Military Compensation

• Basic Pay Table and Growth Rates - The BRS Calculator uses the current Military Pay Chart. Future military pay increases (excluding promotion and longevity increases) are projected from the DoD Future Year Defense Program (‘FYDP’). Military pay raises beyond the FYDP will use the Board of Actuaries’ annual across-the-board basic pay assumption, currently of 2.75% per year.

• Cost of Living Adjustments (COLA) - The calculator uses future Military Retirement System COLA rates as projected by the Office of Management and Budget (OMB) for the immediate five calendar years.COLAs beyond the most immediate five years will use the DoD Board of Actuaries annual inflation assumption of 2.5% per year.

• Government Discount Rate (GDR) for Determining the Lump Sum Calculation - This rate is approved annually by the Deputy Assistant Secretary of Defense(Military Personnel Policy) based on calculations provided by the DoD Office of the Actuary.As of January 1, 2021, the GDR for determining lump sum is 6.73% (in real economic terms).

• Present Value -To determine the present value of an annuity stream for comparative financial purposes the future stream of then - year annuity payments are discounted to a current, or "present," value.The discount rate used is the Board of Actuaries’ annual nominal interest assumption of 4.25% per year.

• Thrift Savings Plan(TSP) Elective Deferral - Each year the Internal Revenue Service (IRS) determines the maximum amount an individual can contribute to tax - deferred savings plans like the TSP.The elective deferral limit for 2019 is $19,500 (excludes catch-up contributions beyond age 50). The calculator assumes the annual cap increases, on average, $500 annually to account for anticipated IRS cap increases.

Members of the Reserve Component calculate their retirement differently than the Active Component. In general, Reserve Component Service members need a minimum of 20 qualifying years of service to be eligible to retire. A qualifying year in the Reserve Component means the member earned a minimum of 50 retirement points. Service that results in fewer than 50 points in a given year will not count as a qualifying year towards retirement.

Reserve Component members earn 15 points for each year they participate in the Reserve Component. This includes service in the Individual Ready Reserve (IRR) of the Ready Reserve. Reserve Component members earn additional points through their annual participation. Participation is broken down into active service and inactive service. Examples of the types of active service include:

• Active Duty (AD), and full-time National Guard duty.
• Inactive Duty Service – Inactive Duty Training (paid and non-paid), and membership in a Reserve Component.

The maximum number of retirement points a Service member can earn in any given year is 365 (366 in leap years). This corresponds to serving every day on active service. By law, there is a cap on the amount of in active duty points that can be accrued for retirement in a given year.

Calculation of a non-regular retirement starts by taking your total number of retirement points and dividing by 360 (the military considers a month as 30 days for pay purposes, so each day is worth 1/30th of a month--12 months would then equal 360 days). For example, if you had 3,960 retirement points, you would have 11 years of equivalent years of service.

The next step in calculating a non-regular retirement is to multiple the equivalent years of service by the retirement multiplier. Under the BRS the multiplier is 2.0% times equivalent years of service. For example, 11 equivalent years of service (i.e., 3,960 points) is worth 22% under BRS (11 x 2.0% = 22.0%). Partial years are calculated in a similar manner; months are worth 1/12 of a year and days are worth 1/30th of a month.

When you are considering when to collect retirement benefits, one important factor to take into account is how long you might live.

According to data compiled by the Social Security Administration:

• A man reaching age 65 today can expect to live, on average, until age 84.3.
• A woman turning age 65 today can expect to live, on average, until age 86.6.

According to data compiled by the Department of Defense’s Office of the Actuary:

• A male service member can expect to live, on average, until age 83.
• A female service member can expect to live, on average, until age 85.

And those are just averages. About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95. The chart below shows that an individual who has lived to age 65 has a substantial life expectancy. Also, when an individual is part of a couple, the likelihood of at least one member of the couple living beyond age 90 is substantial. So when considering your retirement needs, think beyond the average. This is particularly important if you have a family history of longevity, are in good health, and maintain a healthy lifestyle.

Want to know your life expectancy? You can use the Social Security Administration’s simple Life Expectancy Calculator to get a rough estimate of how long you (or your spouse) may live. Knowing this information can help you make a more informed choice regarding when to collect your TSP retirement benefits.

The FRTIB offers several options for withdrawing the money from your account. Because the TSP is tax-deferred, there are IRS rules and restrictions if you retire before a specified age and withdraw money from your account prior to age 59 ½. TSP is unique in that any uniformed service members who retire in the calendar year in which they are age 55 or older can access any and all money in their TSP account without penalty. However, if you retire prior to the year in which you are age 55 there is a 10% early withdrawal penalty on all withdrawals prior to reaching the age of 59 ½, unless your withdraw funds are based on projected life expectancy. If you are separated from the Uniformed Service, you will be required to start withdrawing your money by April 1 of the year following the year you turn age 70½.

When making your decision, it's important to think about your income needs and the lifestyle you would like to have in retirement. The approach you take to withdrawing your TSP account depends on your specific goals. Visit TSP.gov for more information.

Each year the IRS determines the maximum amount you can contribute to a tax-deferred savings plans like the TSP. You should keep the annual contribution limit in mind when deciding how much you will contribute to your TSP account [b:each pay period]. If you reach the annual maximum too quickly, you could lose some Government Matching Contributions, because you only receive Government Matching Contributions on the first 5% of your basic pay that you contribute each pay period. If you reach the annual limit before the end of the year, your contributions (and consequently your Government Matching Contributions) will stop. (If you are purposely making larger contributions early in the year in an attempt to maximize your earnings, be aware that the amount you could lose in Government Matching Contributions would, in all likelihood, be far greater than the value of the added earnings you might receive by making employee contributions sooner.)

