Military Coast FIRE: What a 20-Year Pension Does to Your Number

If you retire from active duty after 20 years, your pension starts the month you leave, lasts for life and rises with inflation. Counted properly, it can cut your Coast FIRE number by more than half, because your investments only have to cover the part of your spending the pension doesn’t.

The catch is the 20 years. Active-duty retired pay is all or nothing, so for most service members Coast FIRE is about what happens after the uniform comes off: how little the second career has to pay, and when you can stop saving on top of the pension.

How does military retired pay work?

There are two systems for most people serving today. Which one you’re in depends on when you joined.

Under High-3, your pension is 50% of the average of your highest 36 months of basic pay after 20 years, plus 2.5% for each extra year. That’s 2.5% per year of service. It covers members who entered before 2018 and didn’t switch to the new system or take the old Career Status Bonus (REDUX), which pays 40% at 20 years with a smaller COLA.

Anyone who entered on or after January 1, 2018 is in the Blended Retirement System. Its multiplier is 2.0% per year, so 40% of your High-3 at 20 years. In exchange, the government puts money in your Thrift Savings Plan: 1% of basic pay automatically starting 60 days after you enter, and after your second full year a match on your own contributions of up to 4% more, for 5% in total. Members who had fewer than 12 years of service at the end of 2017 could opt in during 2018, so some mid-career members are in BRS too.

In both systems, active-duty retired pay starts right after you retire, at any age. Guard and Reserve pay usually waits until 60, which I’ll come back to. Both also get a cost-of-living adjustment tied to the Consumer Price Index. The 2026 increase was 2.8% for High-3 and BRS retirees and 1.8% under REDUX, and if you retire partway through a year, your first COLA is prorated.

The check is smaller than the formula suggests. The IRS treats military retired pay as a pension, so it’s taxable income, and if you elect the Survivor Benefit Plan to protect a spouse, the premium comes out before you’re paid. I’d enter the pension after the SBP premium and keep income tax in your spending figure.

How much does the pension lower your Coast FIRE number?

Take Carmen, a 38-year-old Army sergeant first class with 18 years in. She joined in 2008 and stayed in High-3 when BRS opened. She plans to retire at 20 years, when she’s 40, work a civilian job for a while, and stop working entirely at 60. She has $180,000 in the TSP, saves $1,500 a month, and expects to spend $64,000 a year in today’s dollars.

In 2026 an E-7 with over 20 years earns $6,245 a month in basic pay, according to the DFAS pay tables. Her High-3 will be a bit lower, since it averages her last three years, some at lower pay steps and before raises. Call it $6,000 a month. Half of that is $36,000 a year, starting at 40, adjusted for inflation every year after that.

Because the pension has a full COLA, I count all of it. Because it starts 20 years before she stops working, there’s no gap to bridge. Her portfolio only has to cover the difference, $64,000 minus $36,000, or $28,000 a year.

The pension cuts her Coast FIRE number by 56%. Ignoring it, she’d never get there before 60 at her current savings rate. Counting it, she can stop contributing at 45. After that, her civilian job only has to pay for the $28,000 a year the pension doesn’t cover, plus the tax on both. That’s a very different job search from someone who needs a full salary.

You can load Carmen’s numbers into our Coast FIRE with pension calculator and change them to yours. I’ve left Social Security out. Military pay is covered by Social Security, so she’ll likely get a benefit at 62 or later, and that’s margin on top. Our post on Social Security and pensions covers how much of it to count.

Is the Blended Retirement System worse for Coast FIRE?

At 20 years, yes, on the pension alone. The BRS multiplier gives Carmen 40% instead of 50%, or $28,800 a year instead of $36,000. The TSP contributions are supposed to make up the difference, and whether they do depends on you.

To see how that plays out, I ran the same career under BRS rules, the way someone who joined in 2018 will experience it. I assumed her basic pay averaged $4,500 a month in today’s dollars over 18 years, with the automatic 1% for two years and the full 5% after that. If she contributed enough to get the whole match and left it invested, the government’s share would be worth about $61,473 by now.

With the match captured and invested, BRS lands close to High-3, about 2 years later. Without it, the gap is 7 years. If you’re under BRS, contributing at least 5% of basic pay is the single most important Coast FIRE decision you’ll make in uniform.

BRS adds two more choices. Continuation pay is a one-time bonus offered mid-career, roughly between 7 and 12 years of service, in exchange for agreeing to serve longer; for active duty it’s at least 2.5 times your monthly basic pay, per Military OneSource. If you plan to stay anyway, I’d take it and invest it. The lump sum at retirement is different. You can take 25% or 50% of your pension’s value up front, but your monthly retired pay is reduced until 67. For Coast FIRE purposes that’s swapping inflation-adjusted income for a pile of cash, and I’d only do it for a specific reason, like paying off a high-rate debt.

What happens to health insurance?

This is where military retirees have the biggest advantage over everyone else trying to coast. As a retiree you keep TRICARE. For 2026, a Group A retiree (sponsor who entered before 2018) pays $381.96 a year for individual TRICARE Prime or $765 for a family, and $186.96 or $375 for TRICARE Select. Group B retirees, who entered in 2018 or later, pay more: $462.96 or $927 for Prime and $594.96 or $1,191 for Select. There are copays and deductibles on top, but compare that with the full-price individual coverage most people face before Medicare, which is why we wrote a whole post on health insurance before 65.

At 65, you move to TRICARE For Life, which has no enrollment fee but requires Medicare Part A and Part B. Budget for the Part B premium from 65 on.

In practice, Carmen’s civilian job doesn’t need to come with benefits. She can take part-time work, contract work, or something she likes more than she’s paid for, which is most of the point of coasting.

What if you leave before 20 years?

Unless you’re medically retired, leaving active duty before 20 years under High-3 means no pension at all. Under BRS you keep your TSP, including the government’s contributions once you’re past two years of service, but the pension is gone too.

If you’re at 12 or 14 years, that’s what makes coasting in the military different. The last six years are worth a lifetime of income, so a Coast FIRE plan that has you getting out early has to replace that on its own. Run the numbers twice, once with the pension and once without, and the gap between the two Coast FIRE numbers is the price of leaving. For Carmen it would be $389,241 of extra savings needed today. For most people that settles the question.

Guard and Reserve: the pension waits until 60

Reserve component retirees with 20 qualifying years generally can’t draw retired pay until 60. That age drops by three months for every 90 days of qualifying active duty in a fiscal year after January 28, 2008, but not below 50. Retiree health care still starts at 60.

For Coast FIRE, that makes a Reserve pension income that starts later, like Social Security. If you want to stop working at 55 and your pension starts at 60, your portfolio has to cover those five years in full before the pension takes over. The pension calculator handles this if you set the start age to when your retired pay actually begins. If you’re thinking about stopping work before 60, our retire at 40 page walks through what a portfolio needs to do when the gap is long.