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Retiring from the Reserves and National Guard

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Retiring from the Reserves or National Guard is more flexible than retiring from active duty. In the vast majority of cases, your retirement is based on at least 20 good years of service.  (A “good year” requires a certain minimum number of points or days of drill or active duty as well as complying with other readiness requirements.)  You’ll be tracking these years as you complete the minimum annual requirements, and after you reach 20 years our service will formally notify you with a letter of eligibility.

Some Reserve/NG members may actually be eligible for a retirement earlier than 20 years.  The current legislation (passed in early 2008) reduces the age 60 retirement requirement by three months for every 90 consecutive days of mobilization for war or national emergency.  In other words, a Reservist volunteering to deploy to the desert for a year would now be eligible to start their Reserve pension at age 59.  A member of the National Guard who deploys with their unit for 24 months of the next five years would be able to draw their pension at age 58.  But this law only applies for deployment time served after Jan. 28, 2008.  Several amendments have been proposed to retroactively extend this benefit to September 11, 2001, but none of these modifications have yet been approved by Congress.

When you’re eligible to retire, you may still prefer to stay as long as you can. You may be successfully balancing the military with your civilian career and your family and you might be able to continue your routine for years. The money may not be much, but it can greatly boost your tax-deferred savings. Military pay offers another stream of income to serve as insurance against civilian layoffs and may also augment necessary skills in a civilian career. Some Reservists/NG will even work in unpaid billets that only offer retirement points, in hopes of later qualifying for a paid billet or earning a promotion. As your family situation permits you may be able to kickstart your military career with advanced schools, special programs, or extended active-duty mobilizations. In metropolitan areas with large military commands it’s not unusual to serve with many Reserve/NG members in their late 40s or even mid-50s.

Of course you’ll have to balance your interest in staying with the prospect of mobilizing and deploying every few years.

Another issue, perhaps a minor one, is time in rank.  The service requirement to retire at your current rank is generally three years (since the date of promotion, not selection!).  Keep an eye on your service policies, because when the services are trying to cut their end strength it’s not unusual for this requirement to be reduced to two years.

Retiring from the Reserves/National Guard

Reserve/NG retirement is even simpler than an active duty retirement.  (This link summarizes the requirements.)  The letter of eligibility has already certified that the member is eligible to retire, and their retirement request sets the date. If a retiring Reservist/NG is actually on active duty (mobilized) at the time of their retirement then separation procedures are executed just as for any demobilization. If a Reservist/NG is not on active duty then there is no DD-214, no medical/dental examination, and no other paperwork. They’re transferred to “retired awaiting pay” status, they’re issued a “gray” ID card, and they wait for age 60. At age 59½ another round of verification paperwork is completed and the pension begins six months later.

The Department of Defense wants Reservists/NG to request retirement instead of resigning. One difference is that personnel “retired awaiting pay” could hypothetically be mobilized, although that has not happened in decades. (It would require a full mobilization for a Congressionally-approved war, which is broader than the Presidential mobilization declared after 9/11.) Another difference is that requesting retirement keeps Reservists/NG on the pay seniority list. At age 60, the years of annual pay raises and longevity increases will be applied to your first pension check, which will be based on the latest pay tables and the maximum longevity at that rank. A resigning Reservist/NG will not receive any of those increases, so the cost of avoiding mobilization is a retirement frozen at the pay tables in effect at resignation– which by age 60 may be decades old and without any pay raises or longevity increases.

The Survivor Benefit Plan is an important consideration for “retired awaiting pay” status. You may be waiting for the pension benefit for over two decades, and if you don’t make it to age 60 then you may want to ensure that some of your pension is still available to your surviving loved ones. Retiring Reservists/NG can elect SBP coverage during the years between retiring and reaching age 60. No premiums are paid during this time, and if you don’t make it to age 60 then at least your survivors will still receive their SBP payments. However if you do celebrate your 60th birthday then you’re required to pay the next two years of SBP premiums (deducted from your pension payment) to recover the cost of your insurance during those years between retiring and reaching age 60. After paying two years of premiums the Reserve/NG retiree has the option to decline SBP or to continue with it under the same rules as active-duty retirees.