Government Automatic (1%) Contributions

If you choose to opt into the BRS, the Government will contribute an amount equal to 1% of your basic pay each pay date to your TSP account. These are called Government Automatic (1%) Contributions. There is no waiting period for opt-in service members, and you do not need to be making contributions to receive them.

Government Matching Contributions

If you choose to opt into the Blended Retirement System, you will receive Government Matching Contributions from the Government based on your regular contributions. There is no waiting period for opt-in service members, but you do have to make regular contributions each pay period to receive them.

Reserve Component members earn 15 points for each year they participate in the Reserve Component. This includes service in the Individual Ready Reserve (IRR) of the Ready Reserve.

Reserve Component members earn additional points through their annual participation. Participation is broken down into Active Service and Inactive Service. Examples of the types of service include:

• Active Duty (AD), and full-time National Guard duty (FTNGD)
• Inactive Duty Service – Inactive Duty Training (IDT) (i.e., paid or non-paid drills), and membership in an Reserve Component.

Points breakdown:

• 1 point for each day on Active Service (AD, FTNGD)
• 1 point per drill (IDT) period (Each drill weekend normally has 4 periods)
• 1 point for serving in an Honor Guard for Funeral Honors Duty (normally capped at 1 point per day, regardless of the number of funerals in which you serve as an Honor Guard).
The maximum number of retirement points a Service member can earn in any given year is 365 (366 in leap years). This corresponds to serving every day on active duty. By law, there is a cap on the amount of inactive duty points that can be accrued for retirement in a given year. By law, there is a cap on the amount of inactive duty points that can be accrued for retirement in a given year.
• Reserve year ends on or after 30 Oct 2007: max of 130 points
• Reserve year ends on or after 29 Oct 2000: max of 90 points

A typical year in the National Guard or Reserve should be worth approximately 78 Retirement Points. This is broken down as:

• 15 points – Annual Participation (membership points)
• 48 points (ID Paid) – 12 Monthly Drills, 4 drill periods per month
• 0 points (ID Non-paid)
• 14 points – Annual Training (this can vary based on your unit)
• Additional Points as earned (training, Honor Guard, mobilizations, etc.).

Keep in mind these are guidelines, there will be exceptions.

The Blended Retirement System provides the opportunity for Service members to elect a portion of their retired pay as a lump sum upon retirement. This means you can receive money upfront as an advance on your own retired pay. The Lump Sum Option could be a very valuable opportunity for Service members entering retirement. This payment may provide you the opportunity to pay off debts, buy a house, or even to start a business. It is important to understand, though, that there is a cost to receiving your retired pay upfront. The amount you receive will be less than you would have gotten if it was spread out over normal monthly payments. Also, there are tax considerations to understand, and the Lump Sum payment may even impact any disability compensation you are entitled to from the Department of Veterans Affairs.

You may choose to receive either 50 percent or 25 percent of the discounted present value of your future retirement payments in exchange for reduced monthly retired pay from when you retire until when you reach the Social Security “full retirement age”, which for most people is age 67. At age 67, your retired pay goes back to its full amount.

For Reserve Component Members

Like their active duty counterparts, Reserve Component members participating in the Blended Retirement System have the option of electing a lump sum payment of retired pay. Like all retired pay, though, Reserve Component members qualifying for a “non-regular retirement” are not eligible to get this lump sum until becoming entitled to retired pay.” Usually this is age 60, but your age of eligibility may be reduced if you have certain types of qualifying active service.

Thrift Savings Plan (TSP): Participating in the TSP can significantly increase your retirement income, but starting early is important. Contributing early gives the money in your account more time to increase in value through the compounding of earnings.

TSP Contribution: To maximize the government matching TSP contributions you need to contribute 5 percent of your basic pay. Anything less and you are leaving money on the table. However, you can contribute more than 5 percent up to the IRS contribution limit. If you can make ends meet, try 7 percent or even 10 percent.

TSP Return Rate: Investment performance (linked to the rate of return) can dramatically affect your TSP retirement benefit. If you invest aggressively and have a few good years of market performance your retirement benefit will likely increase. Similarly, if your investments decrease in value, your benefit might shrink as a result.

Retirement Age/Years of Service: How long you serve or when you retire can affect your retirement benefit. Basically, the earlier you leave or retire from service, the smaller your retirement benefit will be. If you leave service or retire at a young age, you’ll be missing out on TSP contributions and compounding growth of those contributions or the increase in your total defined benefit.

Military Pay/Career Progression: The amount of money you earn, which is based off of your years of service and your grade, has a major effect on your retirement benefits. With the defined benefit plan, the government pension is based on the average of your highest 36 months of basic pay. In a defined contribution plan, such as the TSP, the amount you contribute and the amount the government contributes is based on a percentage of your basic pay or inactive duty pay. In both the defined benefit and with TSP, higher pay, and a longer career will result in greater retirement benefits.

Life Expectancy: When you are considering when to collect retirement benefits, one important factor to take into account is how long you might live. About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95. So when considering your retirement needs, think beyond the average. This is particularly important if you have a family history of longevity, are in good health, and maintain a healthy lifestyle.