2017 Defense Budget

The 2017 defense bill has been signed into law by President Obama and includes a 2.1% military pay increase.

Highlights of the 2017 Defense Budget:

  • A 2.1% military pay increase effective January 1st, 2017.
    • The pay increase will mean about $550 more a year for most junior enlisted troops and about $1,800 for officers.
  • Basic Allowance for Housing (BAH) was increased on average by 2.4%.
    • Congress removed a proposal to award BAH only for actual expenses where proof of rent and utility costs would have be provided.
  • Basic Allowance for Sustenance (BAS) was not increased.
  • The bill includes plans to significantly increase the number of service members. Plans are:
    • Army 476,000 to 492,000
    • Marine Corps 182,000 to 185,000
    • Air Force 317,000 to 321,000
    • Navy would remain unchanged at 324,000
  • The 619 billion bill is about $3.2 billion more than Obama’s request.
  • Both houses passed the bill with veto-proof margins with significant Democratic support.
  • President Obama’s statement read “”Congress again failed to enact meaningful reforms to divest unneeded force structure, reduce wasteful overhead, and modernize military healthcare.”
  • The NDAA includes language prohibiting base closings.
  • Congress further added language restricting the closing of detention facilities at Naval Base Guantanamo Bay in Cuba.
  • Language was added to fix the The National Guard bonus clawback.
  • Expanded telehealth access for active duty military personnel and veterans
  • Tricare will be restructured where new service members entering in 2018 and beyond will incur additional fees and costs.

Timeline

March, 2016– Congressional committees submitted “views and estimates” of spending and revenues.

April –  June, 2016 – House & Senate Armed Appropriations Committees worked on the FY2016 defense bill.

July – October, 2016 – House of Representatives and Senate passed their versions of the defense bill and negotiated differences.

September 30, 2016 – President Obama signed a continuing resolution (CR). The CR maintains department and agency funding as is through December 9, 2016, but it does not answer the question of what comes after that date. This is avoided a government shutdown.

November 14, 2016– Congress returned post elections. The lame duck period until the new Congress is sworn in on January 3, 2017.

December 2, 2016 – The House of Representatives passed their final version of the defense bill.

December 6, 2016 – The Senate passed their final version of the defense bill.

December 23, 2016 – President Obama signed the defense bill into law.

Compare to the 2016 Defense Budget that went into effect on January 1, 2016, or for more detailed information read about 2017 Military Pay, 2017 BAH, and 2017 BAS. For more detailed information on the 2017 Defense Budget proposal, visit the Defense Budget Overview document starting on page 57.

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2017 Military Pay Raise 2017 BAH (Basic Allowance for Housing) Rates
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2017 Military Pay Charts Military Allowance, Incentive, Bonus & Special Pay
Military Pay Dates Military Reserve Pay Dates
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2017 BAS (Basic Allowance for Subsistence) rates

The Basic Allowance for Subsistence (BAS) did not increase in 2017 for the first time in many years due to the average price of food in the US not increasing.

The 3.4% increase would be effective on January 1, 2017, if approved by the FY2017 National Defense Authorization Act. Typically Congress and the President agree on a final version and sign into law in December.

BAS is calculated on the current cost of food in the United States as recorded by the Department of Agriculture. Just as Basic Allowance for Housing (BAH) correlates with the overall cost of living in a given zip code, BAS correlates with the cost of food in the given zip code. BAS, however, is not affected by the presence or absence of dependents, whereas BAH is a higher figure for service members with dependents.

BAS is not intended to cover all food-related expenses, but rather to aid in these expenses. The additional monthly stipend that service members can receive while overseas or when stationed in costly areas, known as Cost of Living Allowance (COLA), will not be affected by the proposed BAS rate.

Year Proposed Increase Actual Increase Enlisted Rate Officer Rate
2017 3.40% 0% $368.29 $253.63
2016 3.40% 0.1% $368.29 $253.63
2015 3.40% 2.90% $367.92 $253.38
2014 3.40% 1.48% $357.55 $246.24
2013 3.40% 1.09% $352.27 $242.60
2012 3.40% 7.20% $348.44 $239.96
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2017 Military Pay Raise 2017 BAH (Basic Allowance for Housing) Rates
2017 BAS (Basic Allowance for Subsistence) Rates Armed Forces Comparative Pay Grades and Ranks
2017 Military Pay Charts Military Allowance, Incentive, Bonus & Special Pay
Military Pay Dates Military Reserve Pay Dates
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Saving Money-Military Edition

Saving money in the military is not difficult, but the key is to start saving early. Saving money and getting out of debt to stay out of debt are the two keys to becoming financially stable. It’s easy to start saving in the military, and the advice below will explain how.

