The High-3 formula in detail
Your monthly retired pay equals 2.5% × Years of Service × Average of highest 36 months of basic pay. The 2.5% multiplier comes from 10 U.S.C. § 1409(b)(1)(A); the high-3 average is defined in 10 U.S.C. § 1407; the computation procedure lives in DoD FMR Volume 7B, Chapter 3.
"Highest 36 months" means consecutive months of basic pay — usually the final 36, but if you took a temporary demotion or retired-on-disability, the look-back can include earlier higher-paid months. The system also handles broken service and time at multiple ranks; the math is performed by DFAS at retirement, not by the member.
Maximum benefit caps at 75% of high-3. That equates to 30 years of service(30 × 2.5% = 75%). YOS beyond 30 does not increase the pension under High-3 — but it does increase the high-3 average if your basic pay continues to rise. Many senior officers and senior enlisted advisors hit the 75% cap and continue serving for the high-3 effect alone.
COLA: how your pension keeps up with inflation
High-3 retirees receive full CPI-W cost-of-living adjustments annually under 10 U.S.C. § 1401a. CPI-W has averaged roughly 2.4–2.7% annually over the past two decades, though high-inflation periods (1980s, 2022) drove one-year COLAs above 7%. The 30-year-with-COLA estimate above models a flat 2.5% annual COLA — a defensible long-term average. Historical actual COLAs are published by SSA each October.
CSB/REDUX retirees (the system you can opt into for a $30,000 lump sum at 15 YOS) take a permanent 1.0-percentage-point COLA penalty each year before age 62 and a one-time catch-up at 62. High-3 has no COLA penalty.
Taxes, allotments, and SBP premiums
Retired pay is fully taxable as ordinary income for federal purposes (it is reported on a 1099-R, not a W-2). State tax treatment varies: roughly 30 states fully exempt military retirement, others partially exempt by age or amount, and some (e.g., California, Vermont) tax it as regular income. Use the Federal Tax Withholding tool for federal modeling and the State Tax page to see your state's treatment.
Common deductions from gross retired pay before you see it in your bank account:
- Federal income tax withholding (you choose via DD 2866 / myPay)
- State income tax withholding (where applicable)
- Survivor Benefit Plan (SBP) premium — typically 6.5% of base amount for spouse coverage
- VA disability offset (waived if you elect VA compensation; 100% restored under CRDP if you have 50%+ VA rating with 20+ YOS)
- Court-ordered USFSPA former-spouse pension division (if applicable)
- Federal Long Term Care Insurance (FLTCIP) premiums (voluntary)
- Survivor Benefit Plan / RCSBP premiums for reservists
High-3 vs. BRS — a quick comparison
The Blended Retirement System (BRS) replaced High-3 for everyone entering service on or after 1 Jan 2018. Key differences:
| Feature | High-3 | BRS |
|---|---|---|
| Multiplier | 2.5% × YOS | 2.0% × YOS |
| TSP government contribution | None | 1% auto + up to 4% match |
| Continuation Pay (at 12 YOS) | None | 2.5–13× monthly base pay |
| Lump-sum option | None | 25% or 50% of pension to age 67 |
| Vesting period (TSP) | N/A | 2 years for the 1% auto contribution |
| Eligibility for retirement | 20 YOS | 20 YOS |
BRS produces a 20% lower pension multiplier in exchange for the TSP match + continuation pay + lump-sum option. For long-career retirees who stay 30+ years, High-3 is mathematically superior; for separators who leave around 12 YOS, BRS wins because the TSP match is portable. Most members entering after 2018 had no choice — they're BRS by default.
Disability retirement under Chapter 61
If you separate due to a service-connected disability under Chapter 61 of Title 10 (TDRL or PDRL), the pension formula uses the greater of: (a) the disability percentage × high-3, or (b) 2.5% × YOS × high-3. The TDRL minimum is 30% per the rating board; the maximum (under TDRL) is 75%. Chapter 61 retirees may also qualify for VA disability compensation (separate from the Chapter 61 retirement) and, in some cases, CRSC.
This calculator does not yet model Chapter 61 — coming in a future tool. For now, use the standard High-3 formula as a floor and consult finance / Veterans Service Office for the disability-specific computation.