You have decided to get out of the military but when you look at your LES you notice you have 60 days of leave on the books. You have 3 options:
- You can take several periods of leave between now and your separation date
- You can sell back your leave when you get out
- You can take terminal or separation leave.
What should you do?
Taking Regular Leave
This is the worst idea of the three. Sure it is nice to take leave to ease the stress, visit family, or go on vacation; but when you are due to separate from the military it is better to use that leave in other ways, let's discuss them.
Selling Back Leave
Did you know that when you get out of the military you can sell back any unused leave?
You are authorized to get a cash payment for any unused leave when you separate from the military if you are retiring or separating with an honorable discharge.
You are authorized 1/30 of your basic pay for each day of leave you sell back.
You are entitled to sell back a maximum of 60 days leave during your career, you can sell back leave any time you reenlist, extend an enlistment, or when you are discharged.
Taxes are withheld from your final payment at the rate of 25% for federal tax and varying amounts for state tax.
For example: an E-6 with 10 years service gets basic pay of $3,988 a month, this equals $132.93 a day. If you sell back the maximum of 60 days leave you would get the following from just the leave sell back:
- $7,996 Basic Pay (subject to taxes) net $5,997
However, you will still continue to work and be paid as normal for that time period. So you would receive pay and allowances for July and August as follows:
- $7,766 Basic Pay (subject to taxes) net $5,997
- $814 BAS ($407 a month times 2)
- $3,602 BAH ($1,801 a month times 2)
Total Pay and allowances $12,182
Add the leave sell back of $5,997 and you have a total compensation of $18,179.
Taking Terminal Leave
You can alternatively take what is known as terminal or separation leave when you are being discharged.
Terminal leave is just like regular leave except that you aren't required to report back to your duty station, you can basically move back home and get paid, knowing you don't have to go back to work.
Let's take a look at the same E-6 with 10 years service we discussed above, and compare what the pay will be, let's use the national average BAH:
- $7,766 Basic Pay (subject to taxes) net $5,997
- $814 BAS ($407 a month times 2)
- $3,602 BAH ($1,801 a month times 2)
Total Pay and allowances $12,182
So which is the better deal, working those two months and selling back leave or hanging up that uniform two months early?
Which Is Better?
Well, ultimately that is all up to you and your personal situation. Is your unit deploying, do you hate your boss, do you have a cushy job, are your kids in school?
The general rule of thumb is if you have a job waiting on the outside it may be better to sell back your leave, if you don't it may be better to take terminal leave.
Let's look at examples, say you are due to get out on September 1.
- If you sell back your leave you remain on active duty until September 1. You continue to work and draw a regular paycheck for July and August, then when you get out you get a check for almost $6,000 and walk into a job with a civilian paycheck. You get a nice fat chunk of cash and are drawing a civilian salary. This way you probably get more money in total.
- If you take terminal leave you will start leave June 26, draw your regular military pay for 2 months and on September 1, all the money stops since you are now out of the military. (Remember you earn 2.5 days of leave every month, so you will earn leave while you are on leave. Pretty neat! That gives you 5 extra days of terminal leave that you can take.) During July and August you can be looking for work, or laying in the sun while you are getting that nice military paycheck and sleeping till noon. Hopefully in 2 months you will have either found a job or will maybe be using your GI Bill to go to school, so when the military paycheck stops you will have another source of income.
The choices may be a bit complicated, but with a little planning and thought you can choose the option that is best for you.
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