Making sense of National Guard and Reserve retirement

Serving in the National Guard or Reserves means a lot more than yearly training and a monthly trip to get a haircut. It's a great way to serve your country without wearing a uniform on a full-time basis. And, in return for your service, you have an opportunity to boost your retirement.

Even though it can be a great way to give your retirement savings a lift, let's admit that the Reserve Component pay and retirement system can be confusing, especially for those crossing from active duty.

When I retired from the U.S. Air Force Reserve after 20 years of service, I learned a lot from going through the process. I'll highlight a few factors you can take advantage of to help achieve your retirement goals. I'll also share my experience so you can apply my lessons learned to your own situation.

Lock in good years.

Guardsmen and Reservists earn points toward retirement by performing their regular duties. If they earn a minimum of 50 points in a year, they accrue a qualifying year, or "good year." Once they have 20 qualifying years, they're eligible for retirement benefits.

Since you get 15 points automatically just for membership in the Reserve Component, you only need 35 points for a good year. Points also play a factor in determining the amount of retirement pay you'll receive, generally when you turn 60.

Understand how to earn points.

You accumulate points by serving. You can serve through:

• Annual training
• Monthly weekend drills
• Correspondence courses
• Funeral honors duty
• Active-duty service

The idea is that the more you serve, the more points you earn. The more points you earn, the bigger your military pension will be when you retire.

Calculate your National Guard or Reserve retirement.

Active-duty service members usually receive their pension at 20 years, which in Guard or Reserve lingo, equates to 7,200 points.

You can do an easy calculation to find your "equivalent years of active-duty service" by dividing your points by 360. For example, if you retire with 3,600 points, you have 10 years of equivalent years of service (3,600 / 360 = 10).

In the case that you retired with 4,320 points, that would be the equivalent of 12 years of service (4,320 / 360 = 12). How can you do this? By taking a few more deployments or periods of active-duty service.

You can see that more service equates to more points and a greater number of equivalent years of service. In a moment, we'll show why that leads to a larger military pension.

Calculate your pension.

Calculating your pension begins with identifying your retirement system. The Blended Retirement System, or BRS, and High-3 have the same retired base pay, but they require different calculations.

BRS

Under the BRS, your retired base pay is the average of your highest 36 months of basic pay.

To calculate it, take the equivalent years of service (calculated previously) and multiply it by 2%. That equals the percentage of retired base pay you get.

High-3

Under the High-3, your retired base pay is again the average of your highest 36 months of basic pay.

To calculate it, take the equivalent years of service, calculated previously, and multiply it by 2.5%. That equals the percentage of retired base pay you get.

Understand how Guard and Reserve retirement impacts your plans.

Now, let's get into my situation to bring this together.

I retired from the U.S. Air Force Reserve as a lieutenant colonel after 20 years of service — 11.5 years active duty and the last 8.5 in the Reserves — under the High-3 system.

I retired with 4,764 points, which is greater than average for an individual who served a majority of their time in the Reserve Component. That's because I received 3,784 points for my active-duty time before transferring to the Reserves, and I earned the remaining 980 over the next eight years in the Reserves.

Here's how I calculated my retirement income.

Step 1: I converted my points to equivalent years of service:

4,764 divided by 360 equals 13.2 equivalent years of service.

Step 2: I multiplied those equivalent years of service by 2.5%:

13.2 times 2.5% equals 33% of retired base pay. That is what I expect to receive when I turn 60.

Is it possible to stay in the Reserve Component long enough to earn a full, active-duty pension? Yes. That career is often characterized by many years of service with several stints of full-time service.

You can do this quick math as I've shown or you can use the calculator provided by the DoD either the High-3^{See note1} or BRS.^{See note1}

What about the BRS lump sum?

The BRS lump sum option is a complicated but important decision to make. It's so important that we devoted an entire article to the topic of helping you decide if it's right for you. Read Is the Blended Retirement System lump sum option right for me?

Retired reserve: Staying ready reaps rewards.

Once you've qualified for retirement and have decided to hang up your boots, you have two options: discharging from the service altogether or transferring to the Retired Reserve.

Transferring to the Retired Reserve will allow you to earn longevity credits and receive retirement pay based on the pay tables in effect when your retirement pay begins, not the pay when you were discharged.

However, Retired Reserve status means you can be recalled and mobilized to active duty under certain circumstances.

Protect your benefits.

When you're looking at a lifetime of inflation-adjusted income, National Guard and Reserve retired pay is a valuable financial asset.

As you develop your retirement plans, consider preserving this asset for your loved ones. You can provide protection to them for a monthly premium through an optional government program called the Reserve Component Survivor Benefit Plan, or RCSBP.

To learn more about the different RCSBP options, read our article, Understand your Reserve Component Survivor Benefit Plan options.

It's never too early to prepare for Guard and Reserve retirement.

Even if your retirement feels a long way off, you need to understand how to earn points — and how they'll impact your retirement pay. Having the information could influence whether you say yes to opportunities to earn points like periods of full-time service or deployments.

Understanding how Guard and Reserve retirement is calculated will also help you plan for your future and budget for your retirement.