2027 Military Pay Raise: How the 5-7% Increase Affects Your Retirement Pay

What the 2027 Pay Raise Proposal Says

On April 3, 2026, the White House submitted its fiscal year 2027 budget request to Congress. Inside the $1.5 trillion defense spending proposal: a tiered military pay raise that gives the biggest increase to the lowest-ranked service members.

The proposed raise structure:

• 7% for E-1 through E-5 (over 600,000 active-duty service members)
• 6% for E-6 through O-3 (mid-grade enlisted and junior officers)
• 5% for O-4 and above (field-grade and general officers)

If this sounds unusual, it is. Military pay raises have been a flat percentage across all ranks for nearly every year since 2007. The exception: in 2025, Congress added a 10% targeted raise for E-1 through E-4 on top of the 4.5% general raise, giving junior enlisted a total 14.5% bump. The 2027 proposal extends that philosophy across all three tiers.

The driving force is the same: recruitment shortfalls at the junior enlisted level, particularly in the Army and Navy. Before the 2025 targeted raise, the last tiered structure ran from 2000 to 2004 as part of pay table reform efforts.

The 3.6% Fallback

Under 37 U.S.C. Section 1009, the default annual military pay raise is tied to the Employment Cost Index (ECI), which tracks private-sector wage growth. The Bureau of Labor Statistics published the relevant ECI data in December 2025, putting the automatic 2027 raise at 3.6% for all ranks.

That 3.6% happens automatically unless Congress votes to change it. In recent history, Congress has almost always matched or exceeded the ECI-based raise. For 2027, the White House wants to go significantly above the default for junior troops.

The Three Tiers: 7%, 6%, and 5%

Here's what each tier means in dollar terms for active-duty pay. These are monthly base pay increases for members currently at these ranks:

Base pay figures at 20 years of service (except E-3, shown at 3 YOS). Derived from 2026 military pay tables. These are projections based on the proposed raise and will change if Congress modifies the percentages.

How This Compares to Recent Years

Context matters. Here's how the proposed 2027 raise stacks up against recent years:

The 7% tier for E-5 and below builds on the 14.5% that E-1 through E-4 received in 2025. If both years pass as proposed, a junior enlisted member would see back-to-back above-average raises totaling roughly 22% over two years.

How the 2027 Pay Raise Changes Your Retirement Pay

Every site covering this story shows you the active-duty pay increase. Here's what they're not showing: this raise permanently changes your retirement pension.

The High-3 Connection

Under the High-3 retirement system, your pension is calculated as:

When base pay goes up, your High-3 average goes up. At 20 years of service, that means 50% of a higher number. At 30 years, it means 75% of a higher number. The raise compounds permanently into every retirement check you collect for the rest of your life.

Projected Retirement Pay Impact (High-3, 20 Years)

This table shows the eventual retirement pay increase once the full raise is reflected in your High-3 window. For someone retiring in late 2029 or later, all 36 months of their High-3 would include the raised pay.

2026 retirement pay from our 2026 military retirement pay chart. Increase assumes the full tiered raise reflected in the High-3 window.

Tiered Raise vs. 3.6% Default: What You'd Lose

If Congress strips the tiered structure and everyone gets the 3.6% ECI default instead, here's the retirement pay difference:

The tiered structure helps junior enlisted the most. An E-5 gets an extra $912/year in retirement pay from the tiered raise compared to the flat 3.6%, while an O-5 gets an extra $776/year. That gap adds up over a 30-40 year retirement.

BRS Members: Pension and TSP Impact

If you joined on or after January 1, 2018 (or opted into BRS), the pay raise affects you in two ways.

Smaller Pension Increase (2.0% Multiplier)

BRS uses a 2.0% multiplier instead of 2.5%. At 20 years, that's 40% of your High-3 average instead of 50%. The same pay raise produces a smaller pension bump:

Bigger TSP Match (The Part People Forget)

The government matches up to 5% of your base pay into the TSP. When your base pay goes up, the match goes up too.

