How Military Retirement Works: High-3 vs. Blended Retirement System (BRS)

Two Systems, One Decision

The U.S. military operates two retirement systems. The High-3 system is the legacy defined benefit pension governed by 37 U.S.C. § 1409. The Blended Retirement System (BRS) was enacted by the National Defense Authorization Act for Fiscal Year 2016 (P.L. 114-92) and became mandatory for service members who entered on or after January 1, 2018. Service members with fewer than 12 years of service as of January 1, 2018 were given a one-time opt-in window during calendar year 2018.

The fundamental trade-off is straightforward: High-3 offers a higher pension multiplier (2.5% per year) but no government TSP contribution. BRS offers a lower multiplier (2.0% per year) but includes a government TSP contribution worth up to 5% of base pay.

The High-3 System: 37 U.S.C. § 1409

Under the High-3 system, the monthly retirement pension is calculated as:

Monthly Pension = (2.5% x Years of Service) x Average Highest 36 Months of Base Pay

The multiplier caps at 75% at 30 years of service. A service member retiring at exactly 20 years receives 50% of their High-3 average base pay. The "High-3 average" is the arithmetic mean of the highest 36 consecutive months of basic pay — in practice, this is almost always the final three years of service, since base pay increases with time in service and promotions.

The pension is paid for life beginning the month after retirement. It receives annual Cost of Living Adjustments (COLA) tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), as specified in 37 U.S.C. § 1401a.

The Blended Retirement System: 37 U.S.C. § 356

The BRS pension formula is identical in structure to High-3 but uses a 2.0% multiplier instead of 2.5%:

Monthly Pension = (2.0% x Years of Service) x Average Highest 36 Months of Base Pay

The multiplier caps at 60% at 30 years. A BRS retiree at 20 years receives 40% of their High-3 average — 10 percentage points less than a High-3 retiree at the same grade and years of service.

BRS COLA is CPI-W minus 1 percentage point until age 62, at which point a one-time catch-up adjustment is applied to bring the pension to what it would have been under full CPI-W indexing. This is the same COLA formula used for FERS (Federal Employees Retirement System) under 5 U.S.C. § 8462.

BRS Government TSP Contributions

The government TSP contribution under BRS is structured in three tiers, per DoD Financial Management Regulation Volume 7B:

• 1% automatic contribution: The government deposits 1% of base pay into the TSP beginning on day 1 of service, regardless of whether the service member contributes anything.
• Matching contributions (years 3–5): Beginning in the 25th month of service, the government matches service member contributions dollar-for-dollar up to 3% of base pay, then 50 cents on the dollar for the next 2% (up to 5% total from the service member).
• Full matching (year 3 onward): Service members who contribute 5% of base pay receive the maximum government contribution of 5% (1% automatic + 4% match).

The TSP 2026 annual contribution limit is $23,500 (IRS Rev. Proc. 2025-46, effective January 1, 2026). The catch-up contribution limit for service members age 50 and older is an additional $7,500.

Which System Produces More Income?

The answer depends on TSP investment performance and career length. A 2015 GAO report (GAO-15-39) found that under historical TSP return assumptions, BRS produces comparable or greater total retirement income than High-3 for service members who separate before 20 years — because they retain their TSP balance even without a pension. For those who serve a full 20 years, High-3 generally produces more guaranteed lifetime income due to the higher multiplier, but BRS can match it if TSP returns are strong.

The Congressional Budget Office estimated in 2015 that the BRS would reduce long-term military retirement costs by approximately $2 billion annually, primarily because fewer service members reach 20 years under any system, and BRS retains the TSP contributions for those who separate early.

Disability Retirement

Service members with a service-connected disability rating of 30% or higher may be eligible for disability retirement under 10 U.S.C. § 1201, regardless of years of service. The monthly amount is the higher of: (1) the standard retirement formula, or (2) 2.5% x disability rating x base pay. Disability retirement pay is partially or fully excluded from federal income tax under 26 U.S.C. § 104.

Survivor Benefit Plan (SBP)

At retirement, service members may elect the Survivor Benefit Plan (SBP) under 10 U.S.C. § 1447, which provides a surviving spouse up to 55% of the retiree's pension in the event of the retiree's death. The premium is 6.5% of the base amount elected, deducted from the monthly pension. SBP premiums are not subject to federal income tax.