Key Takeaways
- 2026 COLA increase is 2.8% for military retirees, effective with December 2025 payments (paid Jan 1, 2026)
- REDUX retirees receive 1.8% COLA (CPI minus 1%) until the age-62 catch-up adjustment
- High-36 (Legacy) retirement pays 2.5% × years of service × average of highest 36 months of base pay
- Blended Retirement System (BRS) pays 2.0% × years of service, plus TSP matching up to 5%
- Minimum 20 years of service required for military pension (with exceptions for medical retirement)
- SBP annuities and VA disability also receive the 2.8% COLA increase
Table of Contents
- 2026 COLA Increase for Military Retirees
- Military Retirement Systems Explained
- High-36 (Legacy) Retirement System
- Blended Retirement System (BRS)
- REDUX Retirement System
- Final Pay System
- How to Calculate Your Retirement Pay
- COLA History: 2020-2026
- Taxes on Military Retirement Pay
- Survivor Benefit Plan (SBP)
- Frequently Asked Questions
2026 COLA Increase for Military Retirees
Military retirees will receive a 2.8% cost-of-living adjustment (COLA) in 2026, up from 2.5% in 2025. This increase applies to retired pay starting with December 2025 entitlements, which appear in end-of-month payments (typically deposited around January 1, 2026).
The COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), the same index used for Social Security adjustments. While the 2.8% increase is modest compared to 2023’s 8.7% adjustment (the largest in 42 years), it reflects slowing inflation while still helping retirees maintain purchasing power.
Who Receives the 2.8% COLA?
The following benefits all receive the 2.8% COLA increase:
- Military retirement pay (all systems except REDUX)
- Survivor Benefit Plan (SBP) annuities
- VA disability compensation
- VA pension benefits
- Dependency and Indemnity Compensation (DIC)
- Social Security benefits
REDUX Retirees: 1.8% COLA
If you’re under the REDUX retirement system (took the Career Status Bonus at 15 years), your COLA is CPI minus 1 percentage point when inflation exceeds 1%. For 2026, REDUX retirees receive a 1.8% COLA instead of 2.8%.
This 1-point annual gap compounds over time, but at age 62, REDUX retirees receive a one-time adjustment that brings their pay up to what it would have been under High-36. After the age-62 adjustment, the reduced COLA resumes.
Example: 2026 COLA Impact
| Current Monthly Pay | 2.8% COLA Increase | New Monthly Pay |
|---|---|---|
| $1,500 | +$42 | $1,542 |
| $2,000 | +$56 | $2,056 |
| $2,500 | +$70 | $2,570 |
| $3,500 | +$98 | $3,598 |
| $5,000 | +$140 | $5,140 |
Military Retirement Systems Explained
Your military retirement system depends on when you first entered service. Understanding which system applies to you is crucial for planning your retirement income. For a complete overview of all military retirement systems, see our Military Retirement Planning Guide.
| Date of Initial Entry | Retirement System | Multiplier |
|---|---|---|
| Before Sept. 8, 1980 | Final Pay | 2.5% per year |
| Sept. 8, 1980 – July 31, 1986 | High-36 (High-3) | 2.5% per year |
| Aug. 1, 1986 – Dec. 31, 2017 | High-36 or REDUX* | 2.5% (or reduced) |
| Jan. 1, 2018 – Present | Blended Retirement System (BRS) | 2.0% per year |
*Service members who entered between Aug. 1, 1986 and Dec. 31, 2017 could choose REDUX (with $30,000 Career Status Bonus) or remain under High-36.
High-36 (Legacy) Retirement System
The High-36 system (also called “High-3”) applies to most service members who entered between September 8, 1980 and December 31, 2017 (who didn’t opt into BRS). It’s called “High-36” because retirement pay is based on the average of your highest 36 months of base pay.
High-36 Retirement Formula
Monthly Retirement Pay = 2.5% × Years of Service × High-36 Average
High-36 Multiplier by Years of Service
| Years | Multiplier | Years | Multiplier |
|---|---|---|---|
| 20 | 50% | 26 | 65% |
| 21 | 52.5% | 27 | 67.5% |
| 22 | 55% | 28 | 70% |
| 23 | 57.5% | 29 | 72.5% |
| 24 | 60% | 30 | 75% |
| 25 | 62.5% | 30+ | 75% (max) |
High-36 Calculation Example
Scenario: An E-7 retires after 24 years with a High-36 average of $5,800/month.
