Enlisting: How Pay and Benefits Work

Few people would enlist in the U.S. military if not for the compensation. The rigors of training, the unbreakable multiyear commitment, the frequent moves, and the risk of grave harm and death are serious demands that few civilian jobs entail. As such, the government aims to offer enlisted service members pay that’s competitive with civilian employment, along with extensive benefits. If you’re thinking about enlisting, this overview will help you understand how pay and benefits for military service members work.

Military Pay: Base Compensation

Base pay in the military depends on whether you are an enlisted soldier or an officer (you typically need a four-year college degree to be a commissioned officer, though depending on the branch, outstanding service experience may be substituted), your rank, and how many years of service you have completed. It is the same in every branch and taxable. As you are salaried, overtime pay is not available.

For example, a level E-1 enlisted recruit, the level at which most people start, could expect to earn base pay of $1,695 per month in 2022. The base pay for the lowest level commissioned officer, 0-1, is $3,477.30. The most important differences between a commissioned officer and an enlisted service member are that college degree and officer training; those are why commissioned officers earn more.

Advanced enlistment allows qualified individuals to enter the service at a higher rank with higher pay. For example, achieving certification as a Boy Scout Eagle or getting a Girl Scout Gold Award could allow an applicant to enlist as a private first class in the Army.

All service members can expect an annual cost-of-living raise determined by Congress and the opportunity to earn merit-based raises and promotions. The number of years you have served at a particular rank can also affect your pay, depending on your rank.

Military Pay: Allowances, Incentives, and Bonuses

If you’re underwhelmed by base pay, know that it’s only one part of a service member’s total compensation. Here are the other types of pay you may earn.

Allowances

Military allowances are nontaxable forms of compensation that cover housing, uniforms, and meals not directly provided by the military.

Recruits live in group housing on base with shared bathrooms when they first join. Housing options expand as your rank increases. When you are not living on base or in government housing, you receive a Basic Allowance for Housing that’s based on your location, rank, and family size. It’s designed to cover 95% of local housing costs. If you have a spouse and/or children, your housing allowance increases significantly. If you’re stationed overseas and live in private housing, you get an Overseas Housing Allowance.

For food, the Basic Allowance for Subsistence in 2021 is a monthly pay of $386.50 for enlisted service members and $266.18 for officers. This allowance does not change with your pay grade and is only designed to feed service members, not their families.

Moving costs money, and receiving permanent change of station (PCS) orders means you’ll have to move. The military provides a Dislocation Allowance (DLA) to help cover these expenses. Similar to the housing allowance, the amount you receive depends on your rank and family status. Our Personal Finance Guide for Military Service Members and Families goes into more detail about how the military helps pay for your moves.

Special and incentive pay

Special and incentive pay (which is taxable) provides extra compensation for less-desirable, higher-risk, or more-specialized work. It may mean serving as an aviation officer or on submarine duty. It could also mean serving in a location with a low standard of living (hardship duty pay). Hostile fire pay and imminent danger pay compensate service members for risks such as being shot at or encountering a mine.

Combat zone tax exclusion

One of the biggest pay bumps can come from working in a combat zone. Under the Combat Zone Tax Exclusion, many service members will not pay any federal income tax for the whole month if they serve as little as one day in a combat zone. This tax exemption also applies to special pay and bonuses received while serving in a combat zone. You will still pay Social Security and Medicare taxes.

Serving in a combat zone also allows you to contribute up to four times the usual annual limit to your thrift savings plan (TSP). That means you can sock away $58,000 for retirement in 2021 (rising to $61,000 in 2022). You can make your contributions go further by contributing up to $19,500 of that $58,000 to a Roth TSP (in 2022, the limit is $20,500 of the $61,000).

Bonuses

The military offers several types of bonuses to encourage individuals to sign up and extend their commitments.

• Quick Ship Bonus – Earn up to $7,000 for reporting to basic training within seven weeks of signing your contract.
• Enlistment Bonus – By choosing and qualifying for a military occupational specialty that’s in high demand, you can earn an enlistment bonus. For example, an Army human intelligence collector is eligible for a signing bonus of up to $15,000 in 2021. Bonuses vary by position.
• Selective Reenlistment Bonus – You get extra pay for signing back up or extending your contract for at least three years when you have served on active duty for at least 17 months. This bonus, which can be as high as $25,000 per year, is available to service members with critical military skills who have a rank of at least E-3.
• Continuation Pay Bonus – Earn this retention bonus after 12 years of service when you commit to four more years.
• Savings Deposit Program – While not technically a bonus, another opportunity to earn extra money, but only when you’re deployed in a designated combat zone, is through the U.S. Department of Defense (DoD) Savings Deposit Program (SDP). You can earn 10% annual interest on a deposit of up to $10,000 through the SDP. This means that if you served in a combat zone for one year and deposited the full $10,000 as soon as you were eligible, you could earn an extra $1,000. (There are some nuances to it, but you get the idea.)

