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); 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 the 36 months of your career in which basic pay was highest — whether or not consecutive (10 U.S.C. § 1407(c); DoD FMR Vol 7B Ch 1, par. 2.2.1.2). For most members that is simply the final 36 months, but after a demotion or a break in service the look-back picks up earlier higher-paid months. The system also handles time at multiple ranks; the math is performed by DFAS at retirement, not by the member.
Thirty years of service reaches 75% of high-3 (30 × 2.5%), but that is no longer a ceiling. For retirements on or after 1 January 2007 the multiplier keeps accruing at 2.5% for every year past 30 — DoD FMR Vol 7B, Ch 3, Table 3-2 note 5: "the retired pay multiplier is the sum of 75 percent for 30 years of service plus 2.5 percent for every year over 30 years." Serving past 30 therefore raises the pension twice over: a larger multiplier and a higher high-3 average if basic pay keeps rising.
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. Per SSA's published COLA history, the CPI-W-based COLA has averaged roughly 2.4–2.7% annually over the past two decades, though high-inflation periods pushed single-year COLAs above 7% (early 1980s; the 8.7% COLA effective January 2023). 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 (members who elected a $30,000 Career Status Bonus at 15 YOS — new CSB agreements ended 31 December 2017 per P.L. 114-92 § 631) receive an annual COLA reduced by 1.0 percentage point throughout retirement, with a one-time restoration of retired pay at age 62 after which the reduced COLA resumes (DoD FMR Vol 7B Ch 3, par. 2.10.2). 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: most states fully exempt military retirement, while others exempt it partially by age, income, or amount. Use the Federal Tax Withholding tool for federal modeling and the State Tax page to see your state's current treatment.
Common deductions from gross retired pay before you see it in your bank account:
- Federal income tax withholding (set via IRS Form W-4P or myPay)
- State income tax withholding (where applicable — DD Form 2866, "Retiree Change of Address/State Tax Withholding Request," or myPay)
- 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 members who complete a 20+ year career, High-3 produces the larger pension; for members who separate before 20 years, BRS wins because the TSP match is portable while High-3 pays nothing without a length-of-service retirement. Members entering on or after 1 Jan 2018 had no choice — they're BRS automatically.
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 more favorable (the member's election) of: (a) the disability percentage × high-3, or (b) 2.5% × YOS × high-3. If neither computation reaches 50%, DFAS pays a minimum of 50% of the retired pay base while the member is on the TDRL (DoD FMR Vol 7B, Ch 3, par. 2.2.2.2.3). The disability percentage itself may not exceed 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.