For an E-7 at 20 years contributing 5% of base pay:

• 2026 government match: $6,246 x 5% = $312/month ($3,748/year)
• 2027 government match (6% raise): $6,621 x 5% = $331/month ($3,972/year)
• Extra TSP contribution from raise: $224/year

That $224 extra per year in TSP contributions, growing at historical market returns over 10-20 years, adds $3,000 to $6,000 to your TSP balance at retirement. It's not dramatic on its own, but it compounds alongside your higher pension and your own increased contributions.

For a deeper breakdown of BRS pension math, see how to calculate military retirement pay or our BRS lump sum vs. annuity guide.

Retire Before or After the Raise?

If you're planning to retire in late 2026 or early 2027, the timing of the raise matters for your pension.

How the High-3 Window Works

Your High-3 average is the mean of your highest 36 consecutive months of base pay. Since pay generally goes up every year, this is almost always your final 36 months of service.

• Retire December 31, 2026: Your High-3 includes 2024, 2025, and 2026 pay. Zero months at the 2027 rate. You miss the raise entirely.
• Retire December 31, 2027: Your High-3 includes 2025, 2026, and 2027 pay. 12 of 36 months are at the higher rate. You get roughly 1/3 of the full raise impact.
• Retire December 31, 2028: Your High-3 includes 2026, 2027, and 2028 pay. 24 of 36 months reflect post-raise pay (assuming a raise in 2028 too). About 2/3 of the impact.
• Retire in 2029 or later: Full High-3 window reflects the 2027 raise and beyond. Full impact.

For more on retirement timing strategy, see the COLA trap, which explains how your retirement month affects your first COLA adjustment.

Pay Raise vs. COLA: Two Different Raises, Two Different Checks

This is the most common confusion in military retirement planning. The active-duty pay raise and the retiree COLA are not the same thing.

If you're already retired, the pay raise does not change your pension. Your check is adjusted only by the COLA. For the latest COLA tracking data, see our 2027 COLA forecast for military retirees.

If you're still on active duty and planning to retire, both matter. The pay raise increases your future retirement pay. The COLA adjusts that retirement pay for inflation after you retire.

State Tax Impact on the Higher Retirement Pay

A bigger retirement check means more taxable income, unless you live in a state that exempts military retirement pay. What you actually keep from the raise depends on where you retire.

Tax-Free States (You Keep the Full Increase)

37 states fully exempt military retirement pay from state income tax. That includes 9 states with no income tax at all (Texas, Florida, Tennessee, Wyoming, Nevada, South Dakota, Alaska, New Hampshire, Washington) and 28 states that specifically exempt military pensions.

In these states, every dollar of the pay raise increase flows directly to your pocket.

States That Tax Military Retirement

In the remaining 13 states, you'll pay state income tax on the higher retirement pay. Here's what the E-7 retirement increase (+$178/month, +$2,138/year) looks like after state taxes:

The difference isn't massive on the raise alone, but it compounds with your full retirement pay. Over a 30-year retirement, a California retiree pays roughly $3,800 more in state tax on the raise alone compared to a Texas retiree. See our state-by-state military retirement tax guide for all 50 states.

What Happens in Congress

The White House proposal is just that: a proposal. Here's the typical NDAA timeline:

The House Armed Services Committee (HASC) is targeting its FY2027 NDAA markup for around June 10, 2026. The Senate Armed Services Committee (SASC) typically follows in July. They may keep the tiered structure, flatten it, or change the percentages. In past years, Congress has almost always matched or exceeded the president's pay raise request. In 2025, Congress pushed junior enlisted raises to 14.5% when the White House had proposed only 4.5%.

The Trade-Offs in This Budget

The same budget that proposes 5-7% for the military proposes a 0% raise (a pay freeze) for civilian federal employees. That gap has drawn criticism from federal employee groups and some members of Congress. The budget also cuts PCS (permanent change of station) spending: Army PCS travel drops from $2.3 billion to $1.99 billion, with DoD targeting a 50% PCS cut by 2030.

Todd Harrison at the American Enterprise Institute argued the above-ECI raise isn't justified by current data, calling labor costs "sticky" and warning that the compounding effect will be "enormous" over time. Whether you agree or not, the debate is real and could shape the final numbers Congress passes.

What If Congress Changes the Numbers?

