Our annual Financial Planning Guide provides information on retirement, health and survivor benefits, social security, and personal financial and estate planning.
retirement • life insurance • health benefits • survivor benefits veterans benefits • savings & investments • annuities social security • wills & trusts • taxes 2023 Financial Planning Guide
2023 Financial Planning Guide
5Star Financial, LLC | 909 North Washington Street | Alexandria, VA 22314
© 2003-2023 5Star Financial, LLC. All rights reserved. No part of this book may be reproduced or transmitted in any manner, shape, or form, or by any means electronic or mechanical, including photocopy recording, or by an information storage or retrieval system, without the express written permission of the publisher. Printed in the United States of America. The information contained in this publication is intended for the use of individuals who want to develop and implement a personal financial plan. However, the book is distributed based on the understanding that the publisher is not engaged in rendering any legal, professional, or other service. The information contained herein is as up-to-date as possible, but it must be realized that the benefits and entitlements discussed herein are constantly changing. For this reason, the book is intended to be used only as a planning guide and it is not a final authority on benefits and entitlements. Images courtesy of Department of Defense Visual Information Distribution System, U.S. Department of Defense and National Guard Fickr accounts. The apperance of U.S. Department of Defense visual information does not imply or constitute DoD endorsement.
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Table of Contents
PART I —Military and Civil Service Topics Chapter 1. Military Pay & Allowances.......................4 Military Income & Benefits In General ...........................4 Armed Forces Comparative Ranks ................................4 Active Duty Basic Pay . ...................................................4 Other Types of Pay & Allowances . ................................5 Access To Your Pay Account .......................................11 Thrift Savings Plan (TSP) .............................................11 Chapter 2. Reserve & National Guard.....................13 Introduction ...................................................................13 Categories of Service & Duty Requirements ...............13 Pay .................................................................................15 Retirement . ...................................................................15 TRICARE ........................................................................17 Education Benefits . ......................................................18 Reserve Component Survivor Benefit Plan (RCSBP) ........18 Life Insurance .........................................................................19 Chapter 3. TRICARE...............................................20 Overview of TRICARE ...................................................20 Active Duty Members and Dependents .......................22 Retirees and Dependents .............................................22 TRICARE For Life (TFL) ................................................22 TRICARE Young Adult . .................................................23 Pharmacy Benefits .......................................................23 DEERS ............................................................................24 Treatment Priorities at Military Facilities ....................24 Dental Care . ..................................................................24 TRICARE Telephone Numbers .....................................25 TRICARE Regions and Contacts ..................................26 TRICARE Cost Table .....................................................27 Medicare/TFL Cost Share Table ..................................28 Chapter 4. Military Retirements..............................29 Retired Pay Background ...............................................29 DIEMS ............................................................................29 Retired Pay Systems . ...................................................30 Retired Pay Increases . .................................................32 Enlisted Personnel Retirements ..................................32 Officer Retirements . .....................................................33 Disability Retirements ..................................................33 CRSC and CRDP Programs ..........................................33 Retirement Services Offices (RSO) ..............................34 Retirement Pay Schedule .............................................34
Chapter 5. The Survivor Benefit Plan ...................... 36 The Survivor Benefit Plan (SBP) ..................................36 Who Can Participate? ...................................................36 Who Can Be Beneficiaries? ..........................................37 How Much Does The Beneficiary Receive? .................37 How Much Does It Cost? . ............................................37 Disenrollment ................................................................38 Dependency & Indemnity Compensation (DIC) ..........38 Eligibility Requirements ................................................39 Additional Provisions of the SBP .................................40 Taxation of SBP Annuities . ..........................................40 Chapter 6. Veterans Benefits .................................. 42 Veterans Benefits In General . ......................................42 Educational Support .....................................................43 Veteran Readiness & Employment (VR&E) ................... 45 Disability Compensation ..............................................45 Pension Benefits ...........................................................46 Health Care Assistance ................................................46 Home Loan Guaranty Program ....................................47 Life Insurance ...............................................................48 Other Veteran Benefits .................................................49 Burial Benefits ...............................................................50 Survivor Benefits ...........................................................50 Telephone Assistance ..................................................52 Chapter 7. Civil Service Pay & Retirements............53 Overview ........................................................................53 Pay Systems .................................................................53 General Schedule Pay Increases .................................53 Health, Life and Long Term Care Insurance . ..............54 Retirement Systems .....................................................55 Thrift Savings Plan (TSP) .............................................55 Mistakes to Avoid When Planning Your Retirement ...55
Continued >
Table of Contents
PART II — General Financial Topics Chapter 8. Principles of Financial Planning............56 The Need For Financial Planning .................................56 How To Start A Financial Plan .....................................56 Financial Ratios ............................................................58 Debit or Credit ...............................................................59 Some Thoughts On Financial Planning .......................60 Chapter 9. Important Papers, Wills & Trusts...........61 Important Papers ..........................................................61 Wills ...............................................................................62 Estate Planning .............................................................62 Trusts . ...........................................................................63 Health Care Decisions ..................................................65 Personal Record System ..............................................65 Chapter 10. Savings & Investments........................66 Why Save And Invest? ..................................................66 Investment Prerequisites .............................................66 Risk and Return .............................................................67 Types of Investments ...................................................67 Short-Term Investments ..............................................68 Common Stock .............................................................68 Fixed Income Securities ...............................................68 Mutual Funds ................................................................70 Derivatives . ...................................................................71 Real Estate ....................................................................71 Other Tangibles .............................................................72 Retirement Accounts ....................................................72 Education Savings ........................................................73 Health Savings Accounts .............................................74 Investment Goals and Strategies ................................74 Time Value of Money . ..................................................74 Savings & Investment Terminology .............................76 Chapter 11. Personal Credit...................................78 Credit Cards ..................................................................78 Consumer Loans . .........................................................79 Home Mortgages . ........................................................80 Education Loans ...........................................................80 Reverse Mortgages ......................................................81 Credit History ................................................................81 Credit Freeze .................................................................82 Bankruptcy ....................................................................82
