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Editor’s note: This is the fourth installment of New Year, New You, a weeklong look at your financial health headed into 2026.
The military’s regularly occurring pay raises provide an opportunity that many civilians only dream of. Not only do the annual percentage increases troops receive each January provide frequent chances to rebalance financial priorities — savings vs. current standard of living — so do time-in-service increases for every two years of military service, not to mention promotions.
Two experts in military pay and personal finance — a retired admiral and a retired general, each at the head of their respective military mutual aid associations — advised taking a similarly predictable approach to managing each new raise:
Cut it in half.
In one variation of the strategy, a service member simply adds to their savings: whatever it is they prioritize. In the other, consistent increases in retirement contributions soon add up to a desirable threshold.
Rainy Day Fund
The active military’s 3.8% pay raise in 2026 came in a percentage point higher than retirees and disabled veterans received, meaning troops “should be able to afford the market basket of goods that the average American is afforded,” said Michael Meese, a retired Army brigadier general and president of Armed Forces Mutual.
While the veterans’ lower rate relies exclusively on the rate of inflation, Congress has the option to offer more; and in doing so is making up for recent years when the pay raise didn’t keep up with unusually high inflation, Meese said.
“So this is helping us catch up a little bit.”
He also speculated that the government shutdown “upset a lot of people” and that widespread support of the 3.8% raise across party lines and in both houses of Congress showed “that it has confidence in the military and wants to take care of the military and restore government credibility with service men and women,” Meese said.
His suggestion for managing pay raises:
“If you’ve been living already without the pay raise and now you see this pay raise, if you can,” Meese advised, “I always said … you should save half and spend half,” Meese said. “That way, you don’t instantly increase your spending habits just because you see more money at the end of the month.”
A service member who makes only $1,000 every two weeks, for example, gets another $38 every two weeks starting this month. Put $19 into savings, and you can put the other $19 toward “beer and pizza or whatever you’re going to do,” Meese said.
“That way you’re putting money away for a rainy day,” he said — to help prepare for a vacation, for example, “so you’re not putting those on a credit card.” If you set aside only $25 more per pay period, “at the end of the year, you’ve got an extra $300 in there, and that may be great for Christmas vacation or Christmas presents or something like that.”
Retirement Strategy
Brian Luther, retired rear admiral and the president and chief executive officer of Navy Mutual, recognizes that “personal finance is personal” — in other words, “every situation is different.” Nevertheless, he insists that “everyone should have a plan” that includes:
- What your cash flow is
- Where your money is going
- Where you need to go in the future
But even if you don’t know a lot of those details, Luther said, the most important thing:
Luther also advised an approach based on cutting the 3.8% pay raise in half, keeping half for expenses and putting the other half into the Thrift Savings Plan. Then “that pay will work for you until you need it in retirement,” Luther said. With every subsequent increase, put half into the TSP until you’re setting aside a full 15% of your pay.
For a relatively young service member, “Once you hit 15%, and [with] the 5% match from the government, that’s enough for your future,” Luther said.
Previously in this series:
Part 1: 2026 Guide to Pay and Allowances for Military Service Members, Veterans and Retirees
Part 2: Understanding All the Deductions on Your 2026 Military Leave and Earnings Statements
Part 3: Should You Let the Military Set Aside Allotments from Your Pay?
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15 Comments
I’m curious to know how the time-in-service increases for every two years of military service will impact the overall financial health of service members, considering the compound effect of these regular pay raises.
The 3.8% pay raise for active military personnel in 2026 is a significant increase, and Michael Meese’s suggestion to save half and spend half is a prudent approach to managing this new income.
The idea of not instantly increasing spending habits just because of the pay raise is a great reminder to prioritize savings and long-term financial goals, and I’ll definitely be taking this approach with my own finances.
The comparison of the military’s pay raise to the average American’s market basket of goods is an interesting one, and I’d like to know more about how this raise will impact the standard of living for service members.
Brian Luther’s recognition of the importance of retirement contributions is crucial, and I’d like to know more about how consistent increases in these contributions can add up to a desirable threshold over time.
The importance of preparing for a vacation or other expenses without putting them on credit cards is a great reminder, and I’ll be sure to allocate some of my pay raise towards savings for these purposes.
The fact that Congress has the option to offer more than the rate of inflation for retirees and disabled veterans’ pay raises is a testament to their commitment to supporting the military community.
As a service member, I can attest to the importance of having a rainy day fund, and setting aside $25 more per pay period can make a significant difference in being prepared for unexpected expenses or vacations.
The idea of putting $19 into savings and $19 towards discretionary spending for a service member making $1,000 every two weeks is a great way to balance enjoying the present and preparing for the future.
I appreciate Michael Meese’s speculation that the government shutdown upset many people and that the widespread support for the 3.8% raise shows confidence in the military and a desire to restore government credibility with service members.
I’m skeptical about the government’s ability to keep up with inflation, considering the recent years where the pay raise didn’t keep up with unusually high inflation, and I hope this 3.8% raise is a step in the right direction.
I’m excited to see how this pay raise will impact the military community, and I hope it will lead to a better quality of life for service members and their families.
The strategy of cutting the pay raise in half and allocating it towards savings or retirement contributions is a predictable and responsible approach, and I appreciate the experts’ advice on managing these new funds.
I’m concerned that the pay raise may not be enough to keep up with the rising cost of living, and I hope that Congress will continue to prioritize the financial well-being of service members in the future.
The fact that the 3.8% pay raise is a percentage point higher than what retirees and disabled veterans received is a significant distinction, and I’d like to know more about the reasoning behind this difference.