Navy amd Marine Pensions
Until after World War I, the army and the navy maintained separate pension plans for their officers. The Continental Navy created a pension plan for its officers and seamen in 1775, even before an army plan was established. In the following year the navy plan was merged with the first army pension plan, and it too was eventually converted to a retirement plan for surviving veterans in 1832. The first disability pension plan for "regular" navy personnel was created in 1799. Officers' benefits were not to exceed half-pay, while those for seamen and marines were not to exceed $5.00 a month, which was roughly 33 percent of an unskilled seaman's base pay or 25 percent of that of a hired laborer in the private sector.

Except for the eventual conversion of the war pensions to retirement plans, there was no formal retirement plan for naval personnel until 1855. In that year Congress created a review board composed of five officers from each of the following ranks: captain, commander, and lieutenant. The board was to identify superannuated officers or those generally found to be unfit for service, and at the discretion of the Secretary of the Navy, the officers were to be placed on the reserve list at half-pay subject to the approval of the President. Before the plan had much impact the Civil War intervened, and in 1861 Congress established the essential features of the navy retirement plan, which were to remain in effect throughout the rest of the century. Like the army plan, retirement could occur through one of two ways: Either a retirement board could find the officer incapable of continuing on active duty, or after 40 years of service an officer could apply for retirement. In either case, officers on the retired list remained subject to recall; they were entitled to wear their uniforms; they were subject to the Articles of War and courts-martial; and they received 75 percent of their base pay. However, just as with the army certain constraints on the length of the retired list limited the effectiveness of the act.

In 1899, largely at the urging of then Assistant Secretary of the Navy Theodore Roosevelt, the navy adopted a rather Byzantine scheme for identifying and forcibly retiring officers deemed unfit to continue on active duty. Retirement (or "plucking") boards were responsible for identifying those to be retired. Officers could avoid the ignominy of forced retirement by volunteering to retire, and there was a ceiling on the number who could be retired by the boards. In addition, all officers retired under this plan were to receive 75 percent of the sea pay of the next rank above that which they held at the time of retirement. (This last feature was amended in 1912, and officers simply received three-fourths of the pay of the rank in which they retired.) During the expansion of the navy leading up to America's participation in the World War I, the plan was further amended, and in 1915 the president was authorized, with the advice and consent of the Senate, to reinstate any officer involuntarily retired under the 1899 act.

Still, the navy continued to struggle with its superannuated officers. In 1908, Congress finally granted naval officers the right to retire voluntarily at 75 percent of the active-duty pay upon the completion of 30 years of service. In 1916, navy pension rules were again altered, and this time a basic principle – "up or out" (with a pension) - was established, a principle which continues to this day. There were four basic components that differentiated the new navy pension plan from earlier ones. First, promotion to the ranks of rear admiral, captain, and commander were based on the recommendations of a promotion board. Prior to that time, promotions were based solely on seniority. Second, the officers on the active list were to be distributed among the ranks according to percentages that were not to exceed certain limits; thus, there was a limit placed on the number of officers who could be promoted to a certain rank. Third, age limits were placed on officers in each grade. Officers who obtained a certain age in a certain rank were retired with their pay equal to 2.5 percent multiplied by the number of years in service, with the maximum not to exceed 75 percent of their final active-duty pay. For example, a commander who reached age 50 and who had not been selected for promotion to captain, would be placed on the retired list. If he had served 25 years, then he would receive 62.5 percent of his base pay upon retirement. Finally, the act also imposed the same mandatory retirement provision on naval personnel as the 1882 (amended in 1890) act imposed on army personnel, with age 64 being established as the universal age of retirement in the armed forces of the United States.

These plans applied to naval officers only; however, in 1867 Congress authorized the retirement of seamen and marines who had served 20 or more years and who had become infirm as a result of old-age. These veterans would receive one-half their base pay for life. In addition, the act allowed any seaman or marine who had served 10 or more years and subsequently become disabled to apply to the Secretary of the Navy for a "suitable amount of relief" up to one-half base pay from the navy's pension fund (see below). In 1899, the retirement act of 1885, which covered enlisted army personnel, was extended to enlisted navy personnel, with a few minor differences, which were eliminated in 1907. From that year, all enlisted personnel in both services were entitled to voluntarily retire at 75 percent of their pay and other allowances after 30 years' of service, subsequently reduced to 20 years.