You can determine the amount of your pension using this retirement calculator or this one.

Health insurance while retired awaiting pay

You do not have any subsidized military healthcare when you’re retired awaiting pay. Tricare will start at age 60 and Medicare/Tricare For Life will start at age 65, but Reservists/NG awaiting a pension will need to buy other health insurance. Healthcare benefits may be one reason that some Reserves/NG continue to drill well into their 50s, although that should not be the only reason to continue to serve.

In late 2009 Congress authorized “Tricare Retired Reserve“, which began in fall 2010.  It’s intended to offer a version of Tricare Standard to retired Reservists and National Guard who are still under age 60. The program is not subsidized by the government and fees are quite high compared to other Tricare premiums. $400-$1000 per month may even be higher than some civilian healthcare programs, but this program offers the first “gray area” coverage between retirement and age 60.  I’ll cover the details in the next post.

Keep in mind that no matter what version of Tricare you choose, it does not include dental insurance.  Most military retirees pay for their own dental insurance and dental care.

The pension starts at age 60, but you can retire right now on savings

One of the biggest advantages of the Reserve/NG is having an inflation-adjusted pension by age 60. It’s paid by one of the world’s most credible financial institutions, or at least one with the power to raise revenue by taxation.  A civilian retiree, if they even have a pension, may not only have to wait years– but they may also have to worry that the company won’t survive to pay the “guaranteed” pension. A military pension is even more highly rated than an insurance company’s annuity, and you don’t have to worry whether the insurance company will be able to make good on its future claim. The future is never certain, but a military pension is as close as you can get to a guaranteed stream of income at a known date.

The key to retirement as a Reservist/NG is planning your retirement finances around multiple streams of income. By the time you request retirement (awaiting pay), you’ll have several different forms of savings. In addition to the pension at age 60, you’ll also have your military Thrift Savings Plan account, as well as personal IRAs and taxable investments. If you’re in the federal civil service then you’ll have a second TSP account. If you’re employed by a corporation then you’ll probably have another tax-deferred savings account (a 401(k)) as well as other forms of deferred compensation. And if you’re self-employed there are several other ways to save through tax-deferred accounts.

When a Reserve/NG pension is in your future, your early-retiree challenge is to live off your savings until the tax-deferred accounts are available and until the Reserve/NG pension starts. The advantage of the pension is its known starting date, its inflation adjustment, and its high probability of payment. Your other savings may only have to bridge the gap between your retirement request and the start of your pension. You won’t have to worry about outliving your personal portfolio– only about making it last until the pension begins. In addition to spending down your taxable accounts, you can also tap your tax-deferred accounts if necessary, and under some conditions even without penalty. If savings won’t stretch to cover the whole gap between retiring and receiving a pension, then annual income can be augmented from part-time work or a civilian bridge career.

The planning and calculations may seem complicated or even overwhelming, but today’s retirement-planning software is tremendously flexible at projecting multiple streams of income over an entire retirement.  We’ll cover more details and a “multiple streams of income” example in a later post.

Related articles:
Reserves and National Guard
Mobilizing with the Reserves and National Guard
The “Military Articles” section of the Recommended reading tab

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32 Comments

  1. OGF

    October 11, 2014 at 5:52 AM

    Great info, Nords. Quick question: How does a reservist’s pension differ from an active duty pension, in terms of length of the pension? In other words, if I serve 20 yrs in the reserves, and draw the pension at age 60, does the annuity stream last 20 yrs (till age 80), or until death? If I lived to age 90, would the pension continue to pay that stream from age 80-90? Active duty? Thanks a bunch.

  2. Tamla

    September 27, 2014 at 10:22 AM

    I am looking for information on national guard reserves. My dad served 2 years back in teh 50s. What benefits if any is he entiltled to?

