Do You Get Paid After Leaving the Military?

Individuals transitioning from military service to civilian life encounter various forms of compensation and benefits. These payments stem from different sources and serve distinct purposes, extending beyond a final paycheck. Understanding these financial avenues helps separating service members navigate their post-military financial planning. Payments include:
Those received immediately upon separation
Those contingent on specific service circumstances
Disability compensation from the Department of Veterans Affairs
State-administered financial assistance programs

Immediate Military Payouts

Service members separating from the military typically receive a final paycheck covering their remaining active duty pay and allowances up to their separation date. The timing of this final payment can vary depending on the service branch and whether any financial discrepancies exist in the service member’s account. If debts are flagged, such as for tuition or travel overpayments, the final paycheck could be delayed by 120 days or more while an audit is conducted.

Accrued leave is another common immediate payout. Service members accrue 2.5 days of leave per month, totaling 30 days annually. Upon separation, they can sell back a maximum of 60 days of unused leave accumulated over their career. The payout for sold-back leave is calculated based on the service member’s basic pay for the days sold, excluding allowances such as Basic Allowance for Housing (BAH) or Basic Allowance for Subsistence (BAS).

Service members can also use accrued leave as “terminal leave” immediately before their separation date. During terminal leave, the individual remains on active duty status and continues to receive full pay and allowances, including BAH and BAS. Choosing terminal leave can be more financially advantageous than selling back leave because it includes these additional allowances. The decision often depends on individual circumstances, such as having a job lined up.

Conditional Military Payments

Certain financial payments from the Department of Defense are contingent upon specific circumstances, such as length of service, type of separation, or participation in particular programs. Severance pay is one such payment, provided to service members involuntarily separated but not qualifying for military retirement. This includes force shaping reductions or medical separations where the disability rating is insufficient for retirement.

Separation Pay, a form of severance for involuntary separations, is generally calculated as 10% of the product of the service member’s years of service and 12 times their monthly basic pay at separation. This payment is usually a one-time lump sum and is subject to federal income tax, unless it qualifies for specific combat-related exceptions. A service member receiving separation pay may be required to repay the amount if they later become eligible for military retired pay or Department of Veterans Affairs (VA) disability compensation for the same condition, though there are exceptions for combat-related injuries.

Disability Severance Pay applies to service members separated due to a service-connected disability rated less than 30%, which does not qualify them for permanent disability retirement. This payment is a one-time lump sum, calculated as two months of basic pay for each year of service, with a minimum of three years credited for computation (or six years if the disability was combat-related).

Retirement pay is a long-term conditional payment for service members who complete at least 20 years of qualifying service. The calculation depends on the specific retirement system under which the service member serves. For those under the Legacy Retirement System (Final Pay or High-3), the monthly annuity is 2.5% of either their final basic pay or the average of their highest 36 months of basic pay, multiplied by their years of service.

The Blended Retirement System (BRS), implemented in 2018, combines a defined benefit annuity with a Thrift Savings Plan (TSP) and continuation pay. Under BRS, the annuity multiplier is 2.0% per year of service, applied to the average of the highest 36 months of basic pay. The government contributes an automatic 1% of basic pay to a service member’s TSP account after 60 days of service, and matches contributions up to an additional 4% after two years of service, continuing through the 26th year. Continuation pay is a one-time lump-sum bonus offered between 8 and 12 years of service in exchange for an additional service obligation, with the amount varying by service branch.

Veteran Affairs Disability Compensation

Veteran Affairs (VA) disability compensation provides tax-free monthly payments to veterans with disabilities incurred or aggravated during active military service. Eligibility requires a current illness or injury affecting the mind or body, and service on active duty, active duty for training, or inactive duty training. The condition must be service-connected, meaning it was caused or worsened by military service.

The VA assigns a disability rating from 0% to 100% in 10% increments, reflecting the severity of the service-connected condition. Payment amounts are determined by this disability rating and the number of dependents the veteran has. These rates are subject to annual adjustments.

To apply for VA disability, veterans begin by submitting an “Intent to File” form, which secures a potential effective date for benefits. The formal application, VA Form 21-526EZ, requires supporting evidence such as military medical records, private medical records, and statements from family or friends. The VA may also request additional medical exams to evaluate the claim. The effective date for benefits is the date the VA receives the “Intent to File,” provided the complete claim is submitted within one year, potentially allowing for significant back pay.

State-Provided Financial Assistance

Financial assistance programs are also available at the state level, with Unemployment Compensation for Ex-Service Members (UCX) being a prominent example. UCX is a federal program administered by state unemployment agencies, offering financial support to eligible former service members transitioning to the civilian workforce. While federally funded by the military branches, the benefits are processed and managed by individual states.

Eligibility for UCX requires an honorable discharge, sufficient length of service, and that the individual is able, available, and actively seeking employment. The specific eligibility rules, weekly benefit amounts, and duration of benefits are determined by the law of the state where the claim is filed. The weekly benefit rate is based on the service member’s pay grade when they left the military, using a “Schedule of Remuneration” provided by the U.S. Department of Labor.

To apply, former service members contact their state’s unemployment agency or labor department. They will need to provide a copy of their DD Form 214, Certificate of Release or Discharge from Active Duty. The claim for compensation must be submitted within 18 months following discharge or release from active duty.