- Multiplier: 24 years × 2.5% = 60%
- Monthly retirement: $5,800 × 60% = $3,480/month
- Annual retirement: $3,480 × 12 = $41,760/year
Blended Retirement System (BRS)
The Blended Retirement System applies to all service members who entered on or after January 1, 2018, plus those who opted in during the 2018 enrollment window. BRS “blends” a reduced pension with government contributions to your Thrift Savings Plan (TSP).
BRS Components
1. Defined Benefit (Pension): 2.0% × years of service × High-36 average (reduced from 2.5% under legacy systems)
2. TSP Contributions:
TRENDING: See Today’s VA Loan Rates
- Automatic 1% government contribution (you don’t have to contribute anything)
- Government matching up to 4% of base pay (if you contribute at least 5%)
- Maximum government contribution: 5% of your base pay
3. Continuation Pay: A one-time bonus at your 12-year mark (typically 2.5× to 13× monthly base pay, depending on branch and specialty) in exchange for a 4-year service commitment.
BRS vs. High-36 Comparison
| Feature | High-36 | BRS |
|---|---|---|
| Pension multiplier | 2.5% per year | 2.0% per year |
| 20-year pension | 50% of High-36 | 40% of High-36 |
| TSP matching | None | Up to 5% |
| Continuation pay | No | Yes (at 12 years) |
| Benefits if <20 years | None (no pension) | Keep TSP contributions |
| Lump sum option | No | Yes (25% or 50%) |
BRS Lump Sum Option
BRS retirees can elect to receive 25% or 50% of their retired pay as a lump sum at retirement. In exchange, your monthly pension is reduced until you reach full retirement age (currently 67 for Social Security purposes). This option may appeal to those with specific financial goals, but comes with significant trade-offs—consult a financial advisor before choosing this option.
REDUX Retirement System
REDUX applies to service members who entered between August 1, 1986 and December 31, 2017 AND chose to take the $30,000 Career Status Bonus (CSB) at their 15-year mark. If you took the bonus, you’re under REDUX; if you declined it, you remained under High-36.
REDUX Trade-offs
- Reduced multiplier: Pension multiplier is reduced by 1% for each year under 30 years of service
- Reduced COLA: Annual COLA is CPI minus 1 percentage point
- Age-62 catch-up: At age 62, your pension is recalculated to what it would have been under High-36, but the reduced COLA then resumes
REDUX vs. High-36 Example
20-year retirement comparison:
- High-36: 20 × 2.5% = 50% multiplier
- REDUX: 50% − 10% (penalty for 10 years under 30) = 40% multiplier
For most service members, the $30,000 bonus didn’t compensate for the lifetime reduction in pension and COLA. Financial analyses consistently show that declining the CSB and staying under High-36 was the better long-term choice for those who served 20+ years.
Final Pay System
The Final Pay system applies only to service members who entered before September 8, 1980. Very few active-duty members remain under this system today, but some retirees still receive benefits calculated this way.
Under Final Pay, retirement is calculated using your final base pay at retirement (not the 36-month average), with the same 2.5% per year multiplier as High-36.
How to Calculate Your Retirement Pay
This calculator provides estimates only. Actual retirement pay may vary based on exact service dates, pay history, and other factors. Use official DoD calculators for precise figures.
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Step 1: Determine Your System
Check your Date of Initial Entry into Military Service (DIEMS) to identify which retirement system applies to you. This date doesn’t change even if you leave and rejoin the military.
Step 2: Calculate Your High-36 Average
Add up your base pay for your highest 36 months (usually your last 3 years of service) and divide by 36. Don’t include BAH, BAS, or special pays—only base pay counts.
