What You Need to Know About Recent Military Retirement Changes

Military retirement is an all or nothing thing.  If you leave before 20 years, you get no pension.  This year, there have been some significant changes to retirement that you should know. While this doesn’t include all of the changes, here are the most important ones.

Less Than 20 Years of Service

Service members know that you should never leave before your 20-year anniversary or you lose your pension. However, the Military Compensation and Retirement Modernization Commission (MCRMC) proposed a new plan that would change the way retirement works for those who choose to  leave before the 20-year mark so those  members are entitled to some compensation for their years of service.

The new system will include career continuation pay, retention bonuses, and defined contributions where both the government and service member contribute each year similar to a 401k plan. As of now, the exact details aren’t worked out, but the details are said to be released early 2018, according to Fox Business.

Reduction of Retirement Pay at 20 Years

To compensate for the pay that is going to the new program, service members will see a cut in their retirement pay. The current plan is calculated at 2.5% for each year of service starting at 20 years, but the new plan will bring the rate to 2% times the years of service.

An additional change calls for the military to contribute 1% of basic pay to member’s Thrift Savings Plan (TSP) account. After two years of service, the military is to match 5% of the member’s contribution. At the 12-year mark, members can see a continuation pay bonus for those who commit to another four years.


These changes are intended to assist those who leave service before the 20-year mark, which accounts for the majority of service members. With the cut to the 20-year retirement, it has allowed a hybrid system that consists of a lesser defined benefit pension plan coupled with access to the TSP, which is available for all federal workers. The government gives an automatic 1% contribution to service members TSP account after 60 days. Additionally, troops can see a 5% contribution if they meet the eligibility requirements.

Proposed Changes

These changes are set to take effect in 2018, but the Pentagon and the Department of Defense are seeking to make further changes to retirement benefits in its 2017 budget. This can potentially change the 5% contribution and the starting date for matching government contributions to the first day of a service member’s fifth year. Finally, it can extend matching contributions in the TSP. The new laws, if accepted, could also end TSP contributions after the 26th year of service.