most current retirees fall here.
• Blended Retirement System (BRS): Joined on or after January 1, 2018, or opted in during the 2018 window. Combines a smaller pension with TSP matching. Different math, different planning.

Retired Pay Calculation

The math matters more than people realize:

Final Pay: Final basic pay x 2.5% x years of service. Twenty years at E-7 final pay gives you 50% of that E-7 pay for life.

High-3: Average of your highest 36 months of basic pay x 2.5% x years of service. Usually your last three years unless you were demoted.

BRS: 2.0% multiplier instead of 2.5%, but adds TSP government matching up to 5%. If you leave before 20 years, you keep the TSP. If you hit 20, you get both pension and TSP.

Thrift Savings Plan (TSP)

TSP is the military’s 401(k) equivalent. Under BRS, the government automatically contributes 1% of your pay and matches up to an additional 4% if you contribute. Free money if you participate.

Even under legacy systems, TSP contributions are smart. Tax-advantaged growth, low fees, solid fund options. The Lifecycle funds make reasonable defaults if you don’t want to manage allocation yourself.

Health Care Benefits

TRICARE options for retirees:

• TRICARE Prime: HMO-style, lowest costs, but you use military facilities or network providers. Works well near major bases.
• TRICARE Select: More flexibility in providers, higher costs. Better if you live far from military facilities or have specific doctors.
• TRICARE for Life: Kicks in at 65 when Medicare becomes primary. Covers most of what Medicare doesn’t. Excellent coverage for retirees.

Survivor Benefit Plan (SBP)

SBP ensures your spouse receives income after you die. Costs roughly 6.5% of your retirement pay but provides 55% of your elected base to your survivor for life. The decision to elect or decline SBP happens at retirement and is mostly irreversible.

Run the numbers carefully. Life insurance might be cheaper depending on your age and health, but SBP has inflation adjustment and lasts your spouse’s entire life.

Commissary and Exchange Benefits

Retirees keep commissary and exchange access. Savings vary by what you buy and local prices, but 20-30% off groceries adds up over a lifetime. Tax-free shopping helps too, depending on your state.

VA Benefits (Separate from DoD)

The VA operates independently from military retirement. Benefits include disability compensation, healthcare, home loans, education, and more. File claims for any service-connected conditions — even things that seem minor can add up to meaningful compensation.

VA Disability Compensation

Tax-free monthly payments based on disability rating (0-100%). Higher ratings mean higher payments. Service-connected conditions count regardless of when symptoms appeared, as long as service caused them.

If you have a 50%+ rating, you may be eligible for concurrent receipt — collecting both full retirement pay and full VA disability without offset.

VA Home Loan Program

Zero down payment, no PMI, competitive rates. One of the best benefits available to veterans. Use it for purchasing, refinancing, or building. Reusable throughout your life as long as you repay and restore entitlement.

Military retirement benefits provide substantial financial security when used properly. Understand your specific system, maximize TSP contributions, plan your healthcare carefully, and file for any VA benefits you’ve earned. The combination of these programs can mean a comfortable retirement.