MSN and CNN both report about the rise in retention bonuses being paid to troops to maintain force strength. The military is having a hard time keeping its personnel numbers at high enough levels to sustain current operations. The hardest hit are the Army and Marines as many troops are getting out due to the deployment requirements or competitive job offers in the civilian sector. The article reports that bonuses range from a few thousand dollars up to $150,000 for selected special ops personnel.
Last year the armed forces spent over $1 billion in retention bonuses, and this year it looks like it may be even more.
A friend of mine in the Marine Corps told me that everyone re-enlisting in FY07 will get a minimum of $10,000 for a 4 year re-enlistment, and those with 20+ years service only have to sign up for 3 more years to get the $10k. He already has 11 years in and plans on staying until he receives a pension at 20 years. He will re-enlist later this month.
Marine Times reports that the maximum re-enlistment bonuses are:
- Army – $40,000
- Air Force – $60,000
- Marines – $45,000 (Stars & Stripes reports certain career fields can receive up to $60,000)
- Navy – $75,000 (up to $100,000 for certain qualified nuclear specialties)
These are re-enlistment bonuses only, and do not include officer retention bonuses which can be substantially higher for pilots and many members of the medical field.
Many bonuses are paid in a lump sum equal to half the total bonus, followed by annual installments pro-rated for the remainder of the bonus. The beautiful part of the re-enlistment bonuses is the potential for all the income to be tax free if the re-enlistment is done in a tax free zone. If you qualify for the bonus while in the tax free zone, all portions of the bonus will be tax free, even if they are paid out 3 years later while you are not currently in a tax-free zone. How sweet is that? 
Service members also have the option of directing a portion of the signing bonus toward their TSP if they want. You can deposit 0-100% of your sign-on bonus, up to the max allowed, which is $15,500 in 2007. If you are in a tax free zone at the time and your bonus is already tax free, the TSP has a provision that will allow that money to be withdrawn tax free during retirement. (Only the principle I believe, not the growth from that money) But that gives you another great option!
For further information about what you might be eligible for, please check with your personnel office. But don’t re-enlist just for the money. Make sure it’s because it is something you want to do.