Chapter 12. Social Security & Medicare..................83 Social Security Benefits In General . ............................83 Social Security Eligibility ..............................................84 Applying For Social Security ........................................84 Estimating Social Security Benefits . ...........................84 Retirement Benefits ......................................................85 Disability Benefits .........................................................87 Survivor Benefits ...........................................................87 Supplemental Security Income (SSI) ...........................87 Medicare.......................................................................88 Nursing Homes .............................................................91 Chapter 13. Life Insurance.....................................92 Introduction ...................................................................92 Building a Personal Insurance Program ......................92 Why Life Insurance? .....................................................93 Types of Life Insurance ................................................93 Term Life Insurance . ....................................................93 Whole Life Insurance ....................................................93 Universal Life Insurance ...............................................95 Other Types of Life Insurance ......................................95 Contract Provisions ......................................................96 How Much Life Insurance? . .........................................97 Risk Classification ........................................................97 Selecting a Life Insurance Company ...........................97 The Language of Life Insurance ..................................99 Chapter 14. Annuities...........................................100 The Annuity Principle . ............................................... 100 Annuity Classifications . ............................................ 100 Annuity Pros and Cons .............................................. 102 Life Expectancy Table . .............................................. 103 Chapter 15. Federal & State Taxes........................104 Federal Income Tax In General ................................. 104 Determination of Tax Liability ................................... 105 When To File Your Return .......................................... 106 Combat Zone ............................................................. 106 State Income Taxes ................................................... 107 Federal Estate And Gift Taxes . ................................. 107 State Inheritance Taxes ............................................. 108 Tax Tips ...................................................................... 109 Appendix A — Internet Resources.........................112 Appendix B — Military Information Directory........113 Appendix C — Identity Theft.................................114 Appendix D — Spotlight on Commissaries............116
CHAPTER 1 | MILITARY PAY & ALLOWANCES
Chapter 1. Military Pay & Allowances Military Income & Benefits In General ...................................................................................... 1–1 Armed Forces Comparative Ranks..........................................................................................1–2 Active Duty Basic Pay.............................................................................................................1–3 Other Types of Pay & Allowances............................................................................................ 1–4 Access to Your Pay Account...................................................................................................1–5 Thrift Savings Plan (TSP)........................................................................................................1–6
publication. If you think you are entitled to an item we cover, check with your Finance or Personnel Office to determine specific requirements. 1–2. ARMED FORCES COMPARATIVE RANKS. While the military grade structure is the same in all departments, the titles that are associated with each rank can vary. For example, depending upon the branch of service, an E–7 may have the title Sergeant First Class, Master Sergeant, Gunnery Sergeant, or Chief Petty Officer. The table on the next page provides a summary of the grade structure and titles used in the United States Armed Forces. 1–3. ACTIVE DUTY BASIC PAY. A military member’s basic monthly pay is similar to a civilian’s salary and, like the civilian, it is usually the member’s primary source of income. Each year the President submits a pay raise request to
1–1. MILITARY INCOME & BENEFITS IN GENERAL. Military compensation is a complex system of over 40 pay and allowance items. Since military compensation is usually the service member’s primary source of income and because the entitlements are complex and subject to change, it is important that both the member (and his or her family) understand how these entitlements fit into the family’s total financial plan. As we review the most common items of pay and allow ances, keep in mind that the amounts and benefits we discuss are subject to change. The information provided is the most current available at the time of publication. It is also important to remember that entitlements to most military pay and allowances are based on satisfying a variety of requirements that are too numerous to outline in this
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CHAPTER 1 | MILITARY PAY & ALLOWANCES
United States Armed Forces — Comparative Ranks
Rank
U. S. Army Titles
U. S. Air Force Titles U. S. Marine Corps Titles U. S. Navy Titles
U. S. Space Force
Commissioned Officers
O-10
General
General
General
Admiral
General
O-9 O-8 O-7 O-6 O-5 O-4 O-3 O-2 O-1 W-5 W-4 W-3 W-2 W-1
Lieutenant General
Lieutenant General
Lieutenant General
Vice Admiral
Lieutenant General
Major General
Major General
Major General
Rear Admiral (Upper) Rear Admiral (Lower)
Major General
Brigadier General
Brigadier General
Brigadier General
Brigadier General
Colonel
Colonel
Colonel
Captain
Colonel
Lieutenant Colonel
Lieutenant Colonel
Lieutenant Colonel
Commander
Lieutenant Colonel
Major
Major
Major
Lieutenant Commander
Major
Captain
Captain
Captain
Lieutenant
Captain
First Lieutenant Second Lieutenant
First Lieutenant Second Lieutenant
First Lieutenant Second Lieutenant Warrant Officers Chief Warrant Officer Chief Warrant Officer Chief Warrant Officer Chief Warrant Officer
Lieutenant Junior Grade First Lieutenant
Ensign
Second Lieutenant
Chief Warrant Officer Chief Warrant Officer Chief Warrant Officer Chief Warrant Officer
n/a
Chief Warrant Officer Chief Warrant Officer Chief Warrant Officer
(The United States Space Force has no Warrant Officer grades)
(The United States Air Force has no Warrant Officer grades)
Warrant Officer
Warrant Officer
Warrant Officer
Enlisted Personnel
Cmd. Sgt. Major or Sgt. Major Master Sergeant or 1st Sergeant Sergeant First Class
Sgt. Major or Master Gun. Sgt. Master Sergeant or 1st Sergeant
E-9
Chief Master Sergeant
Master Chief Petty Officer
Chief Master Sergeant
Senior Master Sergeant Master Sergeant Technical Sergeant
E-8
Senior Master Sergeant
Senior Chief Petty Officer
E-7 E-6
Master Sergeant Technical Sergeant
Gunnery Sergeant
Chief Petty Officer
Staff Sergeant
Staff Sergeant
Petty Officer First Class Petty Officer Second Class Petty Officer Third Class
E-5
Sergeant
Staff Sergeant
Sergeant
Sergeant
E-4 E-3 E-2 E-1
Corporal or Specialist 4 Sergeant or Senior Airman Corporal
Specialist 4 Specialist 3 Specialist 2 Specialist 1
Private First Class
Airman First Class
Lance Corporal Private First Class
Seaman
Private Private
Airman
Seaman Apprentice
Airman Basic
Private
Seaman Recruit
Career Sea Pay: Career Sea Pay for officers, warrant officers and enlisted members can range from a monthly rate of $60 to $805 depending on paygrade and how many years of sea time. Sea pay is paid to members assigned to ships or to commands that are deployed onboard a ship. There are two incentives associated with Career Sea Pay: a. Submarine Duty Pay. This is a monthly pay for submarine crew members. The amount payable is based on the member’s rank and years of service. Enlisted crew members receive from $85 to $450 while warrant officers receive from $320 to $475. Officer payments range from $255 to $950.
