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Understanding Military Retirement Pay

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Special Compensation for Severely Disabled

Under a brand new law, certain severely disabled retirees of the uniform services that have a disability rating as reported by the Department of Veterans Affairs (VA) are entitled to special compensation. The special compensation is paid for that month in accordance with the following schedule:

  • 70% or 80% = $100.00
  • 90% = $200.00
  • 100% = $300.00 

You must meet the following requirements for entitlement to special compensation for severely disabled:

  1. You are NOT retired from the military for a disability.
  2. You are in a retired status and on the retired pay rolls. Members recalled for more then 30 days to active duty are not in a retired status.
  3. You have 20 or more years of service for the purpose of computing retired pay. A reservist must have 7,200 or more points to qualify.
  4.  The VA rating for disability of m70% or higher must be awarded within 4 years of retirement.
  5. The VA rating must be 70% or higher for each month. If the rating falls below 70% any given month, then the retiree has no entitlement to special compensation for that month.

When/How You Get Paid

Unlike active duty pay, retired/retainer pay is only paid once per month. Your net retired/retainer pay should be sent to your financial institution by Direct Deposit unless you either reside in a foreign country, which Direct Deposit is not available. Your retired pay will be deposited to your account on the first business day of the month following the end of the month.

Your first payment for retired pay normally will arrive 30 days after your release from active duty, or, on the first business day of the month following the month of first entitlement to pay. In a separate mailing, you will receive a letter which will show you how your pay was computed. This will include your deductions for SBP, federal/state income tax, and allotments.

After you retire, you will need to notify The Defense Finance & Accounting Service (DFAS) whenever you change your financial institution. Do not close your old bank account until you receive the first deposit in the new financial institution.

Foreign Employment

Any applicant who accepts employment with a foreign government without approval is subject to having reserve or retired pay withheld for the period of unauthorized employment.

If you are retired and contemplating employment by a foreign government, you must obtain approval from the Secretary of the service concerned and the Secretary of State. For more information contact:

  • Navy - The Office of the Judge Advocate General, 200 Stovall Street, Alexandria, VA 22332-2100.
  • Air Force - HQ AFMPC/DPMARR3, 550 C Street West, Suite 11, Randolph AFB TX 78150-4713.
  • Marine - HQMC (MMSR-6), 2 Navy Annex, Washington, D.C. 20380-1775 or call 1-800-336-4629 if there are any questions.
  • Army - U.S. Army Reserve Personnel Command, Attn: ARPC-SFR-SCI, 1 Reserve Way, St. Louis, MO 63132-5200.

Federal Civil Service Retirement

If you retire from the military, and are retired/retiring from Federal Civil Service, you can elect to waive your military retired pay in order to include your military service in the computation of your civil service annuity. (Which, depending upon the circumstances can be financially worth it). However, for retired reservists, this is true only if you are service retired years of service or disability retired. If you are age retired (age 60) then there is no waiver or offset (a technical "loophole" in the law). If you choose to do so, you need to notify DFAS, in writing, at least 60 days prior to your planned civilian retirement date. It is suggested that you contact your civilian personnel office prior to the submission of your waiver request to ensure that you are aware of all the available options.

If you elect survivor coverage from your civil service annuity, your military SBP participation will be suspended while you receive the civil service annuity. If you want to retain military SBP you may do so, but you must then decline survivor annuity from the Office of Personnel Management. If your pay is subject to court-ordered distribution, you must authorize an allotment in an amount equal to the distribution, in order to include military service in the civil service annuity computation.

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