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  8. David V Grass

    August 28, 2013 at 2:59 PM

    I will be retiring this year Oct 2013, I turn 60 on Nov 2013 . I live in Missouri with 32 plus years of service. Which tricare will I be under? Will it cost me anything? Iam still employed with a city that offers blue cross insurance, I have the HSA plan, will this work with tricare when I retire. Please reply back the my Emil. Dave.grass@yahoo.com

  9. Nathaniel Emery

    May 19, 2013 at 1:45 PM

    Are there still two retirement options when you retire from the Air National Guard? Is so, how do I proceed with the correct version? I am 53 and what the retirement pay to reflect my rank in 7 years time.

  10. R. Scougal

    April 6, 2013 at 1:00 AM

    I hope you can answer my question, or point me to more information. After 21 years in the Army NG, including a year of deployment in Iraq and numerous temporary home-station full-time orders, I went into the IRR – I was caring for my elderly father at home, and could no longer serve. I had originally thought I might return to the Guard, but that turned out not to be possible, and I ETS’ed from the IRR. I received my “twenty-year letter” the year before I went into the IRR.

    Am I eligible for retirement pay? What do I have to do? I am 57 years old now.

    Thanks for any help you can offer.

    • Doug Nordman

      April 6, 2013 at 4:10 PM

      Thanks for your comment!

      Yes, you’re eligible for an Army National Guard retirement, because you received your Notice of Eligibility before you separated from the IRR.

      If you elected for “discharge” from the Guard instead of “retired awaiting pay” then your pension will be based on the pay tables that were in effect during your discharge, and at your discharged rank’s longevity. In other words your pension benefits were frozen instead of keeping up with inflation. Once you start drawing your pension, however, it’ll have a cost-of-living adjustment.

      If you deployed to Iraq after 28 January 2008 then it’s possible that your pension may start a little before age 60. It starts one day earlier for each of at least 90 days that you were deployed in a combat zone after that date. Your Tricare benefits will still start at age 60.

      I’ve e-mailed you more information (with links) to get you started. I’m also going to post your question (anonymously) and the answers on the blog. Please let us know how it goes!

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  13. A R B

    January 10, 2013 at 6:44 AM

    I am an Air Force reservist with 18 good years of service. I have been trying to get back in for over four years, but to no avail. Per two recruiters, I have had to retake the ASVAB (which I passed), only to be told that they lost my results and have to take the ASVAB a third time. I was also told that my blood pressure is too high (140/90) and that my BP has to be below 140/90 without medication. I am at a loss here and do not know where to go from here. I deserve to retire as I am in “sanctuary”. Any assistance you can provide is greatly appreciated.

    • Doug Nordman

      January 11, 2013 at 4:07 AM

      A R B, it seems as if the only thing you could do differently for your third ASVAB would be to try a different recruiter who’ll take better care of the paperwork.

      I don’t have a good answer for the blood pressure numbers. You’ve probably already tried weight loss & exercise. Some people are affected by “white coat syndrome”, where your blood pressure rises whenever a medical technician (in a white coat) takes your BP. That’s a very real effect, but the only way to counteract it is through stress-reduction techniques (during the measurement) like relaxation or meditation. They work, but like losing weight & exercising they also take some practice to pay off. You could ask the medical staff if you could wear a 24-hour BP monitor to show that your BP jumps from white coat syndrome.

      Sanctuary is a different situation. It applies to reaching at least 18 years of active duty service (point count) during a Reserve career and being entitled to serve for 20 years of active duty to qualify for an active-duty retirement. Sanctuary does not apply to years of Reserve duty (“good years”). While you have 18 good years of Reserve service, you’d need at least 20 good years to qualify for a Reserve retirement. There are no guarantees that permit you to obtain those last two good years.

