How is military retired pay calculated?

Multiply your years of service (each full extra month counts as 1/12 of a year) by 2.5%, or by 2% under the Blended Retirement System, and apply that percentage to your retired-pay base: the average of your highest 36 months of basic pay under High-3 and BRS, or your final basic pay under Final Pay. With 20 years and a $7,500 High-3 that is 50% of $7,500, or $3,750 a month.

Which retirement system am I under?

Final Pay if you entered service before September 8, 1980; High-3 if you entered after September 7, 1980; REDUX if you entered after July 31, 1986 and took the Career Status Bonus; the Blended Retirement System if you entered on or after January 1, 2018 or opted into it.

How does REDUX change the pension?

REDUX takes 1 percentage point off the multiplier for each year of service under 30, so 20 years pays 40% instead of 50%. At 62 the multiplier is restored to the full 2.5% per year.

Is military retirement pay taxable?

Yes, it is taxed as a pension on your federal return. The Survivor Benefit Plan premium taken from it is not taxed. Military disability pay and VA disability compensation are generally not taxable, and many states exempt military retirement pay in full or in part, so the state tax depends on where you live: pick your state in the calculator to see what it adds.

Is there a cap on military retired pay?

For members retiring after 2006, service past 30 years keeps adding 2.5% a year (2% under the Blended Retirement System), so the old 75% cap no longer limits a longer career.

Military Retirement Pay Calculator (2026)

Your active-duty retired pay under High-3, the Blended Retirement System, REDUX or Final Pay: 2.5% (2% under BRS) of your retired-pay base for each year of service, under 10 U.S.C. 1409.

Then what the pay statement leaves out: the 2026 federal income tax the pension adds on top of a civilian salary or other income, the state income tax it adds in the state you pick (with that state’s military retirement exemption), and what it pays you a month after both.

Your service

The retired pay

Retirement system Monthly basic pay: High-3 average (or final) The average of your highest 36 months of basic pay; your final basic pay under Final Pay. Years of service …and months Your age on Dec 31, 2026 Survivor Benefit Plan premium (yearly, optional) Not taxed; it comes off the taxable pay.

Your other 2026 income (yearly)

Filing status Spouse’s age Civilian wages (both of you) Social Security (gross) TSP / IRA withdrawals State you live in (optional) Adds the state income tax on the retired pay, with the state’s military retirement rule.

The numbers filled in are an example. Replace them with yours.

Your military retired pay

Turn on JavaScript to calculate your retired pay.

Each tax line is one full year of the retired pay at 2026 tax law, added to the other income you entered: your tax with the pension minus without it. On a joint return every amount is counted in your name (the retiree’s), so the state’s per-person rules see your own pay at your age.

Retired pay is the floor of a second career and a retirement. Plan your TSP, Social Security and the pension together in the retirement planner →

The rules this uses, and what it leaves out

The retired pay: 10 U.S.C. 1409: 2.5% per year of service (1/12 of a year for each full extra month), 2% under the Blended Retirement System; REDUX 1 percentage point less for each year under 30, restored at 62; past 30 years the percentage keeps rising for a retirement after 2006. The retired-pay base is the High-3 average or the final basic pay (10 U.S.C. 1407, 1406).
The federal tax: your 2026 federal return through QuantCalc’s federal tax engine, the pension on Form 1040 line 5b; the Survivor Benefit Plan premium is excluded from income (IRC 122).
The state tax: when you pick a state, your 2026 state return through QuantCalc’s state tax engine, the retired pay as military retirement pay, so that state’s own military rule applies (a full exemption, a capped or age-tested one, or none). Whether it is exempt for you is read from the engine: the pay’s state tax is compared with the tax the same dollars would add as a private pension. Not modelled: disability retirement, North Carolina’s service-years test and New Jersey’s veteran facts. Every state side by side for four sample retirees: which states tax military retirement pay.
Not included: cost-of-living adjustments (and REDUX’s smaller ones), disability retirement and the VA disability offset, reserve (points-based) retirement starting at 60, the BRS lump-sum option, the Continuation Pay and Thrift Savings Plan matching, and the rounding DFAS applies to the monthly amount.

An estimate under the statute and QuantCalc’s tax engines (federal and state engines for 2026). DFAS computes the pay that is paid; check it against your retirement pay estimate.

Common questions

How is military retired pay calculated?: Multiply your years of service (each full extra month counts as 1/12 of a year) by 2.5%, or by 2% under the Blended Retirement System, and apply that percentage to your retired-pay base: the average of your highest 36 months of basic pay under High-3 and BRS, or your final basic pay under Final Pay. With 20 years and a $7,500 High-3 that is 50% of $7,500, or $3,750 a month.
Which retirement system am I under?: Final Pay if you entered service before September 8, 1980; High-3 if you entered after September 7, 1980; REDUX if you entered after July 31, 1986 and took the Career Status Bonus; the Blended Retirement System if you entered on or after January 1, 2018 or opted into it.
How does REDUX change the pension?: REDUX takes 1 percentage point off the multiplier for each year of service under 30, so 20 years pays 40% instead of 50%. At 62 the multiplier is restored to the full 2.5% per year.
Is military retirement pay taxable?: Yes, it is taxed as a pension on your federal return. The Survivor Benefit Plan premium taken from it is not taxed. Military disability pay and VA disability compensation are generally not taxable, and many states exempt military retirement pay in full or in part, so the state tax depends on where you live: pick your state in the calculator to see what it adds.
Is there a cap on military retired pay?: For members retiring after 2006, service past 30 years keeps adding 2.5% a year (2% under the Blended Retirement System), so the old 75% cap no longer limits a longer career.