Key Takeaways
- Under the Legacy High-3 system, a 20-year E-7 retiring in 2025 collects roughly $2,314 per month before COLA adjustments.
- Service members who joined after January 1, 2018 but never enrolled in BRS lose the government's 5% TSP match permanently, a potential loss exceeding $80,000 over a 20-year career.
- Calculate your multiplier, confirm your High-3 base pay average, and model both systems side-by-side before making any TSP allocation decisions.
- Tool: Run your military retirement numbers in the CalcMoney Retirement Calculator →
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Two Systems, One Decision Point
The U.S. military runs two retirement structures simultaneously. The system that applies to you depends entirely on when you entered service.
Legacy High-3 System: Covers anyone who entered active duty before January 1, 2018 and did not opt into BRS during the open enrollment window.
Blended Retirement System (BRS): Mandatory for anyone who entered service on or after January 1, 2018. Also available to legacy members who elected to opt in during the 2018-2019 enrollment window.
The structural difference matters more than most service members realize. The Legacy system pays a larger defined benefit. BRS pays a smaller defined benefit but adds an automatic government TSP contribution of 1% of base pay and matches contributions up to 4% more, for a total government contribution of up to 5% of base pay.
Neither system is universally superior. The right answer depends on years of service, expected career length, TSP contribution behavior, and post-service investment assumptions.
How to Calculate Legacy High-3 Retirement Pay
The Legacy High-3 formula is direct.
Formula: Monthly Retirement Pay = 2.5% × Years of Service × Average of Highest 36 Months of Basic Pay
Step 1: Identify Your High-3 Base Pay Average
The "High-3" refers to the average of your 36 consecutive months of highest basic pay. For most career service members, this is the final three years of service. It is not the final month's pay. It is the arithmetic mean of 36 monthly figures.
If your pay increased mid-career at irregular intervals, the High-3 calculation may reach back further than your last three years.
Step 2: Apply the Multiplier
At 20 years of service, your multiplier is 50% (2.5% × 20). At 30 years, it is 75% (2.5% × 30). The maximum multiplier is 75%, reached at 30 years.
Worked Example: E-7 with 20 Years of Service
An E-7 with 20 years retiring in 2025 sits at pay grade E-7 over 20. The 2025 basic pay table places that rate at $5,789.10 per month.
Assume the final 36 months average $5,627.40 per month, accounting for the step increases across years 18, 19, and 20.
Monthly Retirement Pay = 2.5% × 20 × $5,627.40 Monthly Retirement Pay = 0.50 × $5,627.40 Monthly Retirement Pay = $2,813.70
Annualized, that is $33,764.40 per year before COLA adjustments.
Over a 25-year retirement period (age 42 to 67, a realistic range for a 20-year enlisted retiree), this produces $844,110 in nominal payments, before any COLA increases stack on top.
How to Calculate BRS Retirement Pay
BRS reduces the defined benefit multiplier from 2.5% to 2.0% per year of service. The offset is the TSP matching contribution.
Formula: Monthly Retirement Pay = 2.0% × Years of Service × High-3 Average Basic Pay
The TSP Component Under BRS
The government automatically contributes 1% of base pay to your TSP beginning on day one, regardless of whether you contribute anything yourself. After 60 days of service, the government matches your contributions dollar-for-dollar up to 3% of base pay, then 50 cents per dollar for the next 2% of base pay.
At maximum contribution capture, the government puts in 5% of your base pay per month.
For an E-5 earning $3,207.60 per month in 2025, maximum government matching equals $160.38 per month, or $1,924.56 per year. Over a 20-year career with an 7% average annual TSP return, that matching alone compounds to approximately $85,200 at separation.
Worked Example: O-3 with 20 Years Under BRS
An O-3 with 20 years retiring in 2025 earns $7,549.80 per month at the O-3 over 20 pay grade.
Assume the High-3 average is $7,312.50 per month.