Congress. The table on the next page shows the basic pay rates reflecting a 4.6% pay raise effective January 1, 2023. 1–4. OTHER TYPES OF PAY & ALLOWANCES. In addition to basic pay, active duty personnel often receive several other items of pay and allowances depending on their marital status, type of duties performed, professional skills, and areas of assignment. It is important to note that items of “pay” are generally subject to taxation and are included in the taxable income reported to the federal and state government at the end of the year. However, “allowance” items are not subject to taxation and are not included in annual taxable income. The most common special and incentive pay and allowances are discussed here (in alphabetical order).
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CHAPTER 1 | MILITARY PAY & ALLOWANCES
2023 United States Armed Forces Basic Pay Table
Under 2 Years
Over 2 Years
Over 3 Years
Over 4 Years
Over 6 Years
Over 8 Years
Over 10 Years
Over 12 Years
Over 14 Years
Over 16 Years
Over 18 Years
Over 20 Years
Over 22 Years
Over 24 Years
Over 26 Years
Over 28 Years
Over 30 Years
Rank
Commissioned Officers
–––––––––––
17,675 17,675 17,675 17,675 17,675 17,675
O-10
–––––––––––
17,201 17,450 17,675 17,675 17,675 17,675
O-9
O-8 12,171 12,570 12,834 12,908 13,238 13,790 13,918 14,442 14,593 15,044 15,697 16,298 16,700 16,700 16,700 16,700 17,118 O-7 10,113 10,583 10,800 10,973 11,286 11,595 11,953 12,309 12,667 13,790 14,738 14,738 14,738 14,738 14,814 14,814 15,110 O-6 7,669 8,425 8,978 8,978 9,013 9,399 9,450 9,450 9,987 10,936 11,494 12,050 12,368 12,689 13,311 13,311 13,577 O-5 6,393 7,202 7,700 7,794 8,106 8,291 8,701 9,002 9,390 9,983 10,265 10,545 10,862 10,862 10,862 10,862 10,862 O-4 5,516 6,385 6,812 6,906 7,302 7,726 8,255 8,666 8,951 9,116 9,210 9,210 9,210 9,210 9,210 9,210 9,210 O-3 4,850 5,498 5,933 6,470 6,780 7,121 7,340 7,702 7,891 7,891 7,891 7,891 7,891 7,891 7,891 7,891 7,891 O-2 4,191 4,773 5,497 5,683 5,799 5,799 5,799 5,799 5,799 5,799 5,799 5,799 5,799 5,799 5,799 5,799 5,799 O-1 3,637 3,786 4,577 4,577 4,577 4,577 4,577 4,577 4,577 4,577 4,577 4,577 4,577 4,577 4,577 4,577 4,577 Commissioned Officers With Over Four Years of Enlisted or Warrant Officer Service O-3E – – – 6,470 6,780 7,121 7,340 7,702 8,007 8,182 8,421 8,421 8,421 8,421 8,421 8,421 8,421 O-2E – – – 5,683 5,799 5,984 6,296 6,537 6,716 6,716 6,716 6,716 6,716 6,716 6,716 6,716 6,716 O-1E – – – 4,577 4,887 5,068 5,253 5,434 5,683 5,683 5,683 5,683 5,683 5,683 5,683 5,683 5,683 Warrant Officers W-5 ––––––––––– 8,912 9,364 9,701 10,073 10,073 10,578 W-4 5,012 5,391 5,546 5,698 5,961 6,220 6,483 6,878 7,224 7,554 7,824 8,088 8,474 8,792 9,154 9,154 9,336 W-3 4,578 4,768 4,964 5,028 5,232 5,636 6,056 6,254 6,483 6,718 7,142 7,428 7,600 7,781 8,030 8,030 8,030 W-2 4,050 4,433 4,551 4,632 4,895 5,303 5,506 5,705 5,948 6,139 6,311 6,517 6,653 6,760 6,760 6,760 6,760 W-1 3,555 3,938 4,041 4,258 4,515 4,894 5,071 5,319 5,562 5,753 5,929 6,143 6,143 6,143 6,143 6,143 6,143 Enlisted Members E-9 – – – – – – 6,056 6,193 6,366 6,569 6,775 7,103 7,382 7,674 8,122 8,122 8,527 E-8 – – – – – 4,957 5,177 5,312 5,475 5,651 5,969 6,130 6,404 6,557 6,931 6,931 7,070 E-7 3,446 3,761 3,905 4,095 4,245 4,501 4,645 4,901 5,114 5,259 5,414 5,473 5,675 5,783 6,194 6,194 6,194 E-6 2,981 3,280 3,425 3,566 3,712 4,042 4,171 4,420 4,496 4,551 4,616 4,616 4,616 4,616 4,616 4,616 4,616 E-5 2,730 2,914 3,055 3,199 3,424 3,659 3,852 3,875 3,875 3,875 3,875 3,875 3,875 3,875 3,875 3,875 3,875 E-4 2,504 2,632 2,774 2,915 3,039 3,039 3,039 3,039 3,039 3,039 3,039 3,039 3,039 3,039 3,039 3,039 3,039 E-3 2,260 2,402 2,548 2,548 2,548 2,548 2,548 2,548 2,548 2,548 2,548 2,548 2,548 2,548 2,548 2,548 2,548 E-2 2,149 2,149 2,149 2,149 2,149 2,149 2,149 2,149 2,149 2,149 2,149 2,149 2,149 2,149 2,149 2,149 2,149 E-1 1,918 1,918 1,918 1,918 1,918 1,918 1,918 1,918 1,918 1,918 1,918 1,918 1,918 1,918 1,918 1,918 1,918
Note: Monthly base pay for O-7 to O-10 is limited to $17,675 (Level II of the Executive Schedule). Monthly base pay for O-6 is limited to $14,342 (Level V of the Executive Schedule).
