Is Military Retirement Paid in Arrears?

Military retirement benefits provide a significant financial foundation for service members upon completing their dedicated careers. These benefits represent a deferred compensation earned through years of service, offering a reliable income stream designed to support retirees and their families. Understanding how these payments are processed is important for financial planning during the transition from active duty to retirement.

Understanding Payment in Arrears

Military retirement pay is paid in arrears, a common practice for many forms of recurring income, including salaries. This means the payment received covers a period that has already concluded. For instance, a payment disbursed on the first business day of July is for the entitlement accrued during the entire month of June. This method differs from payments made in advance, where funds are provided before the service period begins.

The Defense Finance and Accounting Service (DFAS), which manages military pay, uses this system to ensure accurate calculation of benefits. Paying in arrears allows DFAS to account for any changes or adjustments that may have occurred during the preceding month, such as changes in cost of living allowances (COLAs) or deductions, minimizing the need for subsequent corrections or overpayments.

Standard Payment Schedule

Military retirees can expect their monthly payments to be disbursed on the first day of each month. If the first day of the month falls on a weekend or a federal holiday, the payment date is adjusted. In such cases, retirees receive their payment on the last business day of the preceding month. This adjustment ensures funds are available promptly, even when the scheduled date is not a banking day.

For example, if September 1st is a Saturday, the retirement payment for August would be issued on Friday, August 31st. This consistent schedule helps retirees manage their finances effectively, as income arrives at a predictable time each month. Retirees can access their Retiree Account Statement (RAS) through MyPay, an online portal managed by DFAS, detailing their monthly pay and deductions.

Initial Payment and Transition

The first military retirement payment follows a different timeline. After a service member’s official retirement date, it takes the Defense Finance and Accounting Service (DFAS) approximately 30 to 45 days to process the initial retirement pay. This processing period allows DFAS to finalize all necessary administrative tasks, including reviewing the complete retirement package and verifying eligibility.

If a service member retires mid-month, their initial payment will be prorated to cover the days of that partial month for which they are entitled to retirement pay. For instance, if retirement occurs on August 15th, the first payment would include the prorated amount for August 15th through August 31st, along with the full amount for September, and would be disbursed around October 1st. Retirees should plan for this initial delay and ensure they have sufficient funds to cover expenses during this transition period.