6 Reasons Military, Civilian Pay Don't Line Up

Money

I always believed that life after the military would be greener -- greener as in the piles of money to be made. As a junior captain, transitioning out of the Army after five years, my salary and benefits were nothing to scoff at. But I was optimistic that I would bank significantly more in corporate America.

Three months after my separation from active duty in 2001, I landed a management position with a leading national services provider.

While I was excited that my starting salary exceeded my previous pay, I was rather deflated after discovering that my new $55,000 annual salary gave me less disposable income than my $48,000 military compensation.

This disparity would have been less of a shock had I planned for some obvious differences between military and civilian compensation and expenditures.

Here are six reasons why my civilian compensation didn't match up right away:

  1. State tax liability. Some states don't assess taxes on military pay. In my case, Oregon (my home of record) did not assess a tax liability on my active-duty military income while I lived outside the state. So, when I began receiving a civilian paycheck, I immediately noticed the impact of taxes on my take-home pay.
  2. Federal income taxes. As a civilian, all of my paycheck was subject to federal income taxes. While I was on active duty, however, only my base pay was taxed. My housing allowance, combat pay, overseas cost-of-living allowance and monthly subsistence were not taxable, increasing the amount of my net pay each month.
  3. Civilian health insurance. In 2001, my health insurance in the civilian world cost about $200 a month as a single guy. Not too expensive, but still $200 more than I ever paid in the military.
  4. Auto and property insurance. Living on the Army post usually afforded me better rates for both auto and property insurance policies. Once I moved outside the military community, I saw those rates increase.
  5. Work clothes. Wearing military uniforms saved me money. As an officer, I had to purchase my own uniforms, but they usually lasted several years. During my transition, I easily spent more than $1,500 within a few months for a basic corporate wardrobe and spent at least $50 a month for dry cleaning.
  6. Vacation time. Thirty days of annual paid vacation, which is what I received in the Army, is rare for a civilian job. Each company has different policies, but in my new job, I earned one week of paid vacation after one year with the company. After 15 years with the company, I would accrue only three weeks of vacation. I quickly realized that the military's leave program was one of the best out there.

These points aren't intended to scare anyone. There are many lucrative opportunities out there for ambitious veterans. But there are key differences between civilian and military compensation that need to be factored in to your post-military expectations. By acknowledging them and including them in your planning, you can help prevent a rude awakening, and, hopefully, make your transition go a bit more smoothly.

-- Maj. Alan Brown is an active-duty Army public affairs officer, currently serving at USAA on a one-year Training-with-Industry fellowship in Corporate Communications. This is the last in a three-part series Brown wrote about lessons learned during his 2001 military-to-civilian transition. Brown returned to active duty a year after transitioning out of the Army.

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USAA, a diversified financial services organization, is the leading provider of competitively priced financial planning, insurance, investments, and banking products to members of the U.S. military and their eligible families. Rated among the highest among financial services companies for customer advocacy in a Forrester Research survey, USAA provides convenient and accessible financial products to its more than 9 million members. For more information about USAA, or to learn more about membership, visit usaa.com
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