"Retired Reserve" question

@Jcernoskyjr, here's more perspective in addition to @GJR's response.

The answers to your questions are "Yes, with caveats."

The reference you’re seeking is in federal law Title 10 U.S. Code section 1407(d)(1).

www.law.cornell.edu

“(1)Retired pay under chapter 1223.—The high-three average of a member or former member entitled to retired pay under section 12731 of this title is the amount equal to—

(A)the total amount of monthly basic pay to which the member or former member was entitled during the member or former member’s high-36 months (or to which the member or former member would have been entitled if the member or former member had served on active duty during the entire period of the member or former member’s high-36 months), divided by

(B)36.”

I’ll vouch for this pension being calculated at the future pay tables in effect when you start your pension (typically at age 60) and at the longevity for your retirement rank as if you’d been on active duty the entire time.

More personally, that’s exactly how it’s happened for hundreds of my readers, a couple of close friends in their 60s (like me), and… my spouse. Yes it does seem too good to be true, but it's a retention issue that I'll explain below.

Let me unpack the legalese with a few caveats.

There are two ways to retire from the Reserve/Guard after you reach 20 good years and have your Notice Of Eligibility:

(1) “Retire awaiting pay”, and

(2) Separation or discharge.

99.999% of Reserve/Guard servicemembers choose to retire awaiting pay under 1407(d)(1), but it also means that during your gray-area years you’re subject to involuntary activation for a total force mobilization. (This last happened during WWII.) If you don’t want to take even that risk then you’d separate, but separating means you’re penalized by having your pension calculated at the pay tables on the date you separate (not at age 60) and without the additional longevity in your retirement rank (because you separated).

When you retire awaiting pay (as if "had served on active duty during the entire period”) then your longevity in your retirement rank continues to accrue until you start your pension. For most servicemembers this is the maximum pay scale of their retirement rank, but it depends on the columns of the future pay tables.

(Pro tip for active-duty servicemembers: Reserve/Guard officers have no requirement to serve for at least 10 years’ commissioned service. It’s because they’ll reach that milestone anyway when they’re retired awaiting pay.)

In the last 25 years I’ve seen one Reservist choose separation: an E-5 who wanted to care for her father (dementia) and didn’t want to risk even a WWII-style mobilization. It was the right choice for their situation.

Your retirement rank is based on satisfactory service in that rank. For O-4 & above, and for some services in E-8/9 ranks, federal law requires serving three years’ time in grade to retire at that rank. (Chief Warrant Officers in some services or communities may also have this requirement at the higher grades.) The E-8/9 ranks might have that as a condition of a senior-leader billet or additional training. Each service secretary is authorized to waive this three-year TIG requirement down to two years.

Note that (financially) this means when you’re retired awaiting pay, the “future pay tables” rise at about the Employer Cost Index (a goal of each Congressional session). The longevity in your retirement rank gives it a little more boost to approximate the CPI and keep up with inflation.

Once you start receiving your pension (typically at age 60) you’ll also receive an annual Cost Of Living Adjustment-- the same as an active-duty pension and Social Security. That COLA is in federal law as well. VA disability compensation follows the same COLA algorithm but still has to be approved by Congress each year.

For a COLA perspective, during my 23 years of retirement the COLA adds up to over 77%... and three of those years had zero COLA.

Let me know if you have more questions.

I am in a similar position and have talked to Nords about it in the past. He share and provided a reference that the rate of pay to be paired with your points is the amount in place when you become eligible for pay. For most, that means the pay scale will grow for many years while in grey status to be calculated in. I highly dobt credit for years of service while in grey status though. For me I am topped out at 28 years as an O-5 so immaterial. I am sure the the SME's SME will help us all know for sure. The growing pay scale alone is tremendous given MIL Pay increases have far outpaceced COLA rates for lots of the years since I turned "grey".

For part two we need three years TIG to be retired in that grade on your certs and records but your still get 2.5% per year (old system) even if you don't do all three. Example serve two of the three your get another 5% as your multiplier. Common mistake is to think your don't get the 2.5%/year if you don't get the three years for permanent grade. I personally beleive this matters more to some for status reasons though I don't know of many who care if you acheived a rank or were permanently retired in it. Saying one was retired as a "full bird" is true regardless if that was not your permament grade in retirement. Most just do the three to keep it simple.

I don't have military pension expertise, but I do work with other pensions frequently. I recommend that you "trust but verify" any information that you receive. I work with clients who are a part of either Cal STRS or MPIPHP, and they both offer GREAT support. After working with a client to do our own best estimation of future pension benefits, we make an appointment with a pension specialist to verify our calculations/assumptions. You can also learn extra tidbits that you might not have considered.

@Nords take it away!