Gray Area Retirement Primer

Some may have noticed there have been no posts here for along time.  I’m not apologizing, I was busy with a big move … Colorado to Marilao in the province of Bulacan, just north of Manila, Republic of the Philippines.  Some of course might ask why and my answer is family reasons, personal desire (I’ve lived in Asia many years) and last, but not least, the fact that my retirement dollar is going to go a long way here.  I suppose this means, after many years, that I am completely retired … except for blogging that is.

How many years?  Well according to one yardstick I retired with over 20 good years from the USAF Reserve in 1992.  But even in the Philippines the pension I drew then wouldn’t have covered my living expenses … it was zero.  How do you retire and have no pension at all?  Welcome to the “gray Area” of the US Reserve Component.

“When a Guardsman or Reservist has completed at least 20 “good years”, that is years when s/he has earned enough retirement points, the Reserve Component member may request transfer to the Retired Reserve.  The catch is, Congress, although it seems to think nothing of sending Reservists to Iraq year after year and keeping them on active duty as long as it pleases, hasn’t thought enough of “Citizen Soldiers” to afford them any retirement pay until they reach age 60 …if they reach age 60.  Thus, from an average age of say 40 to 45 the member enters a state of limbo.  They are entitled to pay and full retirement benefits at age 60 but they don’t draw a nickel until that magic birthday.  Since the term ‘limbo’ has religious connotations the practice over the years has been to call these neither fish nor fowl service members ‘Gray Area’ reservists.

If a couple gets divorced before or during the ‘Gray Area’ there are a number of considerations that must be taken into account regarding the equitable division of assets.

  • Retired Pay:   Obviously if a retiree is in the ‘Gray Area’ s/he can’t be immediately ordered to divide his/her retired pay with  a spouse who has earned a share.  But the asset certainly becomes ‘real’ at the 60th birthday so it can be used in many different ways to fill in amounts due in the future. 
  • Reserve Component Survivor’s Benefit Plan:  A gray area retiree can provide for his family’s future income during this time by enrolling in the Reserve Component Survivor’s Benefit Program.  This costs money, of course, but Congress has allowed the program to be funded in arrears … that is reservists under the program get the protection of survivor’s pay for their dependents for free … and if and when they reach age 60 they get to pay double.  That is their retired pay is ‘taxed’ for the standard cost of the regular retiree Survivor’s Benefit program and also a fee to cover the ‘free’ converge they had from the time of their transfer to the retired rolls until they reached age 60.  In round numbers, this will work out to approximately 10% of the gross retirement benefit.  Since the Defense Accounting And Finance Service (the agency who will issue the paychecks) will not divide the cost for survivor’s benefits … they are deducted from the gross available retired pay before it is divided, this cost must usually be apportioned by awarding a larger or smaller percentage to a spouse’s share after the proper division percentage is established.
  • Commissary and Exchange Privileges:   In some cases a separating spouse may be entitled to a continuation of military shopping and base recreational privileges.  The scope is narrow and too complex for this article, but if a spouse can qualify it may make a difference, at least in terms of non-financial negotiations.

Anyway, there’s a brief summary of the Gray Area to give folks a few thoughts about plans they might need to make or actions to take.  Please feel free to comment or ask questions on points I may not have covered as well as you wished.


As always remember that this site, although written by a retiree with substantial experience in the school of hard knocks, it is for personal, lay opinions and informational purposes only. If you have a legal question you should seek help from a legal professional. If you have questions involving current or future values of pensions you need an actuary or competent pension valuation expert. If your questions are tax-related, seek a competent tax advisor. In other cases, I recommend the base chaplain.

If you really need an accurate reading on a case involving these issues, I’d suggest you call Bill — 719-475-7529

Speak Your Mind