Learn how to calculate military retirement and how the point system works, eligibility, and benefits for national guard and army reserve retired pay.
Understanding National Guard or Reserve Retirement Benefits
Retirement benefits for members of the National Guard and Reserves in the U.S. military is based on a points system where the total number of retirement points get converted into years of service when calculating a military pension. This article reviews how the points are accumulated and their impact on retirement income as well as reviewing the military retirement pay calculation for these members of US uniformed services.
The Point System for a Guard or Reservist’s Military Pension
Accumulating Points for Military Retired Pay
To earn points for future military retirement benefits, those in the reserves or National Guard have to complete “regular duties,” which include:
- Annual Training
- Monthly Weekend Drills
- Correspondence Courses
- Funeral honors duty
- Active Service
There are also 15 points awarded for every year that an individual is an active member of either the national guard or reserves. Active duty service plays a significant role in calculating reserve retirement pay. Each day of active duty counts towards retirement points for a guard or reserve member. A year of active duty service typically equates to 365 retirement points. Reserve members who have served on active duty for extended periods typically find their retirement pay significantly enhanced.
Understanding Inactive Points for Retirement Years
One important aspect of the point system is the “qualified year” rule. Known as “good year,” this is when a servicemember collects at least 50 points in a calendar year. If they fail to garner the minimum amount (which is technically 35 points since 15 are given for active membership), then none of the points received that year can count towards their retirement calculation. While the years will be recognized as being in active reserve status, the points cannot count when calculating military retirement pay and benefits. Points can also not be combined with another year’s points, either. If the minimum of 50 retirement points is not met for a given year, all the points are considered inactive and are not eligible for retirement.
Converting Points into Years for Monthly Retirement Pay
With 7200 points, national guard and reserve members become eligible for retired pay as 7200 points equals 20 years and reserve members with 20 years of service become eligible to receive retired pay. To convert years into points (for active duty members entering the reserves), multiply the number of years by 360. To convert points into years for calculating one’s base pay in retirement, simply divide the point total by 360.
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How is Guard and Reserve Retirement Pay Calculated?
Comparing Traditional and Blended Retirement Systems
Before calculating one’s military pension, the retirement system must be identified. There is a legacy system and a newer one known as the the blended retirement system. While both types of retirement are calculated by multiplying number of service years by the high-3 average salary, the old system takes the resulting number and multiplies it by a factor of 2.5% to attain the basic pay benefit amount. The Blended Retirement System (BRS) uses a multiplier of 2.0% that results in a lower pension amount, but those under BRS are allowed to participate in the Thrift Savings Plan (TSP). This system aims to provide more flexibility and financial security for reserve members, allowing them to benefit from both a pension and investment growth. The traditional retirement system for reserve members relied solely on a pension without an investment savings component.
Retiring under the BRS? Try our TSP Calculator to estimate retirement income.
The Application Process and Age Requirements for Military Retired Pay
Important Age Requirements, the Retired Reserve, and the “Gray Area”
Members of the military reserve or national guard receive retired pay until they reach age 60. At this point, the choice is between honorably discharging from ready reserve service or joining the retired reserve, which can boost benefits through longevity credits but also might mean getting recalled into active duty under certain circumstances. You can enter the retired reserve before age 60, but you must be 60 years of age before retired pay can be claimed. The “gray area” refers to the period between a reserve member’s transfer to the retired reserve and the point at which they begin receiving retired pay. During this time, members are not yet receiving retirement pay, but they remain eligible for certain benefits, such as commissary and exchange privileges. Transitioning from the gray area to receiving retired pay requires careful planning and timely action.
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Application Requirements to Start Receiving Retired Pay
A retired member of the ready reserve is generally eligible to receive retired pay at age 60, provided they have completed the required years of service and have sufficient retirement points earned. Eligibility criteria may vary slightly depending on the member’s specific reserve component, such as the Army Reserve, Air National Guard, or Marine Corps reserve.
Application for Retired Pay: Submitting DD-2656
Applying for retirement benefits involves several steps, including submitting an application through the appropriate military channels. Reserve members should gather all necessary documentation, including service records and proof of retirement points, to support their application. It is advisable to start the application process well before reaching age 60 to allow for any potential delays and ensure a seamless transition to receiving retired pay. Submitting DD form 2656 to DFAS is the main application document needed. Although it cannot be submitted before age 60, having it fully prepped before then can help can help in expediting the process.
What is the Reserve Component Survivor Benefit Plan?
The Reserve Component Survivor Benefit Plan (RCSBP) provides financial protection for the beneficiaries of reserve members in the event of their death. This benefit plan allows members to elect coverage for their spouses and dependents, ensuring they receive a portion of the member’s retirement pay. The plan requires members to make elections upon reaching retirement eligibility, and premiums are deducted from the member’s retired pay.
Who is Eligible for the Survivor Benefit Plan?
Eligibility for the RCSBP extends to reserve members who have completed the required years of service and are entitled to retired pay. Members must elect coverage within a specific timeframe, typically upon reaching retirement eligibility or during designated open enrollment periods. It is crucial for reserve members to understand their eligibility and make timely elections to secure coverage for their beneficiaries.
Steps to Enroll in the Reserve Component Survivor Benefit Plan
Enrolling in the RCSBP involves several steps, including completing the necessary forms and selecting the desired level of coverage. Reserve members should carefully consider their options and consult with financial advisors if needed to make informed decisions. Once enrolled, members can rest assured that their beneficiaries will receive financial support in the event of their passing.
Reach Out to Us!
If you have additional federal benefit questions, contact our team of CERTIFIED FINANCIAL PLANNER™ (CFP®) and Chartered Federal Employee Benefits Consultants (ChFEBC℠). At PlanWell, we are federal employee financial advisors with a focus on retirement planning. Learn more about our process designed for the career fed.
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