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What the Recruiter Never Told You
Part 5 - - Military Pay

By Rod Powers, About.com Guide

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Severance Pay. Members with over six years, but less than 20 years of service, who receive an honorable discharge, while being separated from the service involuntarily (draw down, "up-or-out system," etc.) receive a severance pay (also called involuntary separation pay) equal to 10 percent of their annual basic pay, times the amount of years service they have completed. There are several minor restrictions on this pay, and instances of what covers "voluntary," or "involuntary" separations, which are too numerous to cover in this article. Specific questions should be directed to the Defense Finance and Accounting Service. The governing directive is the Defense Pay Regulation, Volume 7A, Chapter 35.

Hardship Duty Pay. Military members assigned to certain "hardship" assignment locations can receive Hardship Duty Pay, ranging from $50.00 to $700 per month. The governing directive is the Defense Pay Regulation, Volume 7A, Chapter 17.

Retirement Pay. Military members who serve for 20 or more years, and retire and receive a portion of their base pay each month for the rest of their lives. For details about military retirement pay, see Understanding Military Retirement Pay.

Reenlistment Bonuses. The purpose of a reenlistment bonus to to entice members to reenlist into jobs which are experiencing critical shortages. For reenlistment bonuses the Army will give up to $40,000. The Air Force and Navy will give up to $60,000, and the Marine Corps will offer up to $35,000.

In general, the greater the re-enlistment bonus, the harder time the service is having convincing people to re-enlist in this job. This is usually for one of two reasons:

This same job pays extremely well in the civilian world, which entices many experienced people to get out and make more money.
The job sucks.

Usually, 50 percent of the reenlistment bonus is paid at the time of reenlistment, with the remainder paid in equal installments, annually for the term of the reenlistment. However, a couple of years ago, Congress gave the services the authority to pay re-enlistment bonuses in a "lump sum" at the time of re-enlistment, and some of the services have began implementing this. For example, at the time of this article update, the Army is paying their enlistment bonuses in a "lump sum." Like enlistment bonuses, if the member does not serve in the job for the entire reenlistment period, any "unearned" portion of the reenlistment bonus must usually be repaid.

All-in-all, it's best not to choose a job based upon enlistment/re-enlistment bonus amounts. Such money is spent fast, and is then gone. It's better to base your preferences based upon your personal interests. You'll be much happier in the long-run.

Taxes. In general, unless earned in a designated combat zone, all military *PAY* items are taxable. Military *allowances* (such as housing allowance [BAH], overseas housing allowance [OHA], family separation allowance [FSA], basic allowance for substinance [BAS]), are not taxable by either the Federal or State Governments. Different states have different rules for taxing military pay. The governing directive is the Defense Pay Regulation, Volume 7A, Chapter 44.

Continued in Part 6 - Housing, Housing Allowance, and Barracks

Other Parts to this Series: