Defined Benefit Plans

If you serve in the active component of the armed forces for 20 years or more, are a member of the Reserve component with the equivalent of 20 years of service, or have a qualifying medical disability, you’re eligible for a lifetime government pension when you retire.

The income you receive depends on your retirement pay base and your length of service—common factors in calculating a defined benefit pension. In addition, you’re entitled to a cost of living adjustment (COLA) in years when rising inflation triggers more than a minimal increase in the Consumer Price Index (CPI).

Unlike civilian pension payments, which typically don’t begin before you reach a specific age, such as 65, military pension payments begin as soon as you leave the service. There is an exception, though. Reserve members are generally not eligible to receive their pensions until they turn 60, regardless of the age at which they retire.

WEIGHING THE ODDS

As valuable as a pension can be, if you’re not planning on a military career of at least 20 years, you won’t be eligible. Currently only 49% of officers and 17% of enlisted men and women reach that milestone.

Job satisfaction is one consideration, both from your perspective and your family’s. If you’re excited about the next 10 or 15 years of career challenges and opportunities as you rise through the ranks, you might feel confident that you’ll have a pension to count on.

But if you see military service as a good transition into a civilian job that really interests you, it’s less likely that you’ll qualify for the security a pension can provide. That makes it even more critical to contribute as much as you can to your TSP account. Those savings plus retirement savings you accumulate in your civilian life can compensate for not having a pension.

If you anticipate making military service your career, it’s probably smart to analyze, to the extent you can, how your branch of the service is likely to evolve over the next decade and how potential changes might affect your career. For example, if there’s a continuing trend toward downsizing, how likely are you to face involuntary separation? Are your skills the ones that are likely to be the ones in greatest demand as the force modernizes?