The military pension system is one of the greatest benefits of serving in the military. After twenty years of service, the soldier is entitled to a pension. The pension is calculated based on the number of years of service. For each year of service, the military awards a pension of 2.5%. For twenty years of service, the pension is 50% of base pay; for thirty years of service, the pension is 75% of base pay, etc.
In the past, there was a cap of 75% of base pay. This was changed and those who serve more than thirty years can still have those extra years of service count in the calculation of retirement pay. This also means that those who served more than forty years can receive more than their base pay in retirement.
Base pay can be calculated in several different ways depending on when the soldier entered the military:
1. Before September 1980 = Final Pay System
2. September 8, 1980 – August 1986 = High 36 System
3. After August 1986 = High 36 System or Career Status Bonus/REDUX (CSB) System
In addition, retired service members also receive COLA each year as well.
The DFAS website has more in depth information about military retirement pay.