A Current and QRMC Reserve Retired Pay Estimator

It occurred to me that the spreadsheet I prepared to produce estimates for my previous article about the QRMC recommendations  could be modified to serve as a simple, general-purpose retirement pay calculator for Reserve personnel under both options.  While others Reserve retirement pay calculators exist (most notably this one at US Army Human Resources Command), they appear to make various assumptions concerning future pay raises and inflation that may or may not be accurate.  They also don’t seem to attempt to convert their calculated future value to current dollars, thus making interpretation of the result difficult.  And they and also don’t seem that easy to use for “what if” drills concerning future correspondence work, voluntary active duty, mobilizations, and the like.  So I decided I’d make this spreadsheet available.  You’ll need software that can use a MicroSoft Excel (97-2003) format workbook in order to use it.

The spreadsheet calculates, under both current and QRMC rules, the Reserve pension that a reservist will earn under each system, plus the percentage reduction under the QRMC proposal.  Users must enter their actual and estimated yearly retirement points and selected other data.  The procedures which follow describe that other data and tell the user how to obtain or calculate it.

 Procedure for Use

1.  Download the spreadsheet found here.

2.  Find or download your latest retirement points statement.  For the Army, that would be ARPC Form 249-2-E (for Army Reserve) or the NGB equivalent (for National Guard).  Don’t know what the other services’ reserve components call theirs.

3.  Enter your retirement points earned to date each year into the corresponding years of the spreadsheet – e.g., your first year of service is year 1, the next is year 2, etc . . . .  Include all retirement points earned – points from “bad” (non-qualifying) years also count towards retired pay, even though those years don’t count towards the 20 qualifying years needed for Reserve retirement.

4.  Take your best guess as to how many retirement points you’ll earn each year during the rest of your Reserve career.

• “Normal” Reserve Years (drill weekends plus AT):  A “quick and dirty” method for drilling reservists for current rules is to start with 77 points per year (48 points for drills plus 14 days AT plus 15 membership points) and add to that any points you expect to earn yearly from correspondence courses.  Enter this total for the year in question.  For QRMC rules, use 53 points (24 points for drills plus 14 days AT plus 15 membership points) and add to that any points expected for correspondence courses, then enter that for the year in question.
• Years With Active Duty Other than AT:  This is more complex, but still not terribly difficult to estimate.  Write down the number of  the number of days you expect to serve on active duty during that year (1 point per day of active duty – don’t forget to count your AT if you perform it).  Add to that 15 membership points, any points expected from drills (you may drill part of the year before or after serving on active duty), plus any points expected for correspondence courses. Enter that total for the year in the spreadsheet.   Repeat for both options – current rules and QRMC proposal.  Remember to use 4 points for a drill weekend under current rules and 2 points for a drill weekend under the QRMC proposal.    Also remember that total retirement points cannot exceed the number of days in a year – 365, or 366 if a leap year.

5.  Enter zeros for retirement points for those years after you plan to request either movement to the Retired Reserve list or discharge.  GOs, W5s, and CSMs can serve well beyond 30 years; medical personnel and Chaplains generally can also serve longer as well.  I’ve extended the spreadsheet to cover up to a 40-year career possibility – not that I expect many GOs/W5s/CSMs to use the spreadsheet.  (smile)

6.  Take your best guess at the grade at which you’ll retire.  There’s a place to enter that on the spreadsheet, but it’s not mandatory to enter it; the spreadsheet works whether you enter a rank or not.

7.  Determine when you’d be eligible to receive retired pay under QRMC recommendations.  That could be as early as age 47 or as late as age 60 (or even later), depending on when you first entered the military.  It’s the earlier of (a) 30 years after first entry into the military, OR (b) age 60 – provided you have 20 qualifying years service at that point.  (If  you don’t have 20 years of qualifying service at your 30 year anniversary, it’s whenever you achieve 20 qualifying years of service.  Getting 20 qualifying years could technically happen after the 30-year anniversary – or even after age 60 – given the proper combination of breaks in service/age at initial entry/number of “bad” years).  You’ll need this info later to determine your years of service for pay purposes.  For most Reservists, though, this will be simple – it’s the date you first entered the military plus 30 years.

