Military Retirement: Background and Recent Developments

Charles A. Henning
Specialist in Military Manpower Policy

The military retirement system is a non-contributory, defined benefit system that has historically been viewed as a significant incentive in retaining a career military force. The system currently includes monthly compensation and benefits after an active or reserve military career, disability retirement for those physically unfit to continue to serve, and survivor benefits for the eligible survivors of deceased retirees. The monthly retirement annuity is adjusted annually by a Cost-of- Living Allowance (COLA) to ensure that the annuity is protected from the adverse consequences of inflation. Military retirees are also entitled to non-monetary benefits which include exchange and commissary privileges, medical care through TRICARE, and access to Morale, Welfare and Recreation facilities and programs. 

The active component retirement system provides a choice between two retirement options based on career expectations and an individual's financial situation. Eligibility is based on years of active duty, generally becoming retirement eligible after completing 20 years of service. For reserve component personnel, their retirement system is based on "points" and reservists do not generally begin to receive retired pay until age 60. There is a third retirement system for those who are retired with a physical disability regardless of the amount of time they have spent on active duty. Disability retirement offers a choice between two retirement options; one based on longevity and one on the severity of the disability. 

Congress grapples with constituent concerns as well as budgetary constraints when considering military retirement issues. While congressionally mandated changes to the military retirement system have been infrequent, any potential future changes are closely monitored by current and future retirees, and the veterans' service organizations who support them. Today, there are approximately 2.2 million military retirees and survivor benefit recipients, and roughly 6 million to 8 million family members, who are generally believed to be an articulate and well-educated constituent group. 

It is estimated that approximately $50 billion will be paid to military retirees and survivor benefit recipients in FY2010. With military retired pay protected from inflation by annual adjustments due to the Cost of Living Allowance, retirement costs will continue to increase. 

The 10th Quadrennial Review of Military Compensation (QRMC) recently recommended a revision of both the active and reserve retirement systems. However, with ongoing military operations in Iraq and Afghanistan, and the recruiting and retention challenges being faced by the Services, the executive branch and the 111th Congress may be reluctant to alter the present system.


Date of Report: July 27, 2010
Number of Pages: 17
Order Number: RL34751
Price: $29.95

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