How Much Is Military Retirement Worth?

Are you or your spouse a military retiree wondering, “How much is military retirement worth?” Or maybe you’re planning on serving 20 years to earn that highly coveted military pension and wondering what kind of financial security it will provide.

Here’s the truth: Your military pension is more than just a monthly paycheck—it’s a tremendous asset. By the time you retire, you may be so accustomed to monthly pay statements that it’s easy to underestimate the true value of what you’ve earned. But don’t make that mistake. Your pension isn’t just a nice little income—it’s a financial cornerstone for your and your family’s future.

Let’s break it down so you can better understand what this means and how to make the most of it.

How to Calculate Military Retirement Pay

The first step in understanding your military retirement is knowing how it’s calculated. The formula varies depending on whether you’re retiring under the Legacy High-3 System or the Blended Retirement System (BRS). If you’re under the Legacy High-3 System, your retirement pay is calculated by taking your highest 36 months of basic pay and multiplying it by 2. 5% for each year of service.

If you’re under the BRS, your retirement pay is calculated by taking your highest 36 months of basic pay and multiplying it by 2% for each year of service. Understanding these calculations is crucial for planning your future military retirement benefits.

The High-3 Formula

Under the High-3 system, your retirement pay is calculated as follows:

[Years of Service] x [2.5%] x [Average of Your Highest 36 Months of Basic Pay]

For example, if you’re an O5 with 20 years of service:

• Average Basic Pay: $10,000 per month
• Calculation: 20 x 2.5% = 50% of $10,000
• Monthly pension: $5,000

Blended Retirement System (BRS)

The BRS uses a similar formula but at a lower multiplier of 2.0% per year of service. It also includes matching contributions to your Thrift Savings Plan (TSP). While this system provides more flexibility, the total retirement benefit is typically lower than the High-3 system.

So, How Much Is Military Retirement Worth?

Let’s put it into perspective. If you’re an O5 retiring under the High-3 system with 20 years of service, your annual retirement pay will be $60,000. Over 30 years that totals $1.8 million before adjusting for inflation. You’ve earned that asset; unfortunately, you can’t access it all at once, so it must be protected.

The True Value of Your Pension: More Than Meets the Eye

Your pension is more than just the dollar amount on your monthly pay stub. It’s an asset you’ve earned through decades of service and sacrifice. But most military families don’t think about it that way, and that’s where opportunity cost comes into play.

By focusing only on the monthly check, you risk treating your pension as a side income instead of the powerful financial tool it is. Here’s the wake-up call: If you’re not maximizing its potential, you could leave money—and security—on the table.

Regular Military Compensation: A Hidden Advantage

Many service members underestimate their earnings because they don’t fully understand Regular Military Compensation (RMC). RMC includes:

• Basic Pay
• Basic Allowance for Housing (BAH)
• Basic Allowance for Subsistence (BAS)
• Tax Advantages of these allowances

For example, an O6 with 30 years of service might have an RMC of $241,000 per year, even though their taxable income is much lower at $142K.

This is why matching your basic pay to a civilian salary after retiring can lead to a significant pay cut. Understanding your RMC is helpful when negotiating a better salary and planning your post-military financial future.

The Survivor Benefit Plan (SBP): Is It Worth It?

One of the most significant decisions you’ll face as a retiree is enrolling in the Survivor Benefit Plan (SBP). The SBP costs 6.5% of your retirement pay and provides your spouse with 55% of your pension if you pass away. While this sounds like a good deal, there are better options than this.

Consider this: If you live for 30 years after retiring, you’ll have paid thousands in SBP premiums. And if your spouse outlives you, they’ll only receive a portion of your pension. For many families, this doesn’t provide the flexibility or financial security they need.

Alternatives to SBP: Protecting Your Pension the Right Way

There are modern solutions that can help you protect your pension while offering more significant benefits than SBP. For example, privatized life insurance can provide:

• A tax-free lump sum death benefit for your spouse
• An annuity-like income stream similar to your pension
• Equity growth tied to market performance
• Liquidity to access funds during your lifetime

This alternative safeguards your family’s financial future and gives you more control over your retirement income.

Maximizing the Value of Your Military Pension

To truly understand and protect the value of your military pension, you need a plan. At US VetWealth, we’ve developed the War Chest Strategy, a life insurance solution that helps retirees like you: This strategy allows you to protect your pension from inflation, market downturns, and taxes while providing a tax-free death benefit for your loved ones. With different life insurance options for military retirement, you can customize the War Chest Strategy to fit your specific needs and financial goals. Whether you’re looking to leave a legacy or simply protect your retirement income, having a plan in place is essential for maximizing the value of your military pension.

• Protect the total value of your pension
• Manage taxes and inflation
• Use it to fund your retirement and leave a legacy for your family

Unlike traditional retirement savings plans, the War Chest offers market-linked returns, managed costs, and greater flexibility. It’s

Protect Your Military Retirement Pay

Military retirement isn’t just a paycheck—it’s the result of decades of dedication and sacrifice. By understanding its true value and exploring alternatives like privatized life insurance, you can turn your pension into a powerful asset that works for you and your family.

Want to learn more about how to protect and maximize your military retirement? Schedule a free discovery call today to see how the War Chest Strategy can help you achieve your financial goals.