Reserves and National Guard – Another Way to Earn a Military Retirement

Another way to get to 20 years for the pension & TRICARE

Everyone who approaches the end of a military obligation has a tough decision:

Stay in or get out?

The decision is even tougher after the first 10 years:

Stay in for retirement, or get out while it’s still easier to transition to a bridge career?

Servicemembers aren’t the only people grappling with that dilemma. Assignment officers are keenly aware that 15-year veterans are unlikely to leave before their 20th. As retirement gets closer the choices get narrower… and the nasty, difficult tours are more likely. Some hardship assignments may seem interesting at the beginning of a career. After the halfway point, it’s bad enough to contemplate a hardship assignment without noticing that your seniors are having even less fun.

When your head’s down in the trenches, doing your best for the mission while preparing for promotions, it’s nearly impossible to contemplate your alternatives. It’s also scary to think about giving up a familiar career and a steady income. The uncertainty of starting over (and perhaps no paycheck for a few months) keeps many servicemembers on active duty for far longer than they may desire.

It’s very easy to serve a decade of active duty in blissful ignorance of the Reserves or National Guard. Some commands never even work with the Reserves or Guard, and there’s little reason to teach active-duty personnel about those careers unless it’s part of their mission.

Each service’s Reserve and National Guard units vary widely in duties, operating tempo, and policies. For those who don’t know the system, here’s a very broad summary.

Members of the Reserves and National Guard can serve on active duty, drill status, or inactive status. (The details are more complicated than this overview.) Drilling is generally one weekend a month with two annual weeks of active duty, but there are many opportunities for longer periods of active duty. Some Reserve and Guard units may deploy every few years, requiring members to serve on continuous active duty for 6-15 months. Other Reservists manage their individual careers and deploy every 5-6 years with or without their unit.

Every drill is worth a point of credit toward retirement, and every day of active duty is worth another point. Members have to earn a minimum annual number of points, generally 35-50, for a “good year” toward retirement. Retirement eligibility is reached after 20 good years (including any active-duty years) and the amount of the pension is determined by the number of points.

Guard and Reserve Retirement Pay

Unlike an active-duty retirement, Reserve/NG pensions start payments at age 60. In general, Reservists and National Guard members will earn enough points during their career for a pension of about 15%-40% of an active-duty base pay scale. Some may earn more, and a few will earn quite a bit more. It’s not uncommon to accumulate 3000-4000 points over 20 good years.

Here are instructions for calculating Guard and Reserve retirement pay, or you can use this calculator as one example of determining your pension for your rank.

Although retiring from the Reserve/NG means that the pension doesn’t begin until age 60, it’s adjusted for both pay raises and inflation. When a retired veteran begins drawing retired pay, the base pay used for their first pension payment is taken from the latest pay charts. Even though a Reservist may have filed for retirement in 1990 at age 40 and spent 20 years awaiting the start of retired pay, in 2010 at age 60 they’ll use the latest pay scale in effect that year. Two decades of pay raises will hopefully have kept up with historic inflation, just as a pension with a cost-of-living-allowance increase will hopefully keep up with future inflation.

An even better benefit is that the pension is based on the pay chart’s maximum longevity in that pay grade. A retiree may only have 20-25 years of service but when the retirement payments begin, they’re paid at the maximum longevity of service in their retirement rank– the numbers under the 26-30-year columns.

This seems to be a suspiciously good deal– waiting 20 years for a pension is no surprise, but why would the military adjust it for years of pay raises and longevity?  Why are “they” being so nice to you?  The reason is that a member of the Reserves or National Guard has the choice to “retire” or “resign” after their 20 good years.

If they retire awaiting retired pay at age 60 then they’ll get the pay raise and longevity benefits. If they “resign” then they still get a pension at age 60, but it’s not adjusted for pay raises or longevity. It’s the exact same amount of pay in effect the day they filed for retirement, and with only their qualifying good years of service. The years they wait until they turn age 60 will subject that amount to decades of erosion by inflation.

The only “good” thing about resigning instead of retiring is that the veteran is not subject to emergency mobilization in time of war. The Department of Defense is willing to hand out the “retire” pay/longevity benefits in the hope that Reservists/NG will retire awaiting pension (and possibly be subject to wartime mobilization) instead of resigning.

