Under the 2008 National Defense Authorization Act, Congress scaled down the age for receipt of Guard/Reserve retired pay by three months for every 90 days of specified duty performed during any fiscal year after January 28, 2008. Monthly basic pay is calculated by an individual’s rank and years served. medianet_height = "250"; Ryan has written multiple articles on this topic, so in lieu of trying to cover each possible situation in this article, we’ll provide links so you can dive deeper into each program and see how receiving VA disability pay may impact your military retirement pay. For example, 20 states do not tax military retirement at all, while 13 states only implement partial taxation. How much you contribute to your retirement accounts will depend on how much your basic pay is. This retirement plan offers a pension after 20 years of service that equals 2.5% of your average basic pay for your three highest paid years, or 36 months, for each year you serve. The subtraction that may be claimed depends on the retired servicemember’s age at the end of the tax year. Adjust your savings. Members of the military can contribute up to $18,500 to the TSP in 2018 ($24,500 if age 50 or older)—or up to $55,000 for the year if you receive tax-exempt pay while serving in a combat zone. Thinking About Rolling Over Funds From Your Thrift Savings Plan? They can review the estimates provided by the calculator and tell you how to get the most for your retirement. The tax bill can be shocking if you aren’t prepared for it! For immediate assistance or to access confidential help, call the Military OneSource toll free number at 800-342-9647 or international collect at 1-484-530-5908. Redux retirees have their COLA capped by a full percentage point underneath inflation rate while other military retirees get an annual COLA equal to the cost of inflation. You can also go to your on-base finance office for free in-person help figuring out your retirement plans and payments. Taxes Investing; Retirement Planning; How to Calculate Military Retirement & VA Compensation By Kay Lee Calculating concurrent military retirement and VA compensation benefits is a highly personal and specialized calculation. If you are reading this before your military transition, then try to run some calculations based on your pay grade, years of service, and expected tax situation. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered. By law, members can accumulate a total of 60 points per year of inactive-duty time for service before 1996 and 75 points per year for duty performed after 1996. All rights reserved. Deployed military personnel are considered active-duty while full-time duty is spent in military schools and is not eligible for the 60/75 point rule because they are not inactive-duty time. You are about to leave the Military OneSource site. For the Final Pay calculator, you’ll enter all the same information that the other service members did for the High-36 calculator. The amount deducted from their pay for federal withholding tax each month is based on this exceptions number. To illustrate here, we’ll assume retirement straight from active duty. Military Retirement Calculator - Compare military retirement pay against different retirement dates and ranks, estimate future pay for 40 years after retirement and automatically calculates early retirement pay if you enter a retirement date that is less than 20 years of service. (8yrs active 360 x 8 =2880 plus 14yrs res 14 x 78 =1092) The 78 is the average for a normal year in the guard. Although the Department That means your TSP account has a real dollar amount, just like a checking or savings account. These individuals receive a retirement pay that is their final base pay multiplied by the number of years of active-duty service multiplied by 2.5 percent: Final Base Pay × Number of Years of Active-Duty Service × 2.5. Medical retirement pay is tax-free under the condition a member joined before September 24, 1975, and if the military determines that a member’s medical condition is combat related. I think they called it active retired reserves if I’m not mistaken. Just need to talk to someone prior to being officially retired so I can start future planning. Remember, your TSP savings account is an actual account which uses your contributions to invest for your retirement. This step is the simplest – select “Active Duty,” then choose whether you expect to retire from active or reserve duty. Tricare Prime – $23.55/month for single or $47.10 for family plan for 2016 (rates subject to change annually). Calculate to determine the specific dollar amount to be deducted each pay period in order to maximize contributions. Find programs and services at your local installation. The High 36 Program determines retirement pay by using a member’s highest 36 months of basic pay. You may be surprised at how fast tiny contributions today can grow into a fat nest egg of BRS lump-sum retirement payments or steady withdrawals from your Thrift Savings Plan, or TSP, over retirement. This would increase your retirement pay. However, pretend that you’ll get a promotion soon – with a higher basic pay – and stay in for another three years at that pay grade. 