Monthly Retirement Pay = 2.0% × 20 × $7,312.50 Monthly Retirement Pay = 0.40 × $7,312.50 Monthly Retirement Pay = $2,925.00
Under the Legacy system with identical figures, this officer would receive: Monthly Retirement Pay = 2.5% × 20 × $7,312.50 = $3,656.25
The Legacy system pays $731.25 more per month. That is $8,775.00 per year. Over a 25-year retirement, the cumulative gap reaches $219,375 in nominal terms.
However, the BRS officer who maximized TSP matching from year one accumulates a separate investment account alongside the pension. Whether the TSP balance bridges that $219,375 gap depends on contribution rates, return assumptions, and withdrawal timing.
The BRS vs. Legacy Break-Even Analysis
The break-even question is specific: at what TSP balance does the BRS retiree come out ahead?
Use the O-3 example above. The pension gap is $731.25 per month. To replace that income from a TSP balance at a 4% withdrawal rate, the officer needs an additional TSP balance of $219,375 at retirement.
If the officer contributed at the maximum match capture level throughout a 20-year career, and the TSP averaged 7% annual returns, the government matching alone accumulates to roughly $85,200. Personal contributions on top of that can close the gap, but the math requires intentional contribution behavior throughout the career.
Three factors determine which system wins for any individual:
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Years actually served. BRS pays a smaller pension but preserves TSP matching for shorter careers. A service member who separates at 15 years receives no pension under either system, but keeps every dollar of TSP contributions under BRS.
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TSP contribution discipline. A BRS enrollee who contributes less than 5% of base pay forfeits part of the government match. That is not a hypothetical risk. It is the single most common BRS error.
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Post-separation investment behavior. The TSP balance compounds only if it stays invested or rolls into a comparable vehicle.
COLA: The Multiplier That Compounds Over Decades
Both Legacy and BRS pensions receive annual cost-of-living adjustments tied to the Consumer Price Index for Urban Wage Earners (CPI-W).
A $2,813.70 monthly pension with 2.5% average annual COLA grows to $3,591.60 per month after 12 years. At 20 years of retirement, it reaches $4,590.10. The cumulative COLA effect over a 25-year retirement period on the E-7 Legacy example above pushes total payments from $844,110 nominal to over $1.1 million in actual dollars received.
COLA is not an afterthought. It is a structural feature that makes the defined benefit component highly valuable relative to the TSP balance, which requires active management to keep pace with inflation.
Disability Ratings and Concurrent Receipt
Service members with VA disability ratings at 50% or higher may qualify for Concurrent Retirement and Disability Pay (CRDP). This allows full collection of both military retirement pay and VA disability compensation simultaneously.
Below 50%, the Combat-Related Special Compensation (CRSC) program may still provide tax-free disability payments without offsetting retirement pay.
These programs materially alter the net income calculation for affected retirees. A 30-year O-5 with a 60% VA disability rating collecting CRDP receives retirement pay plus tax-free VA compensation with no offset. That combination can exceed the retirement pay figure by $1,500 to $2,500 per month depending on rating and dependent status.
Model your specific disability rating scenario separately before projecting total retirement income.
SBP: The Cost of Protecting a Survivor
The Survivor Benefit Plan allows retiring service members to elect up to 55% of their retirement base amount as a survivor annuity. The premium is 6.5% of the covered base amount, deducted from monthly retirement pay.
For the E-7 Legacy retiree above, full SBP coverage on a $2,813.70 base costs $182.89 per month. It guarantees a surviving spouse $1,547.54 per month for life.
Whether SBP makes financial sense relative to commercial term life insurance depends on age, health, survivor life expectancy, and the insured amount needed. It is not automatically the right choice, but walking away from SBP at retirement is irrevocable without specific qualifying events.
Run the Actual Numbers Before Your Separation Date
Ballpark estimates built on round numbers produce planning errors. The difference between estimating a High-3 average and calculating it from 36 actual pay records can alter monthly retirement income by $150 to $400 depending on career progression.
Use your myPay records to pull exact basic pay figures for your final 36 highest-pay months. Apply the correct multiplier for your system. Model TSP accumulation separately using realistic return assumptions.
The CalcMoney Retirement Calculator lets you input your specific pay history, years of service, TSP balance, and expected COLA rate to generate a retirement income projection grounded in your actual numbers, not generalized tables.
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