The U.S. House of Representatives sent the National Defense Authorization Act (NDAA) for 2020 to the Senate this week. You can find the latest updates of the bill here. The link goes directly to the Congressional website and will have the latest information and updates as it is passed through Congress and eventually to the President.
Compared to Previous Years
Last year the bill was signed at it’s earliest time since 1978 when it was signed on August 13th, 2018. The bill last year was the first signed before the fiscal year since 1997. I wouldn’t expect this year’s to be signed anytime soon because of the split House/Senate even though the bill was passed through the House on July 12th. The bill proposed for 2020 that is being sent to the Senate included a 3.1% pay raise and is is the highest since 2010. Active Duty Military pay is designed to keep up with the Employment Cost Index and is different than retired members pay raises. Retired military members have their pay raises set to keep in line with the Consumer Price Index (CPI).
Employment Cost Index vs Consumer Price Index
Employment Cost Index covers the changes in cost of labor for businesses. The military specifically looks at the private industry when comparing for price raises and you can find the data here. Consumer Price Index refers to the purchasing power (which makes sense for retired members to maintain that purchasing power), it can be found here.
Previous Year Pay Raises
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020 (Proposed)
3.5%
3.9%
3.4%
1.4%
1.6%
1.7%
1.0%
1.0%
1.3%
2.1%
2.4%
2.6%
3.1%
On average, an E-5 will see about a $100 more a month and an O-3 will see around $180 more per month. You can see the expected 2020 pay charts by visiting this link. If the pay raise does get approved at 3.1% then prior to the first pay date of the year is a great time to bump up those retirement contributions to TSP by 1-2%. You will still see an increase in your pay and get closer to maxing out your Thrift Savings Plan (find out more about fund choices here). How will you adjust for a 3.1% pay raise?
Thanks for reading!
Wolfe Miglio, Crypto Attorneys says
Had no idea about these statistics! Thank you!
Eric says
You’re welcome!