The Department of Defense uses a multi-step formula to compute your retired pay. The amount generally is based on your length of service or your disability percentage. Factors such as the year you entered service and your retirement type also affect your pay.
Retired Pay Formula
All of the retirement plans determine your monthly pay by multiplying your retired pay base by a service percentage:
Retired Pay Base
x Service Percent Multiplier
= Gross Retired Pay
Your gross retired pay is rounded down to the nearest dollar.
What is My Retired Pay Base?
If you entered active or reserve military service before September 8, 1980, your retired pay will be based on your final basic pay.
If you entered active or reserve military service after September 7, 1980, your retired pay base is the average of the highest 36 months of basic pay. If you served less than three years, your base will be the average monthly active duty basic pay during your period of service.
What is My Service Percent Multiplier?
The longer you stay on active duty, the higher your retirement pay. Each year of active duty service is worth 2.5 percent toward your service percent multiplier.
A retiree with 20 years of service would have a service percent multiplier of 50 percent:
2.5% x 20 years = 50%
Reserve service is “converted” to active service by dividing retirement points by 360.
7200 points divided by 360 = 20 years of active duty service
2.5% x 20 years = 50%
If you retired under CSB/REDUX, your retired pay multiplier will be reduced by 1 percent for each full year. This reduction remains in effect up to the age of 62 when your retired pay will be restored to the same amount paid under the High-3 System.
The multiplier for disability retired pay is either:
2.5 percent for each year of service, or
disability percentage assigned by the service at the time you retire
Either way, the multiplier is limited to 75 percent by law. If you are on the Temporary Disability Retired List, the minimum multiplier is 50 percent while on the TDRL.
DFAS uses the method that results in the largest payment. But if you’d like to choose the other method, please send DFAS your request in writing.