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In the US, there are 3 different types of retirement pay plans for the military and army and each one take the Date of Initial Entry into Military Service (DIEMS) to retired pay computations. This date is fixed even if there is a break in service.
Below is a brief explanation of each type of military retirement plan.
Military Retirement Plans for Personnel Who Entered Active Duty before 8 September 1980:
For these personnel, the retirement pay plan is calculated by taking into account their monthly basic pay and multiplying it by 2.5 percent of the number of years of service. For example, a person has served for 24.5 years his retirement pay would be calculated as follows:
24.5 years X 2.5 percent = 61.25 percent
Monthly basic pay X 61.25 percent = estimated retirement pay
Military Retirement Plans for Personnel Who Entered Active Duty between 8 September 1980 and 31 July 1986:
Here the retirement pay is calculated by taking the average of the highest of 36 months of active basic pay, times 2.5 percent of the personnel’s years of service. The calculation for is same as above. The only difference is average highest pay in 36 months.
Military Retirement Plans for Personnel Who Entered Active Duty on or after 1 August 1986
Once again the average of the personnel’s highest 36 months basic pay is taken and multiplied by 2.5 percent of the number of years of service minus 1 percent for every year of service less than 30 years. For instance, a person serves for 24.5 years, his retirement pay would be calculates as follows:
24.5 years X 2.5 percent - 5.5 percent = 55.75 percent
Average basic pay X 55.75 percent = estimated retired pay
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