Is it Better to Sell Back Leave or Take Terminal Leave?

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A popular topic among separating and retiring military members is whether or not it is better to take terminal leave or sell it. I have heard a lot of heated debates about which is better, and I have even heard people raise their voices about this topic. Most people feel selling back their hard-earned leave…

A popular topic among separating and retiring military members is whether or not it is better to take terminal leave or sell it. I have heard a lot of heated debates about which is better, and I have even heard people raise their voices about this topic.

Most people feel selling back their hard-earned leave is a black or white issue, but it’s not. It is a very important and emotional financial issue to consider. Separating or retiring can be a stressful time, so it is well worth your time to plan ahead! I hope this information helps make a few people’s decisions easier.

The Argument for Taking Terminal Leave:

Most of the people that argue in favor of taking terminal leave stress that you get the full benefits while you are on terminal leave (BAH, BAS, incentive pay, health care, etc.). Their main argument is that you are shorting yourself by not getting the full monetary benefits when you sell leave.

Another popular argument for taking terminal leave is that this is time off you have earned. And most people with a lot of terminal leave have not taken it because operations tempos were too high, they didn’t have time to take leave, or they chose to save their leave.

All of these are legitimate arguments and have their place.

The Arguments for Selling Leave:

The decision to sell leave usually stems from one of two reasons:

  • Wanting more money, or
  • Not being able to take all your terminal leave.

Selling Terminal Leave for the Money

Many servicemembers sell their leave to get a cash infusion when they are leaving the military. If you have no immediate plans for employment following separation, or if you absolutely need the money, you can choose to work until your separation date and sell the remaining leave.

In effect you will be getting more money than had you taken terminal leave because you would have received full pay and benefits until your separation date; the sold leave is compensation for time off you never took.

There are some people who view selling leave as missing out on benefits since they could earn their full pay and benefits without having to work. However, servicemembers who choose to work up to, or close to, their termination date, and then sell their leave will earn their full benefits that entire time.

Selling their leave after that time allows that servicemember to receive an extra chunk of money when they separate. It really comes down to personal preference as to which is better.

Selling Terminal Leave Because You Can’t Take it All

Believe it or not, some units don’t allow people to take a lot of terminal leave. Some units will allow you to take up to 60 days of terminal leave if you are retiring. But some units may cap that amount at 30 days.

Still, other units may be even more strict. Here are two personal examples I’ve seen:

When my wife separated from the USAF (she did not retire), she was told by her supervision she could only take 2 weeks terminal leave. The rest of the leave she will have to sell. This is common for critically manned fields, especially for those who are not retiring.

My brother, who is a Marine, told me their old Top would allow Marines who were separating after completing their first enlistment to take only 5 days of terminal leave no matter what. I guess a lot depends on the unit.

Separating from an overseas location may also impact your decision.

Pros & Cons to Selling Terminal Leave

Pros to selling leave:

  • Extra money (great for transitions when changing careers, paying bills, paying off debt, etc.)

Cons to selling leave:

  • You do not get benefits such as BAH, BAS, medical benefits, or incentives such as special duty pay for the time off that you earned.
  • You do not get to take the time off that you earned.

Other factors to consider:

Leave that you sell back is automatically taxed – usually somewhere around the 20% range. This is common with large cash payments, bonuses, etc.

You can mix and match. You can elect to take as much terminal leave as your unit will allow and sell back the rest (up to 60 days).

The choice is (mostly) yours. No one can force you to take terminal leave. They can, however, require you to work until a certain date and force you to sell some or all of your leave.

What Did I Do When I Separated from the Military?

I sold all of my leave, over 50 days worth.

Why? There were several reasons.

When I was at my last duty station my family and high school friends only lived a 6-7 hour drive away. I deployed several times while I was in the AF and we got a week or more in compensation time when we returned from our deployments. I used my comp time and long weekends to visit my family and friends. During my last 2 years on Active Duty, I rarely had to take leave.

When I transitioned out of the AF I did not have a job lined up immediately. Selling leave allowed me to take a month off before beginning a serious job search. I visited my brother halfway across the nation, stayed with my parents for a couple weeks, then took the scenic route and visited with some friends when I moved to the Midwest.

Selling my leave gave me the freedom to take some time off without having to worry about paying for my car, cell phone, or any other bills while I was between careers.

Of course, there are others who would like to do all that while still receiving their full pay and benefits. Either works – just make sure you have a plan in place when your terminal leave rolls around.

A Note About Selling Your Terminal Leave: There are limits to how much you can sell back

You are only allowed to sell up to 60 days of leave during your active duty career. When I separated, I wasn’t planning on joining the military again. So I sold over 50 days of leave. Little did I know that over 8 years after leaving the Air Force, I would join the Air National Guard. Life has a funny way of coming full circle sometimes!

While I don’t believe I will run into any issues selling back leave, since I am in the Guard, and not active duty, this is something to keep this in mind if you believe you might ever go back in the service.

In fact, Guard and Reserve members are often required to sell back their leave if they earn it under certain types of orders (this does not count against the 60 day limit for selling leave in your career). Your finance office should be able to explain this situation to you, should you come across it.

Conclusion: There is No Right or Wrong – Just Make Sure You Know the Score

Selling back leave should be taken on a case by case basis. Some people should sell it all, some people should take terminal leave, and for others, a combination works best. This case study takes a deeper dive into selling terminal leave, including running the numbers for pay and benefits.

Take your time when making the decision, and good luck in your post-military career!

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About Ryan Guina

Ryan Guina is the founder and editor of Cash Money Life. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is a current member of the IL Air National Guard.

Ryan started Cash Money Life in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about military money topics and military and veterans benefits at The Military Wallet.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free account here.

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  1. Nick says

    Couldn’t leave my comment for a previous comment (Derek at comment #20)

    Anyways, I think he was spot-on with his assessment of the situation and how generally, single service members should take terminal leave and married SM’s should sell leave from a pure financial standpoint.

    Bottom line, do the math and weigh the benefits for yourself and your family. The financial benefits of taking/selling leave will be pretty obvious; but other things to consider might include: are you able to take and TDY leave as well? Do you live in on-post/base housing?

    The financial pro/con of selling/taking leave is only one aspect to consider; albeit for most it will be the chief motivator for most SMs leaving the military.

  2. Jonathan says

    Quick note regarding taxes. When you sell your leave you are not taxed 25%. Your withholding will be 25% but withholding is not a tax. Your wages will be taxed at a rate based on your income regardless.

    Bottom line, from a financial perspective, selling your leave is the best financial move because in the end you make more money. The argument that you don’t receive BAH, BAS, Medical etc… is bogus as you only receive those until your ETS date regardless, terminal leave or not. Just my two cents, have a wonderful day!

  3. Joe says

    In my situation I am taking 60 days of leave because where I am living I am getting almost 3k a month BAH and 750 COLA. If I sell my leave, I get none of that, then I am short changing myself about 10 grand overall.

  4. Pete says

    To points to add to the calculus if you’re retiring. Terminal can extend your retirement out to the right a month or two and increase your retirement compensation. Also, if you sell leave back those months you are out, and not on terminal, you will get a retirement check which counter balances the loss of bah (add your retirement check to the lump sum you got when you sold leave). Basically if your trying to work while on terminal it really doesn’t make too much difference what you elect to do.

  5. Adam says

    I’m retiring from the Navy and on my DD-214 in block 16 it reads: “Days Accrued Leave Paid”. Should this block reflect my current leave balance prior to retirement? I don’t want to sign and “mark accurate” if it’s not correct. Thanks in advance!

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