Photo by Maria Kanai
Photo by Maria Kanai

Set-up recurring transfers into your savings account. The easiest way to start saving money is to set up automatic transfers to a savings account. It does not need to start big, any little bit will add up fast. To get started, set up a recurring payment of $5 each time you get paid. Monitor your savings account and see that soon you will have $20 in there, then $100, then $500, and so on.

Scheduling recurring transfers can easily be set up through the bank’s app or online, and you control the transfers. Changing the amount or the frequency can be done at any time, and it can even be cancelled as easily as it was set up. If you prefer to speak to a representative, don’t hesitate to call your bank’s customer service.

Once you are feeling confident, start putting away more money. The more money you put away, the more money you will save.

Start a Thrift Savings Plan (TSP) or an Individual Retirement Account (IRA), which can be started through Navy Federal or USAA.These may sound intimidating, but they are simply savings accounts that allow your money to grow over time at a higher percent than a normal savings account. The main difference between these and a normal savings account is that the money you deposit into a TSP or IRA cannot be withdrawn until retirement age (usually 59 ½ years of age) without penalty.

You determine the amount that will be contributed whether it be per military paycheck or monthly, which will allow the money to accrue over time. Before you start either, speak to a financial counselor to determine what option would be best for you. The TSP is only available for current service members, but can remain upon discharge and continue with you as a veteran. An IRA can be separate from the military. If you did not start a TSP as a service member, you can start an IRA as a veteran through your employer or bank.

Set a savings goal. You may find that you need more motivation to deliberately put money into your savings account. Admittedly, it can be hard to control instant gratification. If this is the case, choose something pricey you would like to purchase or perhaps a travel destination you would like to visit. For instance, you want a motorcycle. A used motorcycle can cost approximately $3,000-$4,000, though it can certainly cost more. A new motorcycle might cost $12,000, or more so start saving for that motorcycle!

Photo by Maria Kanai
Photo by Maria Kanai

Choosing to save for a goal rather than using a credit card for instant gratification will automatically save money because savings accounts pay interest, while purchasing with credit will cost interest. It will also save you the stress of having to pay off a debt that you may find out later that you couldn’t afford when you thought you could.

Everyday tips for saving money:

Bring coffee, bring lunch. Daily coffee for $2.00 doesn’t seem like much that morning, and neither does a $3.00 energy drink that afternoon after a nice $10.00 lunch. That’s $15.00 spent just on Monday. If this is your habit everyday, that’s $75.00 just on food and drinks for your typical work week. That’s $300.00 you could have put in savings that month, not to mention what a year’s worth of $4 coffee would look like.

Get gas on base. Wherever you are stationed, most likely gas is the least expensive on base. If you happen to find a gas station that has an even better rate, go there. It really does add up – the extra $3-$5 you may be paying each time you fill up could be $20 put in your savings account that month. You can also use the free GasBuddy app to see gas prices near you and weed out overpriced stations.

Shop around. Don’t buy a new item as soon as it gets your heart racing. It might be new Under Armour workout gear or electronics, but check multiple places before making that purchase. You can probably find a better deal at another store, or online, making the delay worth the wait. Sometimes just by waiting you may also realize that the item no longer seems so attractive, allowing the wait to save you money.

If you are taking steps toward financial responsibility, using the steps above to build a financial foundation is a great start. For a more thorough explanation of personal finance, visit educational financial centers offered to military and dependents.

Financial Responsibility: Resources for Managing Military Pay

Welcome to Military Saves Week 2017! Money is often the most common source of stress, but managing your military pay shouldn’t be stressful. The military has you covered when it comes to helping manage money and finances. They are sure to offer classes and counseling about budgeting, saving, and paying bills, which can get overwhelming without the right training.

Staff Sgt. Karina Myers Prepares a U.S. Savings Deposit Collection Voucher Photo By: Tech. Sgt. Jason Edwards
Staff Sgt. Karina Myers Prepares a U.S. Savings Deposit Collection Voucher.                                 Photo By: Tech. Sgt. Jason Edwards

Military Saves Week is one week out of the year devoted to helping service members decide monetary priorities by building awareness for the many financial resources available to active duty service members, their dependents, and veterans alike. Although it is just one week focusing on Military Saves awareness, these resources are available year-round to aid in answering questions and educating on financial responsibility.

There are a number of informative services, offered directly through the military, as well as indirectly through civilian organizations, that provide creative solutions to managing money.

