Depending on the date you initially entered military service, also called your DIEMS date, your monthly Reserve retired pay will be calculated under the “Final Basic Pay” or “High-3” formula as follows:
• DIEMS date before 8 September 1980 – “Final basic pay.” Multiply your years of satisfactory (equivalent) service by 2.5%, up to a maximum of 75%. Multiply the result by the basic pay in effect on the date your retired pay starts.
• DIEMS date on or after 8 September 1980 – “High-3.” Multiply your years of satisfactory (equivalent) service by 2.5%, up to a maximum of 75%. Multiply the result by the average of your highest 36 months of basic pay. The highest 36 months for a member who transfers to the Retired Reserve until age 60 will normally be the 36 months before they turn 60. Members who request a discharge from the Retired Reserve before 60, however, can only use the basic pay for the 36 months prior to their discharge. Think carefully before requesting a discharge from the Retired Reserve!
COST OF LIVING ADJUSTMENTS TO RETIRED PAY
Your retired pay will be increased annually by a cost-of-living allowance (COLA) based on the change in the Consumer Price Index (CPI) from the third quarter of one calendar year to the third quarter of the next. COLAs are normally effective 1 December and payable the first working day in January.
For years the services had difficulty accurately establishing when a member of a reserve component had completed 20 qualifying years of service. Many soldiers stopped participating when they believed they had completed 20 qualifying years only to discover, much too late (at age 60), that they did not meet the requirements for retired pay.
In 1966, PL 89-652 imposed a requirement on the Service Secretaries to notify members of the reserve components when they had completed sufficient years for retired pay purposes. A letter with the subject “Notification of Eligibility For Retired Pay at Age 60,” commonly referred to as the 20-year letter, does this. You should receive this letter within one year of completing 20 qualifying years of service for retired pay purposes.