      To be in sanctuary, you would need to have over 18 years of active-duty service (nearly 6600 points) to be eligible for an active-duty retirement. If you were in sanctuary, you should not have been able to be demobilized from your last active-duty orders. The personnel system software would have flagged your impending sanctuary months before you reached it. (Personnel systems can make mistakes, but from DoD’s perspective this is a hugely expensive oversight and it gets a lot of attention.) If you have over 6500 points then it’s worth discussing sanctuary with your local Air Force Reserve unit.

      One possible solution to all of these issues would be to talk with a recruiter for your local Air National Guard or National Guard. Their recruiters might take better care with your ASVAB and they might have different standards for blood pressure. Other Reservists have used the NG/ANG to get to 20 good years, so I know that option works.

      Sanctuary has been a very confusing issue among the Reserves during the drawdown, and it’s even more important when Reservists are mobilized for a combat deployment. I’ll write up a new post with the DoD & service references and link it to this post. Thanks for asking about it!

    • Doug Nordman

      January 21, 2013 at 5:53 AM

      A R B, here’s the link to a new post that gives more answers to your questions:
      http://the-military-guide.com/2013/01/21/sanctuary-and-military-retirement-during-a-reserve-career/

  14. george

    November 10, 2012 at 11:08 AM

    Two questions: 1. Can I still earn points as a grey area “retired awaiting pay” using the distance education programs of the various military branches like the Marine Corps Institute?
    2. In the article it states to use the maximime time in service/grade to calulate the base pay. I will have 30 years of qualifying service. Looking at the DOD pay chart on the DFAS web site the pay in my grade goes up to 40 years of service. Do I use the 30 years of qualifying service that I actually completed or the 40 years of service according to the pay chart?

    • Doug Nordman

      November 11, 2012 at 3:40 AM

      Those are darn good questions.

      1. I haven’t found an answer on earning points while gray-area “retired awaiting pay”. (I suspect that nobody’s asked the question before, either.) I would expect the answer to be “No”, because the military gains nothing from you by giving you points– you’re already retired and you’re not coming back unless the President mobilizes you. The service Reserve/Guard bureaucracy would have to keep re-opening your retiree record to add more points, and I know that the computer networks of most services lock the electronic files of retiree records to avoid mistakes in data entries. There’s no reason to let you earn a few more dollars in your pension, either. However there are differences among the services’ Reserve and National Guard programs, and there could be some niche provision for this situation.

      I’m on travel in Houston right now (and away from all of my bookmarks & files) so I’m going to do more research when I get back home to Hawaii. If you’re a member of the Association of the United States Navy then you could also send your question to them– or to your service’s Reserve association. I’ll let you know if I learn anything new.

      A cynical financial advisor would suggest that your time could be better spent earning money some other way, or just enjoying your life. And if you were going to use these distance-education programs anyway, then the military would have no reason to motivate you with retirement points.

      2. When your pension starts, its base pay scale is the longevity in the pay tables “as though you had been on active duty the entire time while retired awaiting pay”. Now that the pay tables go to 40 years, everyone uses the 40-year pay tables. If your pension starts next month, then for your 30 years of qualifying service you’d also use the “Over 40” column for your retirement rank include the years in which you’ve been retired awaiting pay. That means your pay column would be at least >30, and might be as much as >40. For the vast majority of Reserve/Guard ranks it’s the same dollar figure in those columns. The only pay raises after the >30 column are for E-9, W-5, and O-8->10.

      Keep in mind that the pay table you’ll actually use when your pension starts is the pay table in effect for that year, not today’s pay table. If your pension starts in 2020 then you’ll use the 2020 pay table to determine your base pay amount to use in calculating your pension. By the rules currently in effect, you’ll use the longevity for your retirement rank at the age you start your pension (usually age 60). That’s 40 at least >30 years.

      Regardless of the rule, it may not make a difference. The only ranks that see pay increases after 30 years are the paygrades of E-9, W-5, and flag officer. If you’re in one of these ranks then congratulations! You’ve earned the pension boost. If you’re not in one of these ranks then your pension’s base pay amount is the same whether you have 30 years of service or 40.

      The 40-year pay tables only started in 2007, so not very many servicemembers have retired under them. The Reserve retirement system is affected by the change to 40-year tables, but I think that this is an unintended consequence of the change. (The reason for the change was to encourage senior active-duty ranks to stay to 40 years.) It’s possible that the rules will change again before you begin receiving pay, so it’s worth keeping an eye on the military news.

      • Doug Nordman

        November 26, 2012 at 3:55 AM

        George, it looks like the answer to your first question is definitely “No”.
        You’d have to check your service-specific instruction, but both the Army and the Navy Reserve instructions specifically will not award points while in retirement status.
        Page 8 of the Army Reserve instruction (“Army Reserve Non-Regular Retirement Information Guide”, chapter 3-1 c.2.b, http://www.armyg1.army.mil/rso/docs/ARReserveRetirementGuide.doc) says:
        “2. Transfer to the Retired Reserve. A member in this category may participate in inactive duty training provided:
        a) Such training is at no expense to the Government.
        b) Members are not entitled to pay or retirement points.
        c) No official record of such participation is maintained.”

        The Navy Reserve instruction is being revised, but page 1-2 of the Navy Reserve instruction (BUPERSINST 1001.39F , “Administrative Procedures for Navy Reservists”) archived on the AUSN.org website, chapter 1 section 102.2.b, says:
        “3. Retired Status. Members in the Retired Reserve are in a retired status. Unless recalled to Active Duty, they may not receive retirement point credit. They may not be advanced or promoted. See section 103 of this chapter; chapter 5, section 507; and chapter 10, section 1008 for further information.”

        Section 103 says “Retired Reservists may not receive retirement point credit for the performance of any duty (except while authorized to serve on Active Duty) after the
        effective date of their transfer to retired status.”

        If anyone has the references to the Marine, Air Force, and Coast Guard instructions then I’ll put them here, too.

        Good question, and it flexed my research muscles– thanks!

      • Jeff

        June 30, 2014 at 3:02 AM

        Doug – Concerning the 40 year pay tables, from how I read the rules you use the pay tables in effect at your last 36 months of pay before retirement. This 36 month average determines your pay level. If you joined the military, for instance, at age 24, you would only be able to reach 36 years of service by age 60 when you draw the pension. You would never be able to reach the 40 year table. This could affect George and your answer to him above?

        • Doug Nordman

          July 1, 2014 at 6:30 AM

          That’s correct, Jeff. The federal law says “as though the servicemember had been on active duty the entire time” until their pension starts. Reserve/Guard officers (commissioned at age 21 or older) would never reach the 40-year column. Some Reserve/Guard with combat deployments after 27 Jan 2008 are also eligible to start their pensions a little earlier than age 60. Not many would actually use the 40-year column on the pay tables.

          As of the 2014 pay tables, the only ranks that see pay raises after 30 years are E-9s, W-5s, and O-8->10. However O-6s and E-8s now see pay raises at 30 years, and their pay used to top out at 26 years.

          Any column between 30-40 years will give the correct result for the vast majority of Reserve/Guard retirees. I’ve corrected my answer to George to reflect the actual numbers.

          Thanks for your feedback! We have to educate an entire generation of Reserve/Guard members who entered “retired awaiting pay” status before the pay tables extended out to 40 years.

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  21. Doug Nordman

    December 6, 2010 at 10:21 AM

    Thanks! The next three posts are on Reserve/NG healthcare, pension comparisons, and handling those multiple streams…

  22. Deserat

    December 6, 2010 at 10:08 AM

    Great job, Nords – really summarizes the situation nicely – the key being the streams of income. One other aspect is that while in the Reserves, you get training in areas that may complement or enhance your civilian skills and help you progress more rapidly in that career. Juggling can get difficult and you may end up sacrificing in one or both of your careers, but it does expand the opportunities available to you and as in this posting, provide another pre-and retirement stream of income.

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