Service members will see meaningful increases in key compensation elements for 2026 as basic pay, Basic Allowance for Housing (BAH), and Cost-of-Living Adjustments all rise. These changes affect household budgeting, housing decisions, and long-term planning this year (3.8 percent pay raise, average 4.2 percent BAH increase, 2.8 percent COLA). Reviewing your LES, housing choices, and tax strategies now will ensure you benefit fully.

Congress and the Department of Defense finalized the 2026 military pay raise, resulting in a 3.8 percent increase in basic pay that took effect January 1. That translates to roughly $88 more per month for junior enlisted troops and several hundred dollars for mid-career officers, depending on rank. This raise aims to keep military compensation competitive with civilian wage trends and help offset ongoing cost pressures.

Housing costs, a major line item in many service members’ budgets, are also increasing. For 2026, BAH rates will rise by an average of 4.2 percent, with typical monthly boosts of $93 to $212 depending on pay grade, location, and dependency status. The Pentagon bases these rates on extensive housing cost data for nearly 300 military housing areas nationwide.

Retired pay and disability benefits will benefit from a 2.8 percent COLA adjustment, helping retirees and survivors keep pace with inflation. This increase raises monthly retirement checks modestly across the board and reflects broader inflation trends.

In addition, Thrift Savings Plan (TSP) rules are shifting for 2026. The elective deferral limit is increasing to $24,500, and catch-up contributions for participants age 50 and older remain available at higher levels. Starting in 2026, catch-up contributions above the elective limit may be required to go into Roth accounts for some higher-income members, which can alter the tax profile of retirement saving decisions.