BRS lump sum: 25% or 50% and the 6.60% discount rate for 2027

What the law lets you elect

• Who: members covered by BRS who qualify for a regular or a reserve retirement. Members retired for disability under chapter 61 can’t elect it (10 U.S.C. 1415(a)(2); FMR 7B, 6.1).
• How much: the discounted present value of either 25% or 50% of your retired pay for the period from retirement to your Social Security full retirement age.
• Monthly pay during that period: 75% of your retired pay if you take 25%, or 50% if you take 50%.
• When it ends: on the first day of the month after the month you reach full retirement age, your pay is recomputed to the full amount as if every cost-of-living adjustment (COLA) since retirement had been applied (1415(c)(2)).
• Deadline: you elect on DD Form 2656, signed no later than 90 days before you retire (for a reserve retirement, before the date you become eligible for retired pay). The Defense Finance and Accounting Service (DFAS) must have it at least 30 days before that date, and it can’t be revoked on or after it (FMR 6.2).
• Payment: within 60 days, in one payment or up to four equal yearly installments (FMR 6.5–6.6). Reserve members are paid within 60 days of age 60 or of first becoming entitled to retired pay, whichever is earlier.
• Final: once you accept it, you can’t challenge the amount later over COLAs, actuarial assumptions or the rate (1415(b)(6); FMR 6.10).

Full retirement age comes from the Social Security table: 67 for anyone born in 1960 or later, between 66 and 67 for 1955–1959. Social Security figures you as born in the previous month if your birthday is on the 1st.

The discount rate, and why a higher one pays less

The FMR (7B, 6.4) spells out the formula. It takes a 7-year average of a 23-year corporate bond yield, removes inflation using a 7-year average breakeven inflation rate, adds 4.28 percentage points and rounds to 0.01 point. The result is a real rate, with inflation taken out. The first rate, for 2018, was 6.99%.

Each year’s rate comes in a memo, and it applies to any retirement whose retired pay begins in that calendar year:

The 2026 memo’s body refers to elections in calendar year 2025, a typo: its subject line and its effective dates (January 1 through December 31, 2026) make clear that 2026 is meant. DoD’s pages now also use the name Department of War, and the 2027 memo is signed on that letterhead.

A discount rate works like interest in reverse. The higher the rate, the less a dollar paid years from now is worth today, so the same pay given up buys a smaller lump sum. DoD’s calculator says so directly: higher discount rates mean lower payouts.

How DoD’s calculator turns that into dollars

The statute leaves the details to DoD. DoD’s BRS calculator on militarypay.defense.gov describes the lump sum as 25% or 50% of the present value of the full monthly pay up to full retirement age, discounted at the LSDR. In steps:

1. Start with your full gross monthly retired pay, held level. No future COLAs are added, because the rate already has inflation taken out.
2. Count the months from the month retired pay begins to the first day of the month after you reach full retirement age.
3. Discount each month’s payment at the monthly equivalent of the annual rate (the 12th root), with the first payment not discounted, and add them up. DoD’s calculator counts one fewer discounted payment than months in the period.
4. Take 25% or 50% of that present value, to the cent.

Our calculator uses this method and matches the results DoD’s calculator returned for the same inputs, to the cent. Two cautions apply. DoD’s calculator page has carried the note that its “resulting calculations are currently approximations” (as captured June 13, 2026), and it carries a disclaimer that it is for information only. The amount you are paid is computed by DFAS from your actual retired pay.

Worked example: an E-7 retiring at 20

Take the example from the High-3 vs BRS guide: an E-7 under BRS retiring at 20 years. High-36 is $6,118.50 (2026 pay table), so full retired pay is 40% = $2,447.40. DFAS pays that rounded down to $2,447; DoD’s calculator keeps the cents in the lump-sum step, and so do we.

Assume a birth date of June 15, 1989 and retired pay beginning in July 2027. Full retirement age is 67, reached in June 2056, so the lump-sum period ends July 1, 2056. That is 348 months, at the 2027 rate of 6.60%.

The last row is the plain sum of what you give up, in today’s dollars. The lump sum is less than half of it because of the discount. The gap between the lump sum and that plain sum is the price of getting the money now, and it grows with the rate and with the number of years to full retirement age.

Rate and timing, same E-7:

The second row isolates the rate: 0.14 point higher costs this E-7 $1,314.28 on the 25% option. The third row shows the other lever (an earlier start, past this year’s election deadline, so only an illustration): more months before full retirement age, so a larger lump sum and a longer stretch of reduced pay.

What else changes when you take it

• Your reduced pay is your retired pay until full retirement age. In the example, $1,835 or $1,223 a month instead of $2,447, every month for 29 years. After that, the full amount returns with every COLA applied (see the COLA guide).
• VA disability compensation. Under FMR 6.8, VA withholds disability compensation until the amount withheld equals the gross lump sum. It doesn’t if you qualify for concurrent receipt with a rating of 50% or more. Combat-Related Special Compensation (CRSC) has its own rules there. The CRDP vs CRSC guide covers both programs.
• Survivor Benefit Plan. Coverage is figured on your unreduced retired pay unless you elect a lower base amount (FMR 6.9).
• Taxes. How a lump sum is taxed in the year you receive it depends on your whole return. MilTax, the tax service of Military OneSource, or a tax professional can answer that.

None of this says whether the lump sum is right for anyone. It depends on what the cash would be used for, other income, health, family and the rate in your year. The personal financial counselor on your installation can work through your numbers at no cost. DoD also has a BRS Lump Sum Option course, revised May 1, 2026, linked from militarypay.defense.gov.

Next step

Enter your High-36 (or grade and years), birth date and the month retired pay starts in the military retirement calculator. It shows the reduced monthly pay and the 25% and 50% estimates by DoD’s method for any year whose rate has been published.