Options For National Guard And Reserve Retirement

I get several e-mails or “Contact me” questions every day about how to handle service in the National Guard and Reserve. Most of them I can answer on my own, and they’re good questions that deserve to be discussed in their own posts. Occasionally I’m stumped by a question and I hope that you readers have seen a similar situation.

Retirement now or later?

First up is Lisa’s question about going back on active duty to qualify for a Reserve pension:

I have 10 years of just Reserve time. I’m planning on going back on active duty to complete another 10 years. If I do that, will I get my retirement when I complete my 10 years of active duty time or will I have to do more time to get my retirement right when I retire?

The answer is “Yes”: you can get either one.

For the vast majority of servicemembers, 10 “good years” of Reserve or National Guard duty is halfway to a retirement. When you add another 10 years of active duty to that Reserve record, you’ll reach 20 good years and have over 4000 points. At that point you’ll be eligible for a Reserve/Guard retirement (and get a big boost toward financial independence).

Your Reserve retirement doesn’t start right away, but it will start no later than age 60. (For every 90 days of qualifying service that you mobilize during a fiscal year then your retirement age will be reduced by 90 days.) When you’re part of the active-duty services then your personnel branch may not know to send you a Notice of Eligibility for a Reserve/Guard retirement. You’ll have to query your Reserve/Guard force headquarters to produce a NOE before you leave active duty for “retired awaiting pay” status. You can read more about leaving active duty for a Reserve retirement at this post.

If you want an active-duty retirement then you’ll have to stick around for 20 years of active duty or a Temporary Early Retirement Authorization at 15-20 years (these are generally only used during drawdowns). Medical or disability retirements are another possibility but way beyond the scope of your question.

You could also separate anytime between 10-20 years of active duty and still enjoy the extra points on your Reserve retirement, but if you take any separation incentive payments (to leave active duty) then you’ll have to repay them once you start receiving your pension.

Definition of Active Federal Service

Next up is a question for a military lawyer:

A friend is trying to straighten out his Active Federal Service (AFS) time as an Army Reserve AGR officer. He’s looking for the regulation that defines AFS and specifies what the calculation includes. As this deals with pay and thousands of folks have gone through this process (and the DOD being a bureaucratic beast) I’d imagine this is spelled out in detail. At stake is whether he’s forced to a mandatory retirement date or gets to retire. Could use some help!  Thanks, Chris

I’m not a lawyer, and your friend definitely needs the services of one.

Lawyers know how to sort out the federal law’s revisions, amendments, updates, and other minor changes. They also have the tools to research previous cases for legal precedents that might not be reflected in the actual text of the law. As you say, I’m sure that there have been many lawsuits in this area over the last few decades, but I’m not sure how to find them.

The definition of active federal service starts in Title10 of the U.S. Code, parts 101(d)(6) and (7). In the “Notes” tab of the Cornell law website it says “In clause (22), the definition of “active duty” is based on the definition of “active Federal service” in the source statute, since it is believed to be closer to general usage than the definition in 50:901(b), which excludes active duty for training from the general concept of active duty.”

That’s generally the contentious issue: ADT and AT (or anything else with the word “training” in it) does not count as active duty for Reserve/Guard sanctuary. Even if it involved a mission supporting active-duty forces (for example, flying fuel tankers for refueling jets flown by active-duty pilots) it’s still “training”. This is how Reserve servicemembers can still conduct drills and AT/ADT (for points and credit toward “good years”) without exceeding 18 years of active duty service and reaching sanctuary.

Army National Guard active duty could also occur under Title 32 of the U.S. Code, which allows states to mobilize their Guard members with federal funds. It’s generally used to for homeland security missions but may have different definitions of “active federal service”. I’m going to have to defer to the lawyers and your friend’s state law on this one.

In general, under Title 10 anything less than 30 days is considered “training” and anything 30 days or more (when a new ID card is issued) would be considered “active duty” no matter what federal law is cited in the orders. I’m not sure about Title 32 limits.

To further confuse the issue, your friend’s orders could have mistakenly referenced the wrong federal law codes. If personnel branches cite the wrong clause in your friend’s orders then that error can’t be held against the military for pay or retirement purposes.

Your friend could contact their unit’s lawyer or base legal officer or even see if they can find someone in their unit who has a civilian practice. Just about any lawyer or paralegal should have the tools to research the law and the case history, although a military lawyer will be more familiar with recent precedents.

Go Individual Ready Reserve or retired awaiting pay?

Regina Roundtree asks:

I have my 20 year letter (15 years 10 months of which was active duty) and 6 years in the reserves (22 years 4 months total). I’m not sure I want to completely end my career, but I want to get out for now (stop drilling monthly). Should I go IRR or Retired awaiting pay?

Your service and your unit may give you several options. The first two are your choice. The last two options depend on the size of the unit, its mission, and your travel distance to the drill site.

  1. “Retire awaiting pay”. You’re completely done and just waiting to start your pension. You also have your service’s Reserve benefits (base access, commissary) while you’re waiting to start your pension. Your longevity in your rank will continue to accrue to the maximum pay for that paygrade.
  2. Transfer to the Individual Ready Reserve and continue to complete correspondence courses for points and “good year” credits. (You are unlikely to select for promotion.) IRR gives you the option to apply to return to drill status but you can also retire at any time. Your longevity will continue to accrue either way.
  3. Reschedule your drills to conduct three consecutive drill weekends at your supported command during a six-day period each quarter. This is greatly appreciated by the supported command (your Reserve funds are paying you, not AT funds or the supported command) but your Reserve unit does not get any support from you. It is possible to remain competitive for promotion.
  4.  Take an occasional authorized absence and skip a drill weekend. Be sure to reach the minimum criteria for a good year and receive the minimum number of points. You’ll also have to continue to complete your unit’s scheduled evolutions like physical assessments, medical/dental readiness, and any other mandatory training. You’re still competitive for promotion.

Personal-finance blogger and financial planner Rob Aeschbach also says:

I don’t know what service Regina is in, so I’ll answer about my service, the Marines.

One of the biggest downsides of leaving a Reserve unit and transferring to the IRR is losing Tricare Reserve. Even if you transfer from one unit to another, if you spend a day in the IRR you will be bumped out of Tricare Reserve. You should do a direct transfer if you want to move to another drilling unit or an IMA.

Once you’ve completed 20 ‘good’ or ‘sat’ years, you only need to keep getting good years to avoid being bumped off the Active Status List to the Inactive Status List, or being forced to retire. There are waivers available, and I’m not sure if how quickly they bump you depends on current personnel needs.

At this point your points only serve to increase your retired pay. Regina has a lot of active duty time. I estimate her total points to be 5800-6000. That converts to a retired pay multiple of about 42%. That would be about $2314/month for an E-8 or $3625 for an O-5 (all in today’s pay). The IRS life expectancy for a 60 year-old is 25.2, making those retirement checks worth a total of about $700,000 or $1,100,000. Every point Regina continues to earn in the Reserves only adds between 30 and 60 cents a month to her retirement check. Drilling a full year (48 drills and 13 days AT) would add $280 to $440 to her annual retired pay.

If you’re thinking about transferring to the IRR, it’s probably because you need a break to clear your head or to focus on other priorities in your life. That’s a good, acceptable reason. If you get recharged after a few months, or a couple of years, go back to the Reserves and do something you enjoy. If hanging up the uniform feels better, then retirement’s the answer.

To give yourself more time you could try to front-load a good year by working full-time at the Reserve unit for a few weeks. Here’s an example (with higher than average degree of difficulty):

Say your anniversary date is coming up soon, say 14Dec2013. You already rate 48 drills for FY 2014 (1Oct13-30Sep14), and you have until 13Dec14 to earn 50 points. You take some time off your civilian job and get approval to work full-time at the unit, Mon-Fri, in January. You work 18 weekdays earning 36 drill points. Add your 15 participation points and you have a sat year with 51 points; then you can transfer to the IRR by 29Jan14. Your next deadline is then almost 2 years away, 13Dec15.