8.  Look up the value of a retirement point corresponding to your projected retired grade and years of service for pay purposes under current rules here.  Enter the appropriate value in the corresponding spreadsheet block, “Value of Retired Point – Current Rules”.  This value must be entered for the spreadsheet to calculate current rules pensions.  Make sure you enter all 3 decimal places.  This gives you today’s value of your estimated Reserve retirement pension under current rules.  Don’t forget that time on the retired list counts for pay purposes; this generally puts you in the “maxed out” part of the table (almost everyone who goes into the Retired Reserve will end up with more than 30 years of service for pay purposes under current rules).  I’m pretty sure the tables of retirement point values assume transfer to the Retired Reserve, so they may not work well (or at all) if you opt for discharge.  (More about opting for discharge in the remarks at the end.)

9.  The point values from step 8 won’t work to calculate retired pay under QRMC rules (the QRMC rules use a different number of days for an equivalent year and earlier receipt of Reserve retired pay further complicates things).  For this case, you’ll need to estimate your highest 3 years of base pay and enter that into the spreadsheet.  For the vast majority of folks, that will be the base pay corresponding to your retired grade during the 3 years prior to your receiving retired pay.  You’ll also need to determine the number of years of service for pay purposes you have during each of these years,

• Historical pay charts can be found here.  Look up the pay charts for your projected retired grade for last year, and the 2 years prior to that.
• Determine your number of years for pay purposes under the QRMC recommendation you’d have during the last 3 years before you start drawing retired pay.  To do this, start with 30 (this assumes you have at least 20 good years on your 30th anniversary of initial entry – if not, you’ll need to add enough years to adjust this number to correspond to the year you expect to achieve your 20th year qualifying for Reserve retirement).  Subtract the duration of any breaks in service – e.g., if you were completely out of the military, including the  Reserve Components, for 5 years you’d subtract 5.
•  From the resulting number, subtract 1, 2, and 3 and disregard any fraction.  This gives the number of years of service for pay purposes you’d have for the last 3 years before you begin drawing retired pay on the 30th anniversary of your initial entry into the military.
• Look up the appropriate values for years of service for pay in the pay tables for the 3rd year prior, 2nd year prior, and the year prior to starting to draw retired pay.

Here’s an example.  For someone who has no break in service and has 20 good years on his/her 30-year anniversary of first joining the military, you’d start with 30.  Subtract zero (no breaks in service).  Now subtract 1, 2, and 3.  This yields 27, 28, and 29 – the number of years of service for pay purposes for each of the last 3 years before the individual could start receiving Reserve Retired pay.  (These values will generally be the case under the QRMC proposal).  With a 5 year break in service, you’d subtract 5 in place of zero above; this would yield 22, 23, and 24 years.  Those are the years of service for pay purposes you’d look up in the pay tables for 3 years/2 years/1 year prior to receiving retired pay.

Remember to use base pay only – no allowances or special pays.

10.  Enter the pay values from step 10 for base pay at 3 years prior/2 years prior/1 year prior into the spreadsheet in the QRMC High-3 Calculations – Base Pay area.

 

The spreadsheet will now calculate the retired pay estimate under both scenarios – e.g., current rules and QRMC recommendations.  It’s obviously not the easiest calculator in the world to use, but hey – it’s free.  And it doesn’t assume anything about the future other than annual military pay raises being about equal to inflation (historically they have since the early 1970s).  What you get is the current value, in today’s dollars, of your estimated Reserve Retirement pension.  Personally, I find current values easier to understand and compare than an inflated value for some future date.  I know what things cost today; mentally adjusting for multiple years of future inflation and pay raises is a bit trickier.

 

Since it’s a reasonably common one, I’ve also preloaded the spreadsheet with the following scenario.  Replace it with your own data if you use the spreadsheet, of course.