Step 3: Apply the Formula
High-36/Final Pay: Years of Service × 2.5% × Base Pay Average
BRS: Years of Service × 2.0% × High-36 Average (plus TSP)
REDUX: (Years of Service × 2.5% − penalty) × High-36 Average
Official Calculators
For accurate estimates, use the official DoD calculators:
- High-36 Calculator (Defense.gov)
- BRS Calculator (Defense.gov)
- DFAS Retirement Estimator
- Military OneSource Calculators
COLA History: 2020-2026
Understanding COLA trends helps with long-term retirement planning. Here’s the recent history of military retiree COLAs:
| Year | COLA % | REDUX COLA % | Notes |
|---|---|---|---|
| 2020 | 1.6% | 0.6% | Pre-pandemic |
| 2021 | 1.3% | 0.3% | Pandemic year |
| 2022 | 5.9% | 4.9% | Inflation surge begins |
| 2023 | 8.7% | 7.7% | Highest in 42 years |
| 2024 | 3.2% | 2.2% | Inflation moderating |
| 2025 | 2.5% | 1.5% | Continued moderation |
| 2026 | 2.8% | 1.8% | Current year |
Taxes on Military Retirement Pay
Military retirement pay is subject to federal income tax. However, state tax treatment varies significantly:
States with No Income Tax (No Tax on Military Retirement)
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming
States That Exempt Military Retirement Pay
Many states have passed laws exempting all or part of military retirement pay from state income tax. As of 2026, over 30 states offer some level of exemption. Check with your state’s tax authority for current rules.
Tax Planning Tips
- Consider state tax implications when choosing where to retire
- If you have a VA disability rating, that portion of your pay is tax-free
- CRDP (Concurrent Retirement and Disability Pay) is taxable; CRSC (Combat-Related Special Compensation) is not
- TSP withdrawals are taxable (unless from Roth contributions)
Survivor Benefit Plan (SBP)
The Survivor Benefit Plan provides continued income to your beneficiaries after your death. SBP annuities also receive the 2.8% COLA increase in 2026.
SBP Key Points
- Cost: 6.5% of covered retired pay
- Benefit: 55% of covered retired pay to your survivor
- COLA: Annuity receives same COLA as retired pay
- Paid-up status: After 30 years of participation AND reaching age 70, premiums stop but coverage continues
The decision to enroll in SBP involves weighing the premium cost against the guaranteed lifetime income for your spouse or dependents. Consider consulting a financial advisor to compare SBP with commercial life insurance options.
Frequently Asked Questions
The 2.8% COLA applies to December 2025 entitlements. For most retirees, this means the increase will appear in your end-of-December payment (deposited around January 1, 2026). SBP annuitants typically see the increase in early January payments.
Yes. Military retirement pay and Social Security are separate benefits, and you can receive both. There is no offset or reduction. However, receiving both may affect the taxation of your Social Security benefits depending on your total income.
If you’re determined medically unfit for service with a DoD disability rating of at least 30%, you may qualify for medical retirement even without 20 years of service. Your retirement pay is calculated using either your disability percentage or years of service, whichever provides the higher benefit (capped at 75%).
Yes. Your military pension is not reduced if you work in the civilian sector. However, if you work for the federal government, your military retired pay may be reduced by your federal salary (with some exceptions). Consult DFAS or OPM for specific dual compensation rules.
Generally, yes. Military retirement pay is protected under federal law and cannot be garnished by most creditors. However, it can be garnished for child support, alimony, and certain federal debts (like unpaid taxes).
COLA adjusts existing retired pay and VA benefits to keep pace with inflation (based on CPI-W). The active-duty pay raise (3.8% in 2026) increases base pay tables for currently serving members (based on the Employment Cost Index). They’re separate calculations announced at different times.
Disclaimer: This article is provided by USMilitary.org, an independent educational resource. We are not affiliated with the Department of Defense, DFAS, or any government agency. For official retirement pay information, visit DFAS.mil or contact your branch’s retirement services office. This content is for informational purposes only and does not constitute financial advice.
Related Resources
TSP Guide 2026
Maximize your Thrift Savings Plan contributions and investment strategy.
2026 Military Pay Calculator
Calculate active-duty pay with the 3.8% raise.
VA Disability Calculator
Calculate 2026 VA disability compensation rates.
2026 BAH Calculator
Look up Basic Allowance for Housing by location.
