The Fiscal Cliff: Your Pay

November 20, 2012 | Kate Horrell

The number one sequestration/fiscal cliff question of currently serving, retired and disabled veteran service members is:  Will we still get paid?  The short answer is:  Yes, your pay, retired pay, or disability benefits will continue as usual.  The long answer, however, is much more complicated.  Isn’t it always?

I want to preface this post by reminding readers that none of this is guaranteed to happen.  Congress can change some or all of these things before they happen.  (Whether that is a good or bad thing is a discussion for another day.)  No changes are scheduled to take place before 1 January 2013.  This article only reports the current status, today, 20 November 2012, and what will happen if nothing is changed.  In addition, this stuff is complicated and subject to some interpretation.  I’m not a lawyer or a politician, I’m just a military spouse with a strange interest in things financial.

Of the components of the fiscal cliff, the one that could theoretically affect pay is sequestration.  However, some things are specifically exempt from these mandatory budget cuts.   Specifically exempt are military payroll, military retirement pay, and veterans disability payments.  That’s good news.

There is bad news, of course.  As Congress attempts to deal with our country’s mess of a financial situation, they will be forced to make cuts everywhere.  Whether it happens this year or in 10 years, eventually it will happen.  Those cuts are sure to mean smaller or no military pay raises, a smaller military, and changes to the way that benefits are paid. In addition, cuts in programs will increase living expenses for people who now rely on government subsidies for programs such as housing, child card, or medical care. I’ll be discussing that subject later this week.

In short, sequestration should not affect the arrival of paychecks in January and thereafter. Military pay, and military retirement pay, and Veterans Administration programs are specifically exempted from sequestration.

Stop back tomorrow to learn how the expiration of tax cuts will impact your tax bill. In my opinion, this might be the most important part of the whole series.

Also in this series:

The Fiscal Cliff: What Is It?

The Fiscal Cliff:  Your Taxes, Part I