Reader testimonial

And finally, a totally unsolicited comment from reader Les:

As a 6-year vet of the U.S. Navy, I just wanted to say “Bravo Zulu”! You are doing a great thing here. I wish I’d had the foresight in my military days to open up a retirement account and work the magic of compound interest way back then. On the contrary, I was one of those young, dumb squids who

  • (a) cashed his check at the mobile check cashing vans charging 3% that would line up outside the base gates every payday (always staffed by pretty young women),
  • (b) lived “like a sailor” paycheck-to-paycheck, and
  • (c) got suckered into the predatory “no money down” loan scheme so prevalent and readily available in military towns.

I smartened up a little about a year before leaving the service, selling my car (that I was still making payments on) and saving enough money to pay for my first year of college. 23+ years.

Later, with a B.A and a J.D., I’ve smartened up quite a bit (though even now looking back I realize I’ve made many mistakes along the way), and have made the best of my opportunities. I’m in a Federal law enforcement officer position now, with five years to go until retirement eligibility. I bought my six years of military service toward my FERS pension, and I have saved aggressively into my TSP for 15 years now. Bolstered by the information I’ve found on your site, as well as MrMoneyMustache.com and others, I’m really looking forward to Early-ish Retirement/FI at 55. And I’ve been preaching the good news to my fellow co-workers, as you do on your website (and books).

Anyway, just wanted to let you know I enjoy your site and your presence as a commenter on other FIRE blogs as well. Thanks for sharing your story and helpful strategies.

Thanks, Les!

Related articles:
Mixed plate: Tricare, “back pay” issues, early Reserve & Guard retirement
Reader questions on Reserve retirement Tricare and points
The Military Wallet: National Guard and Reserve Early Retirement Age
Retiring from the Reserves and National Guard
Calculating a Reserve/Guard retirement

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."
This entry was posted in Military Retirement. Bookmark the permalink.

6 Responses to Options For National Guard And Reserve Retirement

  1. Dennis says:

    I’ve got 8 active duty years and 8years 3 months in army national guard. Can I retire early with that?@

    • Doug Nordman says:

      Thanks for asking, Dennis!

      So far the answer appears to be “No”:

      If you’re mobilized then you may be able to volunteer for a TERA program, but the general requirement is at least 15 years of active service. Your Guard time may not qualify for a voluntary TERA or an involuntary board.

      It may make more sense for you to continue drilling or to transfer to the IRR for correspondence courses. You’ll do much less work (for less pay and fewer points) but you’ll reach retirement eligibility in less than four years. If you e-mail me more details then we can figure out what strategy might work for you. NordsNords [at] Gmail.

  2. Hoon Kim says:

    I had 9 good years before changed to Active component.
    I have 11 years as a Active member.
    When I asked active and reserve retirement personnel, I am not qualify for retirement either way.
    Can I retire as a reserve side?

    • Doug Nordman says:

      Hoon, when you reach a total of 20 good years of active and Reserve duty, you’re qualified for a Reserve pension. The first step is checking your records and making sure that all of the good years and your active-duty time have been correctly entered.

      Once the databases are correct then you can contact your service’s Reserve personnel system to ask about your Notice Of Eligibility for your Reserve retirement. (The active-duty personnel side won’t have this information.) Once they’ve issued the NOE then you can continue your service (for a higher Reserve pension) or apply to retire waiting pay.

      You may also have to complete your active-duty service obligation before you can be considered eligible to retire with the Reserve pension system. Those policies vary by service, and after you complete that obligation then you’d essentially separate from active duty to retire as a Reservist.

  3. Marcus says:

    I am about to get my 20 years with the NG. A few years back I signed a voluntary reduction in rank from E-5 to E-4 (due to stagnation) in order to reenlist at the time. Will I be retiring as an E-5 at E-5 pay, or as an E-4 at E-5 pay, or as an E-4 at E-4 pay? I held the rank of SGT for 6~7 years, don’t recall the exact length of time.

    • Doug Nordman says:

      I’ve never heard of this situation before, Marcus, so I checked with Ryan Guina. He’s the owner of TheMilitaryWallet blog and also a Guard member.

      In general, servicemembers are entitled to retire at the highest rank they satisfactorily held during their career. For the Army and the National Guard, that’s in Title 10 U.S. Code section 7343:
      However each service has different policies and we’re not sure how you’d be affected by your voluntary agreement to re-enlist at E-4. You’d want to review that section of federal law and your re-enlistment agreement with a JAG or a lawyer who’s familiar with military law.

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