If you are a member of the Active Reserves or or National Guard member, you must meet the following minimum requirements to be eligible for retired pay at age 60 (age 50 in some cases):
• Be at least 60 years of age (Note: Some reservists may qualify for retirement pay as early as age 50); and
• Have performed at least 20 years of qualifying service computed under Section 12732, Title 10, United States Code (See Qualifying Year below); and
• Have performed the last eight years of qualifying service while a member of the Active Reserve. (NOTE: If you completed your service requirement between 5 OCT 94 and 30 SEP 01, you need only have performed the last 6 years of qualifying service while a member of the active Reserve). (Added Note: Effective 1 OCT 02, and on, the eight year requirement was changed to six years); and
• Not be entitled, under any other provision of law, to retired pay from an armed force or retainer pay as a member of the Fleet Reserve or the Fleet Marine Corps Reserve; and
• Must apply for retired pay by submitting an application to the branch of service you were assigned to at time of your discharge or transfer to the Retired Reserve. For those serving in the Army National Guard or Army Reserve the address is Commander, AR-PERSCOM, ATTN; ARPC-ALQ, 9700 Page Ave, St Louis, MO 63132-5200.
Qualifying Year - As a Reserve/National Guard member, you must have 20 “qualifying” years of service to be eligible for retired pay at age 60. A “qualifying year” is one in which you earn a minimum of 50 retirement points. This subject is too board and complex to be explained effectively in this article. In very general terms, however, a soldier establishes a retirement year ending date by entering the Active Reserve. The date you enter the Active Reserve is your retirement year beginning date (RYB). As long as you have no break in service, your retirement year ending date (RYE) will be one year later. For example, a soldier who joins the Active Reserve on 2 JUL 86 would have a RYB 2 JUL 86 and a RYE of 1 JUL 87.
60/75 Point Rule - Guard/Reserve members may accumulate a total of 365 points per year (366 in a leap year) from inactive and active duty service (one point for each day of duty). However, for retired pay calculation purposes, members can’t use more than 60 inactive points per year (for Reserve years ending before 23SEP 96) or 75 inactive points per year (for reserve years ending on or after 23 SEP 96)[/b]. This is commonly referred to as the “60-or 75-point rule.”
Computation Of Retired Pay - To determine how much retired pay you may be eligible to receive, the first step is to calculate the number of equivalent years of service. The formula for computing equivalent years of service for Reserve retired pay at age 60 is fairly simple: Total number of Creditable Retirement Points, divided by 360. The formula computes the number of equivalent years of service the soldier has completed (comparable to full time service). For example, 3,600 points equals 10 years. Military Personnel will notify the Defense Finance & Accounting Service – Cleveland Center (DFAS-CL) of the number of years service you’ve earned. Separating/discharging rather than transferring to the Retired Reserve will impact your retired pay and should be carefully considered. Guard and Reserve members who separate or are discharged before age 60 will be credited for basic pay purposes only with the years up until their discharge. Members who transfer to the Retired Reserve until age 60 will receive credit (for basic pay purposes only) for the years spent in the Retired Reserve. Depending on the date you initially entered military service, also called your DIEMS date, your monthly Reserve retired pay will be calculated under the “Final Basic Pay” or “High-3” formula as follows:
• DIEMS date before 8 September 1980 – “Final basic pay.” Multiply your years of satisfactory (equivalent) service by 2.5%, up to a maximum of 75%. Multiply the result by the basic pay in effect on the date your retired pay starts.
• DIEMS date on or after 8 September 1980 – “High-3.” Multiply your years of satisfactory equivalent) service by 2.5%, up to a maximum of 75%. Multiply the result by the average of your highest 36 months of basic pay. The highest 36 months for a member who transfers to the Retired Reserve until age 60 will normally be the 36 months before they turn 60. Members who request a discharge from the Retired Reserve before 60, however, can only use the basic pay for the 36 months prior to their discharge. Think carefully before requesting a discharge from the Retired Reserve!
Cost Of Living Adjustments To Retired Pay - Your retired pay will be increased annually by a cost-of-living allowance (COLA) based on the change in the Consumer Price Index (CPI) from the third quarter of one calendar year to the third quarter of the next. COLAs are normally effective 1 December and payable the first working day in January.
20-Year Letter - For years the services had difficulty accurately establishing when a member of a reserve component had completed 20 qualifying years of service. Many soldiers stopped participating when they believed they had completed 20 qualifying years only to discover, much too late (at age 60), that they did not meet the requirements for retired pay. In 1966, PL 89-652 imposed a requirement on the Service Secretaries to notify members of the reserve components when they had completed sufficient years for retired pay purposes. A letter with the subject “Notification of Eligibility For Retired Pay at Age 60,” commonly referred to as the 20-year letter, does this. You should receive this letter within one year of completing 20 qualifying years of service for retired pay purposes.
[Source: About.com US Military Guide Rod Powers article 15 Dec 08 ++]