11.03 x .025 = 0.27575 Contribution Comparison Calculator – Determine which type of contributions (traditional and/or Roth) will best suit retirement goals. One common topic is how VA Disability Compensation affects your military retirement pay. 10 Veterans Benefits You May Not Know About, Veterans Employment and Training Service (VETS), Security Clearance Jobs After the Military, Military Spouse Career Advancement Accounts (MyCAA), Monthly Housing Allowance (MHA) for the GI Bill, Veterans ID on Driver’s License or ID Card by State. Can you calculate mine ;). For example, if an individual is an E-6 with 20 years of military service and a basic pay of $3,243.30 per month, the equation would run: $3,243.30 × 20 Years = $64,866 $64,866 × 2.5% = $1,621.65. For a total of 22 years. If a member accepts the Career Status Bonus (Redux), their COLA is capped at one full percentage point beneath the rate of inflation. Each of these sections will display total payment for the year, so divide by 12 for your estimated future monthly payments. One of my friends asked me to write about what happens to your military pension when you retire. FREE Weekly Updates! Your Future Depends on Your State of Mind, Writing Military-to-Civilian Resumes: Make Your Resume Interviewable, Work-Therapy (CWT) and Compensated Work-Therapy Transitional Residence (TR) Programs. Still, what you save today will grow significantly by the time you’re ready to retire – even if it’s only a little bit each month. Those having joined the military after September 8, 1980, have a retirement pay that is reduced under High 36. This switch can increase your estimated retirement pay. It’s important to be aware of what your military retirement pay will be so you can properly plan for your military transition. Some states exclude military retired pay from state income taxes. After retirement, veterans specify the number of exemptions they’re eligible for on their W-4. One of my friends asked me to write about the impacts to your cash flow when you retire. References to third party products, rates, and offers may change without notice. The calculator doesn’t give you a guaranteed amount – just an estimate. I wish you the best, and thank you for your service. Military retirement pay is accountable to federal income tax. Veterans can contact their state’s veterans’ office for additional information about state taxes and military retirement pay. This site may be compensated through the bank advertiser Affiliate Program. Remember, the sooner you start planning for your transition to retirement, the more money you’ll have to spend when you get there. You can always customize the responses through drop-down menus. Many of these boxes are pre-filled with the most common responses. Posted In: Military Career & Transition Military Retirement. If you’d like to talk to someone who knows a ton about how to save for the future while still living in the here-and-now, Military OneSource offers free financial counseling for all active-duty service members and their immediate families. Military retirement pay is subject to federal income tax but no FICA (Social Security) deductions. We would like to show you a description here but the site won’t allow us. If increments of a military career were spent as a commissioned officer, the law demands the member have at least 10 years of service as a commissioned officer. When measuring retirement pay, only basic pay militates, which is received by all members of the military. Paycheck Estimator – Estimate how a contribution to a TSP account will affect take-home pay and a account savings over time. When you do your annual tax return, you’re actually calculating your tax liability and reconciling it with the estimated payments that have already been made to the IRS. I was in the Reserves from December 12, 1991 to August 2004. That means you'll need more money to cover your expenses than you would with a Roth IRA, for which withdrawals in retirement can be tax-free. Here’s how to use them – and what you can do to adjust the outcomes to fund your future retirement lifestyle. Here’s how to use the High-3 calculator to see your total projected retirement payments. Once you’ve determined your estimated tax withholding, you’ll want to account for the other programs that you’ll sign up for, such as: Let’s look at a fictional scenario using the numbers I outlined above. You may not know now, so put in your best estimate. © The Military Wallet 2007-2020. They can review your High-3 or Final Pay calculator estimates and offer suggestions on making the most of your future retirement pensions. Guard/Reserve members are eligible for four points for each weekend drill and one point for each day spent on active duty. Enter your account data and we will send you a link to reset your password. How can I get a copy of my points at retirement? The amount of retired pay differs with each individual because of pay increase factors during the member’s final 36 months of service such as: Generally, High 36 retirement pay is approximately 10 percent less than retirement pay for those who aren’t affected by High 36. For those 62 years of age, Redux can provide a unique offer of catch-up in purchasing power. Multiply your monthly income at the end of service by your retirement multiplier to find your monthly retirement pay. How Active-Duty Service Members Can Use the High-3 and Final Pay Military Retirement Calculators. Does REDUX still apply to me? medianet_versionId = "3111299"; In some cases, such as when you qualify for CRDP or CRSC (see below for links), you will continue to receive your full military pension, while also receiving your disability compensation from the VA. Members retiring from the National Guard and Reserves don’t get their retirement pay instantaneously after retirement; they get their first pay at the age of 60.