Military Pilot Retirement – Guard and Reserve

Welcome back to our series on Military Pilot Retirement pay. In Part 1 we discussed retirement for Active Duty pilots. In this part we’ll discuss retirement pay for Guard and Reserve pilots.

Table of Contents

1. Background
2. Let’s Run The Numbers
3. Marginal Utility
4. What is an Hour of Your Life Worth?
5. It’s Not All About the Money!

Background

In essence, a Reserve (or Guard) retirement pays the same as an Active Duty retirement. You receive 2% of your base pay, times the number of years you served. (The newer Blended Retirement System gives you 2%. If you’ve already been serving for a long time, you may still be under the old retirement system that pays 2.5% of base pay.) If a pilot served for 20 full years, his or her retirement pay would equate to 40% of base pay (under the BRS), or 50% of base pay under the legacy retirement system.

Remember though, we’re dealing with the US government, so everything is extra complicated for a Reserve retirement. Since most reservists don’t work 365 days per year, the government doesn’t want to give you credit toward a full year’s worth of retirement pay for each year of your Reserve military service. They convert the total number of days (pay periods) that you served and divide them by 360 to come up with a number of equivalent full-time years for your service.

(Yes, in most cases, you should log 2 pay periods for each day that you work as a Reservist. However, to prevent good deals, the rules say that you’re not allowed to log more than 360 points per year.)

The resulting equation looks like this:

Years of Service = Points Earned ÷ 360

If you spent 20 years on full-time Reserve orders, you would earn 7200 points and the equation solves as:

20 Years of Service = 7200 Points ÷ 360

Most reservists won’t accrue 7200 total points. The bare minimum any reservist could expect to earn per year is:

48 Points for attending monthly drill (12 weekends, at 2 points per day)
15 “Participation” Points (awarded just because you’re in the Guard or Reserves)
+ 15 Annual Tour Points (essentially the “two weeks in the summer” tagline)
78 Total Points

Most pilots will earn more points than this each year through the necessity of keeping current in your aircraft. For our calculations, we’ll assume a pilot earns roughly 200 points per year (15 for participation, 48 for drill, and then earns 2 points a day for roughly one week of flying per month).

It’s also worth noting that service on Active (full-time) orders only earns you one point per day worked. We’ve mentioned that a pilot who starts his or her service in the Guard or Reserves will probably spend this first 2-4 years on full-time orders. This pilot will receive 360 retirement points per year during that time.

A pilot who transitions from Active Duty to the Guard or Reserve also receives 360 points per year of full-time service. Since most pilots won’t have the option of doing this until the 11-12 year mark, they can expect to start off in the Guard or Reserve with 3,960 - 4,320 points.

An Active Duty retirement is an all-or-nothing deal that kicks in after 20 years of service. The military also requires 20 years of service from its Guard and Reserve pilots, but there’s a lower limit to how lazy you can be. In order for each year of your service to count, you must log at least 50 retirement points. The government refers to this as a “Good Year.” Since each pilot gets 15 points just for participating, he or she could theoretically get by earning 35 points from actual work. Since each point represents 4 hours of work, this equates to a grand total of 140 hours of work in a year. This shouldn’t be difficult for most pilots, and we’ve already decided that the average pilot will earn closer to 200 points each year.

Unfortunately, there’s one more big gotcha that we have to address here: Although Active Duty retirees start collecting monthly checks as soon as they retire, Guard and Reserve retirees don’t get a dime until they reach age 60! If you pursue the Ultimate Military Pilot Career Path by enlisting at age 18, you could accrue 20 Good Years by age 38. No matter how valiant your service was, you’ll have to wait 22 years before you get your first retirement check. (There are some small loopholes here. The date you start collecting retirement moves one day earlier for each day that you spent deployed, with some stipulations.)

With this background, we can start toward calculating what a pilot’s monthly check will be in retirement.

