Nowadays there are three retirement systems that are available to military personnel of United States army. These are Final Pay, High-3 Year Average and Redux retirement plans. There is separate military retirement calculator for each retirement plan.
Final Pay: available to those who joined army before September 8, 1980;
High-3 Year Average: available to those who joined US army between September 8, 1980 and August 8, 1986 and to those who joined army after August 8, 1986 and did not choose Redux retirement plan;
Redux: available to those who joined the army after August 8, 1986 and received Career Status Bonus. If an individual did not receive Career Status Bonus, than he/she falls under High-3 Year Average;
Calculations for all these plans are quite simple; however below we will discuss this issue in details.
Final Pay – under this plan military retirement calculator multiplies number of years served by an individual in the US army by 2.5% (see table below for details) and the result is multiplied by the base pay. For instance, for a person, who served in the army for 30 years 30×2.5/100=0.75 or 75%. If a base pay is $2000, than the retirement pay will be $1500;
High-3 Year Average – the calculation for this plan is similar to Final Pay calculations. The only difference is that instead of base pay, military retirement calculator uses average basic pay for the highest 36 months of the one’s career is used in military retirement calculator. This is usually last three years of the service, since individual usually reaches the highest pay during last three years of his/her service;
Redux – the calculations under Redux retirement system substantially differs from calculations under previous two retirement schemes. Under Redux retirement plan an individual receives Career Status Bonus that is $30,000 and the difference is that under Redux military retirement calculator counts first 20 years of service as 2% and additional years above 20 counts as 3.5% (see table below for details). Note that for 30 years of service the percentage is 75% as in the cases of Final Pay and High-3 Year Average plans.
Usually using military retirement calculator people calculate initial retirement pay, but in real life it is necessary to account for inflation. To offset adverse effect of inflation Cost of Living Adjustment (COLA) is made every year. COLA adjustment is the same as Consumer Price Index (CPI) for Final Pay and High-3 Year Average plans. Things are a little different for Redux plan. Military retirement calculator uses CPI-1 for inflation. For instance, if CPI was 6% for 2009, Redux is adjusted by 5% (6-1).