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CHAPTER 1 | MILITARY PAY & ALLOWANCES
• He/she is qualified in a critical military skill. • He/she isn’t receiving special nuclear-training pay. • He/she reenlists or voluntarily extends their enlistment for a period of at least three years. • He/she enlists in a regular component of the service concerned; or continues in a reserve component of the service concerned. Flight Pay. There are four primary special pays for members whose military duties involve aerial flight. a. Aviation Career Incentive Pay for Officers. Active duty commissioned officers on aviation duty are entitled to Aviation Career Incentive Pay (ACIP). Aviation career incentive pay is restricted to regular and reserve officers who hold, or are in training leading to, an aeronautical rating or designation and who engage and remain in aviation service on a career basis. The amount payable ranges from $125 to $1,000 per month. b. Critical Skill Incentive Pay. This pay may be authorized in lieu of HDIP for enlisted crew members. Enlisted aviators may receive continuous flight pay as long as they meet flying requirements. The pay ranges from $225 to $600 a month. c. Aviation Bonus Pay. An annual bonus of up to $35,000, depending on branch, may be paid to selected officers who agree to extend their aviation service. d. Hazardous Duty Incentive Pay (HDIP) . HDIP is payable to crew members whose duties can only be performed on an in-flight aircraft. Monthly officer payments range from $150 to $250 while the monthly entitlement for enlisted personnel ranges from $150 to $240 per month. Foreign Language Proficiency Bonus Pay. A monthly payment, not to exceed $500 for a single language or dialect, or $1,000 for two or more, is payable to those who maintain
b. Nuclear Qualified Officer Pay. In order to train and retain nuclear qualified officers, the Navy is authorized to pay two types of special pays: an annual Continuation Pay not to exceed $40,000 and an annual Incentive Bonus not to exceed $22,000. Diving Pay. A monthly payment of up to $240 is given to officers and up to $340 to enlisted members whose duties involve diving. Enlistment & Reenlistment Bonuses. Enlistment Bonus. There are many benefits to joining the military, but few directly affect pay as much as enlistment bonuses which can be as much as $50,000. Reenlistment Bonus. The Selective Reenlistment Bonus (SRB), sometimes called the Selective Retention Bonus, is a cash incentive paid to enlisted members to encourage reenlistments and retention in critical military skills. Bonus award levels are adjusted as needed to ensure the services are retaining the correct quantity and critical skill mix to optimize their ability to accomplish the mission. Currently the SRB ranges from $30,000 to $100,000. Members may qualify for up to 2 SRBs in their military career for a maximum total of $200,000. The bonus is usually paid in a lump sum or 50% paid at the time of reenlistment. The remaining bonus amount is paid in equal annual installments. It is taxable, however if the member reenlists in a tax-free combat zone or is a foreign national who reenlists OCONUS it is not taxable, and the installments are also tax-free. Active duty members may be eligible for a reenlistment (or retention) bonus, if: • He/she has completed at least 17 months of continuous active duty (other than for training) but not more than fourteen years of active duty.
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CHAPTER 1 | MILITARY PAY & ALLOWANCES
Servicemembers that meet the requirements for more than one type of hazardous duty pay during the same period are entitled to receive a maximum of two types of hazardous duty pay. This presumes that the individual in question was assigned to a unit whose mission involves the performance of both types of hazardous duties. Hostile Fire and Imminent Danger Pay. A $225 monthly payment is authorized to members who perform duties within areas designated as imminent danger zones. Involuntary Separation Pay. This is a special lump– sum payment authorized for certain members who are involuntarily separated from the service (for reasons other than misconduct) after having served at least six years but less than 20 years on active duty. Medical Pay. Military personnel who are serving in various medical specialities are entitled to receive a variety of special pays. Health Professions Special & Incentive (HPS&I) pay is paid to Health Profession Officers (HPOs) for the specialty for which they are fully qualified. Being an HPO doesn’t necessarily mean being a medical doctor. Pharmacists, dentists, social workers, veterinarians, mental health specialists and nurses also qualify to name just a few. The following is a basic summary of HPS&I Pay: a. Accession Bonus (AB). This is paid to HPOs who agree to serve at least 3 or 4 years in the military. The amount varies by medical specialty and length of service agreement. There is also a Critical Wartime Skills Accession Bonus that may pay much more money to HPOs with necessary skill sets during wartime. b. Board Certification Pay (BCP). To qualify for BCP, the HPO must maintain all their licenses, credentials, and specialty qualifications. Currently, the annual amount is $6,000, which is prorated and paid monthly. c. Retention Bonus (RB). After the initial period of obligated service ends, HPOs may sign on for an additional length of time and get an Retention Bonus. Once again, the bonus varies by specialty and length of time. The RB is paid annually when the extension is signed and on the anniversary date. Depending on the situation, an HPO can sign a new service agreement while they are under an existing RB contract. They can do this to get more money, but they have to serve the additional time. This depends on the needs of the military.