Military Benefits: Insurance, Retirement, Education, and More

Full-time military service comes with a plethora of benefits that few civilian jobs can match.

Insurance

Active-duty service members must enroll in TRICARE Prime, a health insurance plan similar to a health maintenance organization (HMO), which has no premiums or deductibles and low copays. Coverage is free for service members and active-duty family members. Voluntary dental insurance is also available through TRICARE.

The military automatically enrolls active-duty service members in Servicemembers’ Group Life Insurance. You can get coverage of up to $400,000 in $50,000 increments.

Service members can get preferential rates on homeowners and auto insurance as well. Certain financial institutions, such as USAA and the Navy Federal Credit Union, specialize in the needs of those in the military and their families. Others, such as Geico, simply offer discounts.

Retirement

The military’s Blended Retirement System provides an annuity for those who serve for at least 20 years. It also enrolls all service members in the government’s TSP after 60 days. This way, those who serve for fewer than 20 years still have a way to save for retirement. 

The government automatically makes a contribution to service members’ TSP accounts equal to 1% of their basic pay. After two years you can get a matching contribution worth another 4% of your basic pay. The TSP is similar to the 401(k) plans that many private-sector employers offer.

Education

The opportunity to earn a college degree without student loan debt is another standout benefit of military service. Through the Tuition Assistance Program, your service branch may pay for up to 100% of your undergraduate or graduate college tuition, or tuition for vocational or technical programs, while you’re on active duty.

The Post-9/11 GI Bill covers tuition, housing, books, and supplies for veterans and, sometimes, for active-duty service members. You can transfer part or all of this benefit to a spouse or child.

The military also provides hands-on career training for your military occupational specialty that will benefit you whether you continue in the military or return to a civilian career.

Here are some other education benefits for which you might become eligible as a service member.

• College Funds – These provide additional benefits on top of the GI Bill for members of the Navy and Marine Corps. The Army, however, appears to have suspended its program in 2012.
• Naval Reserve Officer Training Corps – You can receive full tuition and fees at participating colleges and universities, plus a monthly spending allowance, to complete a two-, three-, or four-year degree.  
• Military College Loan Repayment Program (CLRP) – This is available to new recruits in some branches.
• Federal Student Loan Forgiveness Program – This wipes out up to $65,000 in student loan debt.
• Opportunities to Earn Advanced Degrees – For example, you can attend Naval Postgraduate School in coastal Monterey, Calif., in a number of disciplines. You can become a doctor, dentist, or other health professional through one of the Navy’s medical education programs.

Other

Service members also get many other benefits.  Here’s a partial list.

• Commissary and Exchange Stores – The commissary is significantly less expensive for food, and the post exchange or base exchange is tax free, though it doesn’t necessarily have the best prices.
• Veterans Affairs (VA) Home Loans – The VA program offers no-down-payment, low-interest mortgages.
• Tax Break on Home Sales – The Internal Revenue Service (IRS) provides more-generous qualification standards for tax-free capital gains on the sale of a service member’s primary residence.
• Paid Vacation – Active-duty service members get 30 days of paid vacation annually.
• Military Discounts – Many businesses offer discounts to service members.
• Space-Available Travel – Low- or no-cost travel for service members and their families can be had on military flights when, as the name says, space is available.
• Interest Rate Cap on Debt – A 6% interest rate cap on debt incurred before being deployed, called to active duty, or asked to move unexpectedly is authorized by the Servicemembers Civil Relief Act (SCRA).

The Bottom Line

Unlike in the private sector, where the pay and benefits for most positions are kept secret until you’re actually offered a job, the military makes it clear exactly what you can expect throughout your career before you even talk to a recruiter. With the huge sacrifices involved in serving, it only makes sense that the military would want to advertise what service members stand to gain.

Talking to individuals who have actually served (and are not recruiters) can help you get a more balanced picture of the pros and cons of serving and decide whether you want to pursue this path. The pay and benefits you’re looking for may be available in the private sector too. You just might have to do more research to find them.