Additional Retirement Benefits for Guard and Reserve Members

As attractive as the pension may seem, there are additional privileges with very substantial financial benefits. Reservists/NG are eligible for low-cost healthcare while on active duty. Medicare doesn’t start for most civilian retirees until age 65, but military Reserve/NG retirees are eligible for Tricare at age 60 and Tricare For Life after age 65. That’s five extra years of military medical insurance for only a few dollars a month, and it makes a big difference in states where a private insurer’s premiums are as much as $2500/month.

Learn more about healthcare after leaving the military, and healthcare options for retirement members of the Guard or Reserves.

During the years when a Reservist/NG member is retired awaiting retirement pay, they’re still eligible for access to the base and its commissary, exchange, fitness, and recreation facilities. They can still use benefits like a VA loan and the GI bill. Some of these benefits may be subject to time limits or space availability but they’re a potent way to bridge the gap between a paycheck and a pension.

Healthcare got even better in 2010 for members of the Reserves and National Guard, as well as for those retired awaiting retirement pay. I’ll cover those in a later blog post, or you can Google the terms TRICARE Reserve Select and “TRICARE Retired Reserve”.

Serving in the Guard and Reserves offers Career Fulfillment

No one joins the military to get rich, and that’s especially true of the Reserves/NG. Some Navy Reserve components don’t even pay for some forms of drilling or training and your pension doesn’t start for years after you’ve retired. But you’re not in it just for the money– you’re improving your quality of life! The Reserves/NG can be a vast improvement over active duty because you’ll have much more control over your assignments and better choices for work/life/family balance.

Active-duty members are at the constant beck and call of the assignment officer. Even after years of service they’re still subject to hardship locations, unaccompanied duty, disrupted tours, and reassignment at “the needs of the service”. If the assignment officer calls, it’s probably not good news.

In the Reserve/NG, though, you can decide how much time you want to devote to the military. You can do the minimum required number of drills and mobilizations. You can go on active duty for months at the same command. If other life events make it difficult to balance your military career, you can apply for inactive status– the military’s version of unpaid leave. You can apply for schools and extra training or complete online work or correspondence courses for additional retirement points. You can complete a minimum assignment with a unit, “homestead” for years, or switch among different billets in the same geographic area. You can be your own best assignment officer with your career and your interests at heart.

It’s easy to transfer to the Reserves from active duty. (A short Reserve commitment might even be required after an active-duty obligation.) Active-duty service is credited toward the Reserve/NG retirement system. Veterans might even choose to live in the same area and drill at the same command, but the Reserve obligation is also a great chance to travel the world while working part-time. You can re-invent your life and your career, and you have far more control over your assignments.

Veterans can apply to rejoin the Reserves/NG months or even years later, and civilians can join without any prior military service.

Here’s another advantage of leaving active duty for a Reserve/NG career: It’s a fresh start. When you’re unhappy on active duty, it may be extraordinarily difficult to switch career tracks. You’ll have to apply to your current career field’s personnel mangers to leave, and you’ll have to apply to another career field’s personnel managers to join theirs– where you’re not always greeted with open arms and cries of joy. You’ll be under the gun to learn a new system and to stay competitive for promotion. You might even be expected to start at the bottom of the new ladder, despite all your years of experience (and rank) in your former community. If for some reason you were actually passed over for promotion, it’s next to impossible to recover from it and to remain competitive.

The Reserves/NG allows a do-over and maybe even a clean slate. It’s a chance to not only change your lifestyle but your military specialty, your rating, your location, your duty station, and your environment. Instead of working hours of overtime for months to stay ahead of the pack, you can find a niche where you’re more competitive. Reservists who don’t promote will continue to be considered at subsequent selection boards and may even be permitted to remain in a drilling status, accumulating retirement credit even though they may not be paid for their drills.

I have several more posts about the Reserve and National Guard, and perhaps we’ll finish with a personal sea story. It may be worth your time to subscribe to the blog for the next couple of weeks to make sure that I cover all your Reserve/NG questions. If not, then post a comment or send me an e-mail and we’ll get you the answer.

About Doug Nordman

Author of "The Military Guide to Financial Independence and Retirement" and co-author of "Raising Your Money-Savvy Family For Next Generation Financial Independence."
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2 Responses to Reserves and National Guard – Another Way to Earn a Military Retirement

  1. Ray says:

    A friend of mine just passed away and he was retired from the 107th ANG, NY. On asking on behalf of his wife what contact information does she need to report his death. Thank you.

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