proficiency in specific foreign languages and dialects designated by the military departments. Hardship Duty Pay–Location (HDP–L). These payments are for officers and enlisted personnel for service in locations where living conditions are substantially below those in the continental United States. Payments range from $50 to $150 depending upon the duty location. Hazardous Duty Incentive Pay (Non-Aircrew Members). A $150 monthly payment is authorized for members required to perform certain hazardous duties. Qualifying duties include demolition work, parachute jumping, work with toxic fuels or pesticides, work inside pressure chambers, flight duty as a non–crew member, flight deck operations, and similar hazardous duties. Additionally, in the field of parachute jumping, there is a monthly High Altitude Low Opening (HALO) pay of $225 which may be authorized for members who perform unique parachute duties.
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CHAPTER 1 | MILITARY PAY & ALLOWANCES
c. BAH Differential. Used for personnel who live on base in single quarters and make alimony or child support payments. Basic Allowance for Subsistence (BAS). BAS is a monthly allowance designed to offset the cost of meals to the member. In 2023, officers receive $311.68 a month regardless of rank. Upon completion of initial training, enlisted members who are authorized to mess separately will receive $452.56 per month. Clothing Allowance. To help pay for a uniform and other clothing costs, service members may be given a clothing allowance if appropriate clothing is not furnished. All officers are entitled to an initial uniform allowance. The initial uniform allowance is payable only once to an officer except for the following circumstance: upon transfer to another Reserve Component that requires a different uniform, a Reserve officer may receive another initial uniform allowance. Regular officers may not receive this allowance when transferring to another Military Service. Enlisted personnel receive an initial uniform issue at the time of entry into the service. To provide for uniform replacement, enlisted personnel are subsequently paid an annual clothing replacement allowance. There are two types of clothing replacement allowances — Basic and Standard. The Basic Rate is payable during the first three years of service. After Annual Clothing Replacement Allowance Enlisted Men BASIC STANDARD Army $362.14 $517.34 Navy $352.80 $504.00 Air & Space Force $326.55 $466.50 Marine Corps $517.32 $738.84 Enlisted Women Army $369.48 $527.84 Navy $338.40 $482.40 Air Force $334.62 $478.03 Marine Corps $513.48 $733.68
d. Incentive Pay (IP). IP is paid to HPOs in designated specialties. It is a monthly pay, and paid to HPOs who agree to serve at least one additional year. The amount varies by specialty and length of additional service. HPOs can get IP and RB at the same time if their specialty warrants it. Like the RB, HPOs can sign a longer IP agreement for more money at any time depending on the needs of the service. Special Duty Assignment Pay. A monthly payment ranging from $75 to $450 is given to enlisted members who perform duties that have been designated as being extremely difficult or involving a high degree of responsibility. ALLOWANCES Basic Allowance for Housing (BAH). BAH is a monthly allowance for members not assigned to government quarters. The objective of the BAH program is to ensure the same out–of–pocket housing expense for each member regardless of duty location. BAH covers 95% of housing expenses with members paying 5% of their housing expenses out of pocket. The BAH allowance for each duty location is based on commercially gathered price data of local rental properties. Data is collected to establish the average rental and utility costs for various types of housing units. The information reflects the cost of rental properties with housing characteristics similar to those rented by civilian counterparts with salaries comparable to military members. The data is collected every summer with the new rates effective 1 January of the next year. BAH rates vary by grade and duty location. The 2023 BAH rates increased by 12.1%. The increase is an average for all areas and actual rates will continue to be set by the individual location based on the current local rental housing market survey process. A key feature of the BAH program is “rate protection.” Rate protection ensures that service members will not have a reduction in their BAH payment even if rates go down. The rate in effect when the member arrives at their duty station is the guaranteed minimum rate they will receive during their current assignment. Also, if rate increases are made for a given location, then everyone assigned to that location will receive the benefit of the new rate increase. In addition to the standard BAH, there are three other types of BAH: a. BAH RC/Transient. A prorated housing allowance paid to Reservists who are mobilized for 30 days or less. b. BAH Partial. This may be paid to members without dependents who reside in government quarters.
