What Should You Know About Military Retirement Benefits?
Military retirement benefits can feel complex, but understanding the key components can make a significant difference in your long-term financial planning. Let’s break down the essentials, starting with the two primary pension systems and the additional benefits that come with service.
The Two Main Military Retirement Systems
Service members typically fall under one of two systems: the Blended Retirement System (BRS) or the Legacy High-3 system. Both require 20 years of service to qualify for a pension, but the way that pension is calculated differs.
The High-3 system uses a formula of 2.5% × years of service × highest 36 months of pay, while the BRS uses 2% × years of service × highest 36 months of pay. While the High-3 offers a larger pension percentage, the BRS includes additional benefits that can make up for the difference.
Cost of Living Adjustments (COLA)
Both systems include annual cost-of-living adjustments (COLA) to help protect purchasing power over time. For example, in 2026, retirees received a 2.8% increase, helping pensions keep pace with inflation.
Survivor Benefit Protection
Military pensions also offer continued support for families through a Survivor Benefit Plan (SBP). This allows a spouse or children to continue receiving a portion of the pension after the retiree passes away. However, this protection comes at a cost, typically around 6.5% of the pension annually, deducted pre-tax.
The Thrift Savings Plan (TSP) Advantage
One of the biggest advantages of the BRS system is access to government contributions in the Thrift Savings Plan (TSP). While both systems allow contributions, only BRS participants receive:
- 1% automatic contribution
- Up to 4% matching contributions
To maximize this benefit, contributing at least 5% is essential. Keep in mind there is a 2-year vesting requirement for government contributions, though your personal contributions are always yours.
New Updates: Secure Act 2.0
Recent updates under Secure Act 2.0 bring additional flexibility to retirement savings:
- Higher contribution limits for those 50+
- Introduction of in-plan Roth conversions within the TSP
These changes provide more opportunities for tax-efficient retirement planning.
Mid-Career Bonus: Continuation Pay
Under the BRS, service members may receive continuation pay, a mid-career bonus typically offered between years 8–12 of service in exchange for a commitment to serve an additional four years. Some branches are beginning to adjust eligibility timing, so it’s worth staying updated on current policies.
Healthcare in Retirement: TRICARE
Another major benefit is TRICARE, which provides lifetime healthcare coverage after 20 years of service. Many retirees use TRICARE alongside civilian employer insurance for additional coverage.
However, there’s a key limitation: if you have TRICARE, you are not eligible to contribute to a Health Savings Account (HSA), even if enrolled in a high-deductible health plan.
Take Control of Your Retirement
Military benefits offer powerful tools, but only if you actively manage them. Take time to:
- Review and adjust contributions through MyPay
- Monitor TSP performance at TSP.gov
- Estimate your pension at militarypay.defense.gov
Don’t go into retirement guessing, understand your benefits, make informed decisions, and take control of your financial future. If you have any questions regarding your military retirement benefits, we are here to help. Schedule a complimentary consultation today!
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