1.  An individual joins the Active Component and serves a 4-year initial enlistment.

2.  He/she then leaves active duty and goes directly into the Reserve Component (no break in service).

3.  The individual joins a drilling unit immediately, makes all scheduled drills and Annual Training periods for the next 16 years, and earns an average of 10 correspondence points per year while drilling.

4.  His/her unit is mobilized once during the next 16 years for one year.

5.  In addition to their mobilization, the individual serves a 1-year tour of voluntary active duty at some point before retirement.

6.  The individual is promoted to E7 before retirement and retires at that rank.

7.  He/she elects to move to the Retired Reserve list immediately on completing 20 years of service.

Under current rules, the individual would “max out” the E7 pay scale due to continuing service for pay purposes while on the retired list and would draw retired pay between ages 58 and 60 (depending on whether their later active duty was contingency support service or not).  Under QRMC proposals, their retired points (and pay) would be lower, and would be based on pay tables for 27, 28, and 29 years of service.  (For E7, those years of service are also “maxed out” on the pay scale; however, that’s not true for all grades.)  However, they’d get that pay starting on the 30th anniversary of joining the military – in their late 40s, most likely.

 

Remarks

1.  Retired Reserve vs. Discharge.   I’d very strongly recommend anyone think twice before opting for discharge.  Under the “high 3” system, Reserve Retired retired pay is calculated at time of final retirement or discharge.  If you move to the Retired Reserve list, that means retired pay is determined when you start drawing retired pay, using the pay tables in effect for the previous 36 months (assuming those are the highest 36 months of base pay during your career).  However, if you elect dischargethat calculation occurs immediately and is based on actual high-three average at that time.  You thus likely won’t “max out” the pay tables through additional service credit for pay purposes for time spent on the Reserve retired list.  You also won’t get the benefit of any future pay raises that might happen between discharge and your receipt of retired pay. Under current rules, that can really hurt – because you won’t start drawing retired pay until between ages 55 and 60 (usually closer to 60).  That means you’ll miss out on up to 22 years worth of  annual pay raises between discharge and the date you start drawing retired pay.  (It also hurts under the QRMC recommendations too if you don’t stay for 30 – just not as much, since under that proposal you’re typically waiting for 10 years or less to start drawing retired pay.)

2.  Inflation.  The spreadsheet calculates what a Reserve pension would be worth if it were starting today.  We don’t have a clue as to what future inflation and/or annual military pay raises are, so this implicitly assumes that pay raises will equal inflation.  Reality may be either better or worse, but history indicates that military pay raises will probably track CPI reasonably closely (they have since the early 1970s).  If that continues, future pensions should have roughly the same purchasing power as those calculated by this spreadsheet.

3. Estimation Error.  The use of prior-year pay tables in calculating the high-3 average for QRMC recommendations pensions introduces a minor source of potential error.  Depending on precisely when you start receiving retired pay, this will be either very close to actual (if one starts receiving retired pay early in the year) or a slight underestimate (if one starts receiving retired pay late in the year).  The max error should be 1/3 of the annual cost-of-living raise received in January of the year during which one begins receiving Reserve retired pay.

4.  Comparing the Two Pensions.  The pensions under current rules and QRMC recommendations are only directly comparable if one were to begin receiving them at the same time (e.g., an individual joined at age 30 and served 30 years with no breaks in service).  Otherwise, it’s difficult to compare the two.  Current rules yield a higher pension and generally higher annual pay, but make you wait until near age 60 to receive a pension.  The QRMC proposal yields less annual pay and a lower pension – but the pension also starts up to 13 years earlier.  Is less annual pay and a lower pension received for more years a better deal than more annual pay and a somewhat higher pension starting at or near age 60?  Dunno; that’s an individual call.  YMMV from mine.

5.  Base Pay Loss under QRMC.  Not addressed here since this is a retirement pay calculator.  As noted in the previous article, a drilling reservist will see nearly a 39% reduction in pay for “normal” years (drill plus AT) under the QRMC proposal.

 

If you note any errors,please indicate in the comments section and I’ll revise the instructions and/or spreadsheet.

Category: Military issues, Reserve Issues