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CHAPTER 1 | MILITARY PAY & ALLOWANCES
three years of service, the member receives the Standard Rate which is a higher level of reimbursement. The Basic and Standard rates vary by gender and service. The table on the previous page provides allowance information. In addition, there are special clothing allowances which are payable to members whose duties require them to wear either civilian– type clothing or special military clothing (e.g., members of the Army Band). CONUS COLA. The Cost of Living Allowance for the Continental United States is designed to partially offset the higher, non–housing costs experienced by active duty members living in designated high cost areas in the United States. The amount varies based upon rank, dependent status, years of service and geographical location. Payments range from $22 to $59 per month. Dislocation Allowance (DLA). Dislocation Allowance is designed to partially reimburse active duty personnel for the expenses they incur in relocating their households in conjunction with a permanent change of station. The allowance is determined by the member’s grade and is paid at either a “with dependents” or “without dependents” rate. The table to the right provides the Dislocation Allowance rates for 2023. Family Separation Allowances (FSA). FSA is payable only to members with dependents. The monthly payment of $250 is designed to provide compensation for the added expenses incurred because of an enforced family separation under one of the following conditions: a. FSA-R. Transportation of dependents is not authorized at government expense and the dependents do not live in the vicinity of the member’s home port/permanent duty station. b. FSA-S. The member is on duty aboard a ship, and the ship is away from the home port continuously for more than 30 days. c. FSA-T. The member is on TDY/away from the permanent duty station continuously for more than 30 days and the member’s dependents do not reside at or near the TDY/ TAD station. Overseas Station Allowances. Overseas Station Allowances consist of a series of payments designed to help defray the additional costs for food, lodging, and related incidental
Dislocation Allowance
Without Dependents $4,545.85 $4,545.85
With Dependents $5,595.91 $5,595.91
Paygrade
O-10
O-9 O-8 O-7 O-6 O-5 O-4 O-3 O-2 O-1
$4,545.85 $4,545.85 $4,170.45 $4,016.69 $3,722.33 $2,983.15 $2,366.38 $1,992.63 $3,221.26 $2,738.43 $2,354.79 $3,781.83 $3,358.52 $2,822.75 $2,506.93 $2,098.43 $2,758.30 $2,531.71 $2,162.97 $2,093.94 $2,093.94 $2,093.94 $2,064.19 $1,774.81 $1,639.26
$5,595.91 $5,595.91 $5,038.60 $4,856.70 $4,281.27 $3,542.04 $3,024.48 $2,703.70 $3,806.63 $3,434.60 $3,173.31 $4,132.43 $3,788.50 $3,470.97 $3,193.16 $2,761.61 $3,636.36 $3,351.93 $3,112.14 $3,109.26 $3,109.26 $3,109.26 $3,109.26 $3,109.26 $3,109.26
O-3E O-2E O-1E
W-5 W-4 W-3 W-2 W-1
E-9 E-8 E-7 E-6 E-5 E-4 E-3 E-2 E-1
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CHAPTER 1 | MILITARY PAY & ALLOWANCES
If you are a BRS member who began or rejoined service after October 1, 2020, your service automatically enrolled you in the TSP, and 5% of your basic salary is deducted from your paycheck every pay period and deposited into the traditional balance of your TSP account unless you made a contribution election to stop or change your contributions. If you are a BRS member who stopped your contributions during the year, you are automatically re-enrolled at 5% of your basic pay on January 1. If you are a BRS member who began or rejoined service between August 1, 2010 and September 30, 2020, you were automatically enrolled at 3%. You may invest up to 100 percent of your basic pay each pay period. Contributions are limited only by the restrictions imposed by the Internal Revenue Code. For 2023 tax rules limit the annual dollar amount that can be contributed to $22,500. If you are age 50 or older and are already contributing the maximum amount of regular TSP contributions, you may elect to make up to $7,500 in additional “catch–up” contributions. If you contribute to the TSP from your basic pay, you may also contribute up to 100 percent of any incentive, special, or bonus pays that you earn. You may start, stop, or change your contribution at any time. You can not invest any allowances (BAS, BAH, etc.) that you receive. Service Automatic and Matching Contributions. If you are covered by the BRS, your service will automatically contribute an amount equal to 1% of your basic pay into your TSP account each pay period. This does not come out of your pay. If you elect to contribute a portion of your pay, your service will match dollar to dollar up to 3%. For every dollar beyond 3% and up to 5%, your service will contribute 50 cents. So if you contribute 5%, you will receive a 4% matching contribution plus 1% automatic for a total of 5% from your service. There is no service contribution if you are under the traditional retirement system. Investment Options. The TSP provides seven fund investment opportunities: a. Lifecycle Fund — L Fund. These funds are invested in the individual funds shown above. The specific mix is chosen based on the date when you will need your money. For younger investors, the mix is equity or stock weighted, while for older investors, the allocation is weighted toward bonds and other fixed income securities.
expenses incurred by active duty members and their dependents as a result of assignment to permanent duty outside the United States. This allowance contains four separate components: 1) Cost of Living Allowance (COLA); 2) Overseas Housing Allowance (OHA); 3)Temporary Lodging Allowance (TLA); and, 4) Interim Housing Allowance (IHA). The amount of each of these allowances varies geographically because the excess costs upon which they are based vary from one foreign locality to another. Temporary Lodging Expense (TLE). Temporary Lodging Expense is designed to partially offset the lodging and meal expenses incurred by active duty personnel and/or their dependents when it is necessary to occupy temporary lodgings in conjunction with a permanent change of station (PCS). The allowance is payable for a limited period of time — up to ten days in connection with a CONUS PCS and up to five days in conjunction with a PCS to a duty station outside CONUS. 1–5. ACCESS TO YOUR PAY ACCOUNT. MyPay is a great tool to help members of the military, defense civilians, retirees, and annuitants manage their pay. This tool lets you make changes to your pay account information online at anytime at mypay.dfas.mil . MyPay allows you to view your LES, adjust the amount of your federal and state tax withholdings, change direct deposit accounts for your monthly pay, etc. Features vary slightly by service and status. 1–6. THRIFT SAVINGS PLAN (TSP). The Thrift Savings Plan is an optional retirement investment program that is similar to 401(k) plans administered by many private corporations. Active, reserve, and guard members can contribute to the plan from their military pay and are entitled to keep both their contributions and additional earnings regardless of whether they leave the service prior to retirement or actually retire from military service. On www.tsp.gov , you can access your investment account, get current information on the performance of various funds, find retirement planning information, and more. Enrollment and Member Contributions. If you are a member of the uniformed services who is not covered by the Blended Retirement System (BRS), your account is established by your service after you make a contribution election using your service’s automated system such as myPay. If your service does not use an electronic system, you can complete form TSP-U-1. These forms can be downloaded at www.tsp.gov . You may sign up to contribute to the TSP at any time.
