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Final Pay Retirement System

Final Pay applies to those who entered the Service before September 8, 1980.

Each year of service is worth 2.5% toward the retirement multiplier. Hence, 2.5% x 20 years = 50% and 2.5% x 30 years = 75%. The longer an individual stays on active duty the higher the multiplier and the higher the retirement pay, up to the maximum of 75 percent.

Years of service 20 21 22 23 24 25 26 27 28 29 30
High-3 50% 52.5% 55% 57.5% 60% 62.5% 65% 67.5% 70% 72.5% 75%

This multiplier is applied against the final basic pay of the individual's career. Also, remember only basic pay is used in retirement calculations in all retirement systems. Allowances and special pays do not affect retired pay.

Cost of Living Adjustments (COLA) are given annually based on the increase in the Consumer Price Index (CPI), a measure of inflation. Under the Final Pay Systems and High-3, the annual COLA is equal to CPI. This is a different index than the one used for active duty annual pay raises. The index used for active duty pay raises are based upon average civilian wage increases. Thus, retirement pay COLAs and annual active duty pay raises will differ.

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