Being in the military is not an easy feat. There are, however, incentives to stay long enough in the military, pension benefits being one of them. Retirement benefits in the US military have always been structured to improve retention of recruited military personnels. This article analyzes the best retirement age in the military.
In the US, military retirement is based on the 20-year retirement structure. Service members become eligible for retirement payment after serving in the military for 20 years. A retiring member is eligible to get 2.5% of his/her base salary, multiplied by the years in service (minimum being 20 years). The member keeps receiving this retirement benefit until death.
Thus, after 20 years in service, you get entitlement to 50% of your base salary for the rest of your life. If you started in the military at age 20, you will be entitled to this retirement benefit from age 40 till death (that’s if you do decide to retire). In 2015, the US military spent almost 10% of its annual budget on pension benefits, a whopping $57 billion. The US military holds retirement benefits in high regards. Averagely, as retirement benefits, an enlisted member and an officer get around $200,000 and $700,00 respectively after 20 years in service.
Retirement Structure Pre-2018
Before 2018, as a member, you do not get to enjoy pension benefits if you do not spend a minimum of 20 years in service. Due to various reasons, family being a main one, members retire mostly before 10 years in service and some after 10 years. A study has, however, shown that only one in five members (17%) actually wait 20 years in service to take up the amazing retirement offer.
Around the 20-year mark, a phenomenon known as “cliff vesting” occurs. This phenomenon sees a large number of active service members retire at first opportunity.
However, those who serve beyond 20 years can retire after 40 years in service with extra benefits. They get pension benefits worth 100% of their base salary (2.5% multiplied by 40) when they retire.
Analysts describe the 20 years in service benchmark as “golden handcuffs’, especially after using 10 years in service. Most members with the intent to retire won’t do so as they know retirement before 20 service years brings no retirement benefits. They end up taking minimal and less desirable assignments just to get through the 20 years benchmark.
Retirement Structure Post-2018
Thankfully, 2016 saw the inception of the “Blended Retirement System” (BRS). Basically, the multiplier went down to 2% from 2.5%. From 2018, US military grants members who retire after 20 years of service 40% of their base salary (2% multiplied by 20) as retirement benefits.
Also, the employer contributes 1% of a member’s base salary automatically, which a member can match up to 5%. This retirement plan employs the use of a Thrift Savings Plan.
The BRS, thereby, leaves members who retire before the 20 years of service benchmark with earned benefits. Members roll-over these benefits to their civilian retirement plans when they retire. Consequently, no matter when you decide to retire from the military, you leave with some amount as savings.
The best age of retirement in the military is 20 years plus your base age. If you started serving at 20 years, the best age for you to retire is 40 years. This is because you get entitlement to retirement benefits after 20 years in service. If you also decide to retire before competing 20 years in service, you’ll still have your earned benefits available.