9152 / What types of retirement benefits are military servicemembers generally entitled to receive?
Historically, the perceived generous retirement benefits of a military career are a compelling reason for a servicemember to continue service beyond his or her initial enlistment and to stay for a career either on active duty or in reserve system.1 However, historically, over 80 percent of servicemembers who enlist do not make it to the full 20 years for a retirement.2
Military servicemembers who qualify for retirement have many types of retirement benefits they may qualify for, choices to make on how to receive retirement benefits, and risks to their retirement income. Active and reserve component retirees even have different rules between when their retirement eligibility begins and how much their pensions will pay. The advent of the Blended Retirement System, with its new benefits, adds yet another set of calculations for current and prospective retirees. Those servicemembers with Veteran’s Affairs rated disabilities have some additional calculations to make. While all of this information is available through a labyrinth of government websites, it is not easy to aggregate or calculate with the degree of certainty one might like when planning a retirement income roadmap.
Planning Point: Military retirees also contend with the traditional risks associated with running out of money in retirement. Those risks include a significant increase of federal income taxation, outliving their retirement savings, and paying for the costs of long-term care. Without careful analysis and professional guidance, a servicemember could make mistakes in the present that will not manifest themselves until retirement. Justin L. Baker, JD, MBA, Army Reserve Lieutenant Colonel, Candidate for LLM in Wealth Management and Masters in Strategic Studies at the U.S. Army War College; https://www.bakerwealthstrategies.com/welcome/
Retirement Benefits Generally
Members of the armed services can qualify for Department of Defense (DoD) retirement benefits after completing a satisfactory period of service. The amount of benefits depends primarily on whether the servicemember receives an active duty retirement or reserve retirement. Several other factors are considered in determining a servicemember’s eligibility for retirement, variety of retirement benefits, the age at which benefits begin, whether the plan is a defined contribution or defined benefit plan, and how much the pension pays. Additionally, any service-related disabilities factor into the determination of benefits that a veteran is entitled to receive.