As separation day approaches, many service members glance at their LES and realize they’ve built up weeks — sometimes months — of unused leave. The question quickly becomes: take time off before transition, or cash it in?
For those with 60 days or more on the books, the decision can mean a difference of thousands of dollars, depending on their pay grade, tax rate, and timing.
These are your three options:
- Take several periods of leave between now and your separation date.
- Sell back your leave when you get out.
- Take terminal or separation leave.
Taking Regular Leave
You may request to take your accrued leave before your official separation date. This option can help you rest, spend time with family or handle transition tasks such as job hunting and relocation.
Getting approval for this depends on your command and mission requirements. Typically, your leave must be scheduled in advance through your unit’s normal procedures.
Some advise against taking regular leave, and instead to consider your other options. Let’s explore those.
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 may sell back up to 60 days of leave over your military career (some exceptions apply for special leave accrual in combat or contingency operations).
Payment is based on your basic pay rate only; housing and subsistence allowances are not included. Taxes are withheld at 25% federal tax, and that state taxes may also apply.
For example: an E-6 with 10 years of service earns a basic pay of $4,585 a month, or about $150 a day. If she sells back the maximum of 60 days leave, she would get $9,044 from just the leave sellback, or $6,783 after federal taxes.
However, she would still continue to work and receive pay and allowances as normal for that time period.
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.
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?
A 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 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 a few thousand dollars 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 this leave on June 26 and draw your regular military pay for two months. 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 five extra days of terminal leave that you can take.) During July and August you can be looking for work, or lying in the sun while you are getting that nice military paycheck and sleeping till noon. Hopefully in two 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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