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Let’s Run The Numbers

We decided that a pilot who starts as a “Guard Baby” (no active duty experience) should have about 3 years on full-time orders worth 1080 retirement points. After that, we’ll plan for this pilot to accrue another 17 Good Years by earning an average of 200 points per year. That means this pilot expects to earn a career total of roughly 4,480 points. Here’s a summary:

1080 (3 years x 360 points per year)
+ 3400 (17 years x 200 points per year)
4480 total retirement points

We’ll also consider the case of a pilot who transitioned to the Guard or Reserve after 11 years on Active Duty. His or her points look like this:

3960 (11 years x 360 points per year)
+ 1800 (9 years x 200 points per year)
5760 total retirement points

Next, we have to convert these values to equivalent years of full-time service, dividing total points by 360:

	Guard Baby	Active Duty Transition
Total Retirement Points	4480	5760
Divide by	360	360
Equivalent Years of Service	12.4	16

We multiply the value for equivalent years of service by either 2% (BRS) or 2.5% (legacy retirement system) to get what the military calls a “Service Multiplier.” The pilot transitioning from Active Duty could potentially fall under either system, while a Guard Baby starting out today will definitely fall under the BRS.

	Guard Baby (BRS)	Transition Pilot (BRS)	Transition Pilot (Legacy)
Equivalent Years of Service	12.4	16	16
Retirement Percentage	2%	2%	2.5%
Service Multiplier	24.8%	32%	40%

We apply the Service Multiplier to the monthly base pay that each pilot will be earning on the day he or she retires. (I’ll also add a row that shows annual retirement pay to save you some math.) Although a pilot could retire at a variety of ranks, we’ll limit our calculations by showing what he or she would earn as an O-4, or as an O-5.

Here are the O-4 numbers:

O-4 Retirement Pay	Guard Baby (BRS)	Transition Pilot (BRS)	Transition Pilot (Legacy)
Monthly Pay Rate	$8,073.90	$8,073.90	$8,073.90
Service Multiplier	24.8%	32%	40%
Monthly Retirement Pay	$2,009.50	$2,583.65	$3,229.56
Annual Retirement Pay	$24,114	$31,003.80	$38,754.72

And here’s what this pilot would get after retiring as an O-5:

O-5 Retirement Pay	Guard Baby (BRS)	Transition Pilot (BRS)	Transition Pilot (Legacy)
Monthly Pay Rate	$9,243.60	$9,243.60	$9,243.60
Service Multiplier	24.8%	32%	40%
Monthly Retirement Pay	$2,300.63	$2,957.95	$3,697.44
Annual Retirement Pay	$27,607.56	$35,495.40	$44,369.28

Overall, this reserve retirement is a good deal. We should be thankful that we have the ability to earn this taxpayer-funded benefit. Who wouldn’t love to get a check for thousands of dollars each month for doing nothing? Don’t forget that this retirement also gives a pilot access to extremely cheap health insurance. However, unless you’re as badass as my hero, Mr. Money Mustache, a reserve retirement may not be enough to support you for the rest of your life. (Also, don’t forget that you won’t even start receiving these checks until age 60 or so.)

Before we conclude, I want us to take a look at this benefit from another perspective. First, we need to review a very important concept from the discipline of economics.

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Marginal Utility

I don’t know about you, but I love pizza. Is there anything better than taking a bite of pizza after a long day when you felt like you were starving? It’s pretty amazing, right? The next bite is also amazing, but maybe slightly less so. In fact, each subsequent bite and each subsequent slice of pizza brings you just a little less enjoyment than the last one. This principle is what economists call Marginal Utility...the idea that a thing’s value decreases as you have more of it.

If you go on eating slice after slice of pizza, you’ll eventually get full. From that point, eating another slice really doesn’t have much value for you at all. Keep going and you’ll actually reach a point where each additional bite has a negative value.

You probably already knew all of this, but I want it to be fresh in your mind as we ask our next question:

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What is an Hour of Your Life Worth?

Each of us has a limited number of hours on this planet. When we go to work, we’re trading those hours for money. Vicki Robin and Joe Dominguez wrote a fascinating discussion of this idea in their book, Your Money or Your Life. How much do you value those hours of your life? How much compensation do you need to give one up?

It turns out that it’s not too complicated to calculate the value that the military places on our time. We’re going to look at those numbers here, then ask ourselves whether that compensation is adequate.