Serving our country in the Reserves or National Guard is rewarding on many levels. But it is also beneficial in looking toward retirement. On a financial level, for each year of service you gain in benefits and retirement points toward your retirement. These points translate into a source of guaranteed income after you retire. Serving on active duty has a magic number of twenty years of service that is aimed for.
In the Reserve and National Guard, the focus is more on actual retirement points. You gain retirement points in several different ways including: Serving on active duty, educational or correspondence courses, belonging to a Reserve or National Guard Unit, and also finally in the actual drills that you compete as a Reservist or Guardsman.
The service points that you accrue are also pointing toward a magic number of twenty years. When you accumulate twenty years of qualifying service you are awarded a letter that says you are eligible for retirement. This is called a twenty-year letter. Be sure and keep this letter in a secure location, such as a safe or a bank deposit box. Retirement from the guard or reserve does normally kick in until you turn sixty years of age.
At that time you are eligible for one of two plans, high 36 or final pay. Both plans are dependent on when you entered the service.
For the Final Pay plan, you must have entered the Service before September of 1980. The rate of retirement is your basic pay (at the time of retirement) times two and a half percent for each year of creditable service that you have earned. For the High 36 plan, you take an average of the highest three years, or thirty-six months of basic pay, and that figure is times two and a half percent for each year of service you have earned.
If you entered the military after 1986, upon your fifteenth year of military service you have to choose. You have to choose between the high 36, or you can take a retention money bonus, called a career retention bonus and retire under what is called the Military Retirement Reform Act. With either system you can realize substantial retirement financial benefits.
When you retire, many people opt to transfer to the Retired Reserve instead of discharge. There are advantages to this, as you still slowly accrue retirement points and retirement value. But if you choose the Retired Reserve option if it so chooses the government can recall you to active duty, and you literally cannot say no.