Three scenarios are realistic:

1. Tiered structure passes as proposed (7/6/5%). Junior enlisted get the largest raise. Retirement impact matches the projections above.
2. Congress flattens it to a single percentage (likely 5-6% for all ranks). This would give O-4+ a bigger raise than proposed but give junior enlisted less than the 7%.
3. Congress does nothing and the 3.6% ECI default kicks in. This has never happened, but it's the legal floor. Every rank gets 3.6%.

We'll update this article as the NDAA moves through committee markups this summer.

Bottom Line: What to Do Right Now

Whether the final number lands at 5%, 6%, or 7% for your rank, a pay raise is coming in 2027. Here's what matters for your retirement planning:

1. The raise increases your pension permanently. Every dollar added to your base pay flows into your High-3 average, which means a bigger retirement check for life.
2. BRS members benefit through both pension and TSP. The pension increase is smaller (2.0% vs. 2.5% multiplier), but the higher government TSP match partially offsets the difference.
3. State taxes eat into the increase. If you have flexibility on where to retire, the difference between a tax-free state and California can be $100+ per month on your full retirement pay. See our best states for military retirees ranking.
4. Don't confuse the pay raise with the COLA. If you're already retired, the pay raise doesn't apply to you. Your check is adjusted by the 2027 COLA (tracking 2.8-3.2%).
5. Run your numbers. Use our military retirement calculator to see exactly what your projected retirement pay, VA disability, and civilian salary target look like under different raise scenarios.

Frequently Asked Questions

How much is the 2027 military pay raise?

The White House proposed a tiered raise: 7% for E-5 and below, 6% for E-6 through O-3, and 5% for O-4 and above. The default ECI-based raise would be 3.6% for all ranks. Congress sets the final numbers through the FY2027 NDAA, expected to pass by December 2026.

When does the 2027 military pay raise take effect?

January 1, 2027, assuming the NDAA passes on time. If Congress delays, a continuing resolution could temporarily hold the raise until the bill is signed.

Does the pay raise affect my retirement pay?

Yes. The raise increases base pay, which raises the High-3 average used to calculate your pension. The full impact takes about 3 years to fully reflect in your High-3 window. An E-7 retiring at 20 years would eventually see about +$178/month more in retirement pay from the 6% raise.

Is the pay raise the same as the COLA?

No. The pay raise applies to active-duty base pay and affects future retirees. The COLA adjusts current retirees' existing pension checks. Different calculations, different recipients. See our 2027 COLA forecast for the retiree number.

Has a tiered military pay raise been done before?

Yes. In 2025, Congress gave E-1 through E-4 a 14.5% raise (4.5% general + 10% targeted) while all other ranks got 4.5%. Before that, tiered raises were common from 2001 to 2006. The 2027 proposal extends the tiered approach to three full rank tiers rather than just targeting E-4 and below.

What happens if Congress doesn't approve the 5-7% raise?

Under federal law (37 U.S.C. Section 1009), the default raise equals the ECI increase for private-sector wages, which is 3.6% for 2027. Congress would have to actively block the raise entirely, which has never happened. The question is whether they keep the tiered structure or flatten it.

How does the raise affect BRS retirement?

BRS uses a 2.0% multiplier instead of 2.5%, so the pension increase is 80% of what High-3 members get. An E-7 under BRS would see about +$143/month vs. +$178/month under High-3. However, the raise also increases the government TSP match (up to 5% of base pay), adding $222/year more to your TSP.

Does the pay raise affect BAH or BAS?

No. BAH is calculated from local housing cost surveys, and BAS is tied to the USDA food cost index. Neither is connected to the base pay raise percentage.

Sources

• White House FY2027 Budget Request, April 3, 2026
• 37 U.S.C. Section 1009 (ECI-based pay raise formula)
• Bureau of Labor Statistics, Employment Cost Index Q3 2025 release (December 2025)
• Defense Finance and Accounting Service (DFAS), 2026 Military Pay Tables
• 2026 Military Retirement Pay Chart, militaryretirementcalc.com
• How to Calculate Military Retirement Pay 2026, militaryretirementcalc.com

This article will be updated as the FY2027 NDAA progresses through Congress. Last updated: May 21, 2026.