If you're planning for military retirement, understanding your retirement system is crucial for financial planning. Whether you're under the legacy High-3 system or the newer Blended Retirement System (BRS), knowing how your pension is calculated can help you make smarter career and financial decisions.
The High-3 Retirement System (Legacy)
The High-3 system has been the military's standard retirement plan for decades. If you entered service before January 1, 2018, you're likely under this system (unless you opted into BRS during the opt-in period).
How High-3 Works
The formula is simple:
- Take your highest 36 months of base pay (usually your last 3 years)
- Multiply by 2.5% for each year of service
- Result: Your monthly retirement pay
Example: An E-7 retiring at 20 years with an average base pay of $5,467/month would receive:
- 20 years × 2.5% = 50%
- $5,467 × 50% = $2,733/month retirement pay
The High-3 system is an all-or-nothing deal: you need 20 years of service to receive any retirement pay. But if you make it to 20, you're guaranteed 50% of your base pay for life, with annual cost-of-living adjustments.
The Blended Retirement System (BRS)
Introduced in 2018, BRS combines a reduced pension with a government 401(k)-style match through the Thrift Savings Plan (TSP). If you entered service after January 1, 2018, you're automatically in BRS.
Key Components of BRS
- Reduced Pension: Instead of 2.5% per year, BRS gives you 2.0% per year of service
- TSP Match: The government matches up to 5% of your base pay into your TSP
- Continuation Pay: A mid-career bonus (8-12 months base pay) at 12 years of service
- Portability: You keep TSP contributions even if you don't make it to 20 years
BRS Pension Example: Same E-7 at 20 years:
- 20 years × 2.0% = 40%
- $5,467 × 40% = $2,186/month retirement pay
That's $547/month less than High-3 – but you also have your TSP account balance, which (with proper contributions and market returns) could exceed the value of the extra pension over time.
Which System is Better?
There's no universal answer – it depends on your situation:
High-3 is Better If:
- You're confident you'll stay for 20+ years
- You prefer guaranteed, predictable income
- You're not disciplined about saving and investing
- You're close to retirement (grandfathered into High-3)
BRS is Better If:
- You might separate before 20 years (you keep TSP contributions)
- You're early in your career with 15+ years until retirement
- You max out TSP contributions and invest wisely
- You want more control over your retirement savings
💡 Pro Tip: If you're in BRS, make sure you contribute at least 5% to TSP to get the full government match. That's free money you're leaving on the table otherwise.
Planning Your Civilian Transition
Regardless of which system you're under, understanding your retirement pay is just the first step. You also need to factor in:
- VA Disability Compensation: Tax-free monthly payments based on your disability rating
- Healthcare Costs: TRICARE eligibility and premiums
- State Taxes: Some states don't tax military retirement pay
- Living Expenses: Your actual monthly budget
That's where our Military Retirement Calculator comes in. It helps you determine exactly what civilian salary you need by factoring in all these variables.
Conclusion
Whether you're under High-3 or BRS, the most important thing is to understand how your system works and plan accordingly. Run the numbers, contribute to TSP, and have a clear picture of your financial needs before you transition.
Don't leave your financial future to chance – use data to make informed decisions.