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CHAPTER 1 | MILITARY PAY & ALLOWANCES
rate at the time the loan is initiated. Interest and principal repayments are credited back to your account. Withdrawal. Since the TSP is designed to be a long-term retirement savings program, withdrawals made before 59 1/2 years of age may be subject to a 10% early withdrawal tax. The simplest rule to get around the 10% penalty before 59 and 1/2 is if you retire in the year you turn age 55 or later. For example, if you turn 55 in December of this year and you retire this year as well, then you’d be able to access your TSP without the 10% penalty. In addition, there are special rules covering a financial hardship withdrawal for members who are still in–service. Tax Implications. The TSP program allows contributions to be made on either a pre-tax (Traditional TSP) basis or an after tax (Roth TSP) basis. a. Traditional. Contributions that you make today are deducted from your pay before taxes are computed, meaning that you pay less taxes now. The payment of taxes on this income is deferred until you actually withdraw the money from your account. Additionally, taxes on fund earnings are not paid until the money is withdrawn. b. Roth. Taxes on contributions are paid up front. Consequently, contributions are not taxed at the time of withdrawal as long as five years have passed since 1 January of the year you made your first Roth contribution and you are 59 1/2 or older.
b. Government Securities Investment Fund — G Fund. Investment focus is on short term U.S. Treasury securities. c. Fixed Income Index Investment Fund — F Fund. Investment focus is on government and corporate bonds and mortgage backed securities. d. Common Stock Index Investment Fund — C Fund. Investment focus is on the stocks of large and medium size companies included in the S&P 500 Index. e. Small Capitalization Stock Index Investment Fund — S Fund. Investment focus is on the stocks of medium and small companies that are not included in the C Fund. f. International Stock Index Investment Fund — I Fund. Investment focus is on international stocks of 22 developed countries. g. Mutual Fund Window — The mutual fund window is designed for TSP participants who are interested in greater investment flexibility. If your account meets certain eligibility criteria, you can choose to access a selection of more than 5,000 mutual funds. As with most mutual funds, this flexibility comes with fees. All new money coming into your TSP account is automatically invested in the L Fund unless you request a contribution allocation. You may make the allocation online, by phone, or mail. Loans. If the need arises, the TSP loan program gives you access to the money in your account. There are two types of loans — a general purpose loan and a loan for the purchase of your primary residence. Repayment periods are one to five years for a general purpose loan and one to fifteen years for a home loan. The interest rate charged is the G Fund
12
CHAPTER 2: RESERVE & NATIONAL GUARD
Chapter 2. Reserve & National Guard Introduction..............................................................................................................................2–1 Categories of Service & Duty Requirements.............................................................................2–2 Pay.......................................................................................................................................... 2–3 Retirement. ............................................................................................................................. 2–4 TRICARE.................................................................................................................................. 2–5 Education Benefits ................................................................................................................... 2–6 Reserve Component Survivor Benefit Plan (RCSBP) ................................................................. 2–7 Life Insurance..........................................................................................................................2–8
a. Ready Reserve. This group is most often called to active duty and consists of three sub categories — Selected Reserve, Individual Ready Reserve (IRR), and Inactive National Guard (ING). The Selected Reserve consists of designated guard/ reserve units and individuals who are considered essential to wartime mission accomplishment. Most reservists are in this category and are the first to be activated. The president may mobilize up to 200,000 members of the Selected Reserve without declaring a national emergency for a period not to exceed 365 days. Members of the Selected Reserve are generally required to perform one weekend of training each month (“inactive duty for training” or IDT, also known as “weekend drill”) and two weeks of training each year (“annual training” or AT, sometimes known
2–1. INTRODUCTION. An essential component of the nation’s military force is the Reserve and National Guard. The term “Reserve Component” (RC) refers collectively to the seven individual reserve components of the U.S. military: the Army National Guard, the Army Reserve, the Navy Reserve, the Marine Corps Reserve, the Air National Guard, the Air Force Reserve, and the Coast Guard Reserve. This chapter will look at the duty requirements, pay, and retirement that are provided to these members. We will also examine the health, education, and survivor benefits that are available. 2–2. CATEGORIES of SERVICE & DUTY REQUIREMENTS. Members of the Guard and Reserve are assigned to one of three categories — Ready Reserve, Standby Reserve, or Retired Reserve.
