A Few More Thoughts On Reserve Component Retirement



I’m sure I cured a lot of people’s insomnia yesterday with my big post on Reserve Military Component retirement. Just in case there’s still a few of you with insomnia, I’ll post another short one at bedtime here in Sunny Colorado.

One thrust to all my posting and study in this government retired pay area is the rules, methods and tips and techniques for valuing pay and/or annuities. One of the reasons it pays to learn some of the idiosyncrasies of Reserve Component pay is the way it’s earned.

Retirees from the active duty forces present a relatively simple problem if their retired income needs to be divided. In a majority of states and in the great majority of divorces a simple “time rule” formula will suffice. In it’s simplest application the time rule considers that the retirement income was earned jointly by the two marital partners and should be divided 50/50, except that the non-member spouse’s share would typically be 50% time months married/months of service. The intent of this method is to account for time the member might have been serving time that counts toward retirement before s/he got married. If the couple was married the whole time the member was earning credit the division will work out to 50/50, because each month of service is the same value as any other month in qualifying for retirement. The active components also don’t count any time periods less that a month, so the general “Time Rule” is quite simple and highly equitable.

Now, though, if you cast your mind back to yesterday the reserve component retirement is based not only on months and years of participation … but also upon those pesky points … one per day of active duty and/or one per training session … remember now?

Since the actual pay a reserve component retiree will get depends upon his or her total point count and the highest grade held, many reservists do not “earn” their retirement pay equally through their career.

Let’s take a “pure” reservist for example. Suppose she joined the reserve forces at 20, participated each and every year with an average number of, say, 75 points per year and goes into “gray area” retirement at age 40, with 20 good years and 1605 points. She didn’t earn 80.24 points per year, she earned 180 points in her first year while on active duty for training, and then 75 a year for the remaining 19. Each of her years was _not_ the same as far as its contribution to her pay.

Let’s use amore common example that will show the differ4nce more emphatically. John joins the active component at age 20, serves 10 years and then leaves the service. After month’s break he decides to enlist in a reserve component. He does 10 more years, earning the minimum 75 points per year and then asks to be transferred to the retired reserve and wait for his pension at age 60. John has about 4350 points. But 3600 of them came from his initial time in the active component and only 750 from the second half of his career. If John had married at the 10 year point … when he already had 3600 points “in the bank”, can you see why his spouse really has no “claim” to those pints. She really only participated in the earning of John’s last 750 points.

This can be a little complicated, and this post is getting too long already. Tune in tomorrow and I’ll work more examples.

DISCLAIMER This blog is written by a lay person. It is for discussion and illustration only. If you need legal advice, seek an attorney, if you need an accountant, engage one, if you need an actuary, use one. If you need a prayer, try a priest.




3 Comments

  1. If this keeps going on or no changes on this system I wonder who would be part of it. More reasons why I didn’t bother considering in joining the reserve, too much worries and not enough perks.

    • @larry heard: Most changes I have been seeing are actually very positive, Larry. I have always said, though, that there doesn’t seem to be a lot of incentive for “pure” reservists … folks who just go on active duty for training and then drill for 19 more years. But, on the other hand, as a retiree I (small wonder) have many retiee friends and _all_ I hear these days are horror stories (caused especially by the idiocy of having all one’s retirement funds in money markets or stock funds) and worries, worries, worries. As a retired E-7 reservist, Donald Trump is not knocking on my door to ask for aloan, but that check every month … plus the TRICARE For Life (priced any medial insurance for over 65 ages lately?), the standard retired ID card privileges … BX, Commissary, on base MRW, Space-A flights world-wide, etc. are a _lot_ better than a poke in the eye with a sharp stick.

      What is particularly interesting now are so many acquaintances my age who decided that ‘lifers’ and military career folks were such “losers” … you know, NCO=”No Chance Outside”, etc. Now these one time ‘freinds’ who were too smart to serve, froth at the mouth over all the benefits I am getting.

      I guess it’s only human nature to want it both ways … but I paid my fare and now I get to ride the train … everyone has to make their own choice.

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