Finance Office: Each installation offers active duty service members and their dependents financial counseling. Financial counseling is often a mandatory step for service members preparing for marriage, but it is not reserved solely for those tying the knot. A financial counselor or manager is available for single and married service members to help devise a budgeting plan, savings plan, or the current need. Receiving an education on finances here is the beginning for relief of financial strain.

Family Readiness Center: Family Readiness Centers are the go-to information centers for dependents. Financial counseling is available specifically for spouses. These centers are willing and able to help spouses adjust to the military lifestyle, as well as aid those who are already part of the military community.

Julie Duszak (left), volunteer caseworker, educates Financial Boot Camp attendees. Photo By Maria Kanai
Julie Duszak (left), educates Financial Boot Camp attendees. Photo By Maria Kanai

Military-Friendly Banks: Perhaps the most convenient and easiest method of reaching financial advice is through your bank. Two of the most well known military-friendly banks are Navy Federal Credit Union and USAA. Both offer financial advice, as well as significant discounts, promotions, and a variety of other benefits for servicemembers, military family members, and Veterans.

Because of their limited locations, these banks make themselves available by telephone and internet 24/7. Each bank also has its respective app available for smartphones or tablets, making it even easier to manage money and finances for busy service members.

America Saves Website: No matter if it is called America Saves week or Military Saves week, a week in February is dedicated to helping Americans understand money management. Following through with the military saves pledge to continue your journey toward financial wellness this week and stabilize your financial future. “Saves” websites are free resources, so pages such as “Military Saver Tools” can be accessed at any time. For those who like reading, there are various articles on the America Saves website about personal finance, and links to other free online resources. For listeners, you can also find links to free Personal Finance Webinars.

With the right financial knowledge, service members, military spouses, family members, veterans, and all Americans can become experts at managing their finances. The first step is scheduling an appointment for free financial counseling, or browsing information from your most reliable free resources listed above.

Understanding Military Retirement Pay

Military retirement pay is intended to recognize the selfless dedication to a career in the military. While important, calculating Military retirement pay benefits depend on individual circumstances determined by the circumstances below. 

Photo by Lance Cpl. Thomas DeMelo
Photo by Lance Cpl. Thomas DeMelo

Those who served in the military (Active Duty, Reserves or Guard), for a typical length of at least 20 years, will receive military retirement pay. This benefit begins immediately and is based upon a specific calculation determined by the Department of Defense. Length of service, disability percentage, year the member entered the service, and type of retirement are all factors that pertain to retirement benefits equation.

In essence, retirement pay amount can be calculated by multiplying the service member’s Retired Base Pay by the Percentage Multiplier. Retired Base Pay is configured using either Final Pay or High-3.

  • Final Pay: Military who started serving before September 8, 1980 (via active duty or reserve), will receive retirement pay based on their final basic pay.
  • High-3: Military who started serving after September 7, 1980 (via active duty or reserve), will receive retirement pay equaling the average of the highest 36 months of basic pay. If their time in the service accounted for less than three years, base pay would be the average monthly active duty pay during the servicemember’s length of service.

The Percentage Multiplier is accounted for by the service member’s years of service. Typically, the percentage will be 2.5% per year of service. For example, a service member who has served 20 years would be given a 50% multiplier since 20 multiplied by 2.5% equals 50%.

When accounting for time of service, DIEMS (Date of Initial Entry to Military Service) is an important factor. There are a few circumstances to note when considering DIEMS. First, DIEMS for those who joined, separated, and then rejoined the military will be based on the first date of initial military service. Secondly, the DIEMS for members who

Photo by Petty Officer 2nd Class Ace Rheaume
Photo by Petty Officer 2nd Class Ace Rheaume

enlisted under the delayed entry program will be the date in which they entered into the program as opposed to the date of when they reported for duty. Finally, if a person changes their status such as from reserve to active duty, DIEMS will be the initial joining date of service for the reserves.

Also, keep in mind that the years of service are calculated differently for a full time active duty service member versus a reserve service member. Retirement points are divided by 360 for those who served in the reserves. These points are converted to years of active duty service, and thus can be applied to the standard retirement pay formula.

Additional factors to consider when configuring retirement pay is Career Status Bonus/REDUX and Disability.

  • CSB/REDUX: If you retired under the CSB/REDUX plan, which is an option available to active duty members who entered service on or after August 1, 1986 and includes a $30K bonus, the retired pay multiplier will be decreased by 1% of each year served. Additionally, this plan utilizes the High-36 retirement method.
  • DISABILITY: Disability Retired pay is either 2% per service year OR a disability percentage assigned by the service at the time of retirement. By law, the multiplier cannot exceed 75%.

Regardless of the many factors and equations, it’s reassuring to know that military retired pay is considered one of the best and basically, the longer you serve, the higher your pay will be.