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CHAPTER 2: RESERVE & NATIONAL GUARD
2023 Monthly Reserve Drill Pay Schedule Listed below are the Reserve rates of Pay for a weekend cycle of four drills
Under 2 Years
Over 2 Years
Over 3 Years
Over 4 Years
Over 6 Years
Over 8 Years
Over 10 Years
Over 12 Years
Over 14 Years
Over 16 Years
Over 18 Years
Over 20 Years
Over 22 Years
Over 24 Years
Over 26 Years
Over 28 Years
Over 30 Years
Rank
Commissioned Officers
O-7 1,348 1,411 1,440 1,463 1,505 1,546 1,594 1,641 1,689 1,839 1,965 1,965 1,965 1,965 1,975 1,975 2,015 O-6 1,023 1,123 1,197 1,197 1,202 1,253 1,260 1,260 1,332 1,458 1,532 1,607 1,649 1,692 1,775 1,775 1,810 O-5 852 960 1,027 1,039 1,081 1,106 1,160 1,200 1,252 1,331 1,369 1,406 1,448 1,448 1,448 1,448 1,448 O-4 736 851 908 921 974 1,030 1,101 1,155 1,193 1,215 1,228 1,228 1,228 1,228 1,228 1,228 1,228 O-3 647 733 791 863 904 949 979 1,027 1,052 1,052 1,052 1,052 1,052 1,052 1,052 1,052 1,052 O-2 559 636 733 758 773 773 773 773 773 773 773 773 773 773 773 773 773 O-1 485 505 610 610 610 610 610 610 610 610 610 610 610 610 610 610 610 Commissioned Officers With Over Four Years of Enlisted or Warrant Officer Service O-3E – – – 863 904 949 979 1,027 1,068 1,091 1,123 1,123 1,123 1,123 1,123 1,123 1,123 O-2E – – – 758 772 798 839 872 895 895 895 895 895 895 895 895 895 O-1E – – – 610 652 676 700 725 758 758 758 758 758 758 758 758 758 Warrant Officers W-5 – – – – – – – – – – – 1,188 1,249 1,293 1,343 1,343 1,410 W-4 688 740 762 783 819 854 890 945 992 1,037 1,075 1,111 1,164 1,207 1,257 1,257 1,282 W-3 610 636 662 670 698 744 807 834 864 896 952 990 1,013 1,038 1,071 1,071 1,071 W-2 540 591 607 618 653 707 734 761 793 818 841 869 887 901 901 901 901 W-1 474 525 539 568 602 653 676 709 742 767 791 819 819 819 819 819 819 Enlisted Members E-9 – – – – – – 807 826 849 876 903 947 984 1023 1083 1083 1137 E-8 – – – – – 661 690 708 730 753 796 817 854 874 924 924 943 E-7 459 501 521 546 566 600 619 653 682 701 722 730 757 771 826 826 826 E-6 397 437 457 475 495 539 556 589 599 607 616 616 616 616 616 616 616 E-5 364 389 407 427 457 488 514 517 517 517 517 517 517 517 517 517 517 E-4 334 351 370 389 405 405 405 405 405 405 405 405 405 405 405 405 405 E-3 301 320 340 340 340 340 340 340 340 340 340 340 340 340 340 340 340 E-2 287 287 287 287 287 287 287 287 287 287 287 287 287 287 287 287 287 E-1 256 256 256 256 256 256 256 256 256 256 256 256 256 256 256 256 256
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CHAPTER 2: RESERVE & NATIONAL GUARD
as “summer camp”) for which they receive pay and benefits. Individual Mobilization Augmentees (IMAs) are members of the Selected Reserve who participate in training activities and are eligible for unit assignment at the time of mobilization. IRR personnel are normally prior service individuals (active or Selected Reserve) who have some remaining period of obligated military service. Usually, they are not affiliated with a unit and generally do not have to satisfy an annual training requirement. ING personnel are normally members assigned to a specific Guard unit who have been excused from training requirements because of legal or contractual requirements. b. Standby Reserve. This group consists of members who have retained their military affiliation but who are excused from active participation because of hardship, “critical” civilian employment, or other legal requirements. Under certain circumstances members in this category may be involuntarily called to active duty for the duration of a national emergency plus six months. c. Retired Reserve. This group consists primarily of retired members who are drawing retirement pay (over age 60) and those retired members who are not yet eligible for retired pay (under age 60). Eligibility for mobilization is a function of category. Category I retirees are those within their first five years of retirement and are under age 60; Category II retirees are under age 60 but have been retired for more than five years; and, Category III retirees include all remaining retirees. 2–3. PAY. The pay received by members of the reserve and national guard is determined by the type of duty performed — active duty or inactive duty training. While on active duty, generally he/she receives the normal active duty pay and allowances associated with their grade and years of service. While on inactive duty training, reservists receive drill pay in lieu of normal pay and allowances. Generally, a drill is one four hour period of assembly, training, or military service. Pay for one drill period is equivalent to one day of active duty base pay. Reservists cannot be paid for more than two drills in one calendar day. Reserve units will often drill on a weekend basis performing two drills on Saturday and two drills on Sunday, thereby enabling the member to draw four days of active duty base pay for weekend service. The table on the previous page shows the monthly drill pay while the table on the next page provides an estimate of the annual pay earned by a reservist (assuming attendance at 48 annual drills and two weeks of active duty training).
2–4. RETIREMENT. In general, reservists must have a minimum of 20 qualifying years of service to be eligible for retirement. A qualifying year of service is any 365 day period during which the member has earned at least 50 service points. Point totals are also important because they are used to calculate retired pay. Excluding points earned while in an active duty status (which includes annual training), reservists may not earn more than 130 points per year. Service points are normally earned in accordance with the following criteria: a. One point for each day of active duty. b. One point for each 4 hour drill period. c. 15 points for each year of service in the Guard or Reserve. d. One point for each 3 credit hours of accredited correspondence study. Eligibility to draw retired pay normally begins at age 60. However, the member may begin to draw retired pay as early as age 50 if he/she has 20 qualifying years of service including active duty service performed after January 28, 2008. Specifically, each 90 days of active service performed after January 28, 2008, entitles the member to begin drawing retired pay 3 months prior to age 60. Therefore a member with 360 days of active service would be eligible to draw retired pay at age 59 versus 60. Computation of Retired Pay. The computation of retired pay is determined based upon the DIEMS (Date Initially Entered Military Service). Those with a DIEMS before September 8, 1980 use the Final Pay System, those with a DIEMS on or after September 8, 1980 through December 31, 2017 use the High–36 System, and those with a DIEMS date on or after January 1, 2018 use the Blended Retirement System (BRS). All systems determine the years of service by dividing the total points earned in all years by 360. The result is then multiplied by 2.5% for Final Pay and High-36 or 2% for BRS which provides the percentage of base pay that will be received at retirement. For example, a member accruing 2,880 points would have a retirement rate percentage of 20% under Final Pay and High-36 (2,880/360 = 8 years; 2.5% x 8 years = 20%). Under BRS, this same member would have a retirement percentage of 16% (2,880/360 = 8 years; 2% x 8 years = 16%). The systems also differ in the determination of the base pay amount. In the Final Pay System, the pay computation is based upon the base pay for the grade and length of service at the time the member reaches retirement age. Under High–36 and BRS, the pay computation is based upon the
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