SDF Young-Retirement Benefit 2026: Tax on the Payout

The short answer: for a Sergeant Major (曹長) earning ¥420,000 a month, the benefit totals about ¥11.76 million by age 60, and the second payment costs about ¥1.3 million in tax and premiums

* The amounts are this site's estimate, calculated from the formula in Article 27-3 of the Act on Salaries, etc. of Defense Ministry Personnel (as amended by Act No. 53 of 2026). For four years of service or more, a government-ordinance coefficient (about 0.99 for four years) applies, so the actual amount is 1-2% lower[Act on Salaries, etc. of Defense Ministry Personnel (in Japanese)].

How the benefit works: filling the gap between mandatory retirement and age 60 with 7 months' base pay a year

Self-Defense Force personnel retire earlier than ordinary civil servants: Sergeant (2曹) and Corporal (3曹) retire at 55; ranks from Sergeant First Class (1曹) through Lieutenant (1尉), Warrant Officer (准尉), and Sergeant Major (曹長) retire at 56; Major (3佐) and Lieutenant Colonel (2佐) retire at 57; and Colonel (1佐) retires at 58[Order for Enforcement of the Self-Defense Forces Act, Appended Table 9 (in Japanese)]. The benefit is a policy measure that offsets the disadvantage of this early retirement age, and is separate from pensions and severance pay[Cabinet Secretariat, reference material on improving SDF treatment (in Japanese)].

• Eligibility: anyone who served a combined 20 years or more as Self-Defense Force personnel and retired at the mandatory retirement age. Excluded if you became a full-time national or local government employee the day after retiring.
• The portion through age 60: monthly base pay (capped at the top pay step for Major (3佐)) × the number of years from retirement to age 60 × a number of months, with the number of months set by when you retired.
• The portion from age 60: a separate 3.83 months' worth of pay (for 2026 retirees) is paid for the years from age 60 to the retirement age of regular civil servants.

* The amendment was promulgated on 3 July 2026 and applies retroactively from 1 April 2026. Anyone who retired on or before 31 March 2026 remains under the pre-amendment rates[Ministry of Defense, bill summary (in Japanese)].

The second payment shrinks with your new job's income: for a Sergeant Major, it starts shrinking above ¥4.26 million a year

The second payment is reduced based on how close your income in the year after retirement comes to "the annual salary you would have earned had you stayed on active duty" (給与年額相当額). The test uses business income and employment income converted to an equivalent salary figure; pension and real-estate income are not counted[same Act, Article 27-4 (in Japanese)].

The average re-employment wage is about ¥3.1 million (Cabinet Secretariat data), so most people receive the full amount. About 10% of recipients see a reduction, and fewer than 1% get nothing at all[Defense Personnel Council, interim recommendations, August 2025 (in Japanese)].

If you expect a high private-sector income the year after retirement, even shifting the month your bonus is paid can change the result. Once your new job's terms are set, check where your income the year after retirement falls against these thresholds.

Tax: no filing for the first payment; the second payment is occasional income, and about a tenth of it goes to tax and premiums

The first payment is combined with your severance pay and withheld as retirement income, so no procedure is needed. The retirement income deduction (¥8 million + ¥700,000 × (years of service − 20) for more than 20 years of service) and the half-taxation rule apply, so the tax burden is minimal[National Tax Agency, No. 1420 Retirement Income (in Japanese)]. How retirement pay is taxed is explained in Calculating tax on retirement pay.

The second payment is occasional income (一時所得). The Ministry of Defense sends you a "payment record for the young-retirement benefit for Self-Defense Force personnel," and the same record goes to the tax office. Occasional income is taxed by adding half of "income minus ¥500,000" to your salary and other income, so even salaried employees must file a final tax return[National Tax Agency, No. 1490 Occasional Income (in Japanese)]. The Tokyo Regional Taxation Bureau's collection of common filing errors for tax accountants also lists the mistake of reporting this payment-record amount as retirement income instead.

* This site's estimate. The basic deduction is the amount for 2026 and later; the social insurance premium deduction is assumed to be ¥450,000. National Health Insurance premiums are estimated at a 10% rate with no cap, and vary by municipality and household.

• National Health Insurance premiums: half of the occasional income is included in "total income amount, etc." (総所得金額等), which the income-based premium is calculated from. Retirement income is not included[Koto City, National Health Insurance premium calculation, FY2026 (in Japanese)]. There is no effect if you are enrolled in your new employer's health insurance. See How National Health Insurance premiums are calculated for how it works.
• Programs based on resident tax: the income tests for the high-school tuition support payment and municipal medical-expense subsidies also rise, just for that one year.
• When to file: between 16 February and 15 March of the year after you receive the second payment. There is no withholding, so you pay the income tax in full after filing. Set aside 10-20% of the take-home amount in advance.

General filing for the year you retire is covered in Tax and procedures when changing jobs or retiring.

What's next: three installments and a "continued-work bonus" from fiscal 2028, and the retirement age rising by two years

• For anyone retiring from April 2028, the benefit becomes 9 months' worth, and the second payment splits into three installments ("second payment 4.5 months + third payment 2.25 months"). The reduction calculation also moves to a new method.
• A "continued-work bonus" (就労活躍加算) for people who keep working after re-employment starts at the same time. The details await a government ordinance.
• The mandatory retirement age itself is also set to rise by two years for each rank between fiscal 2028 and fiscal 2032. A later retirement age means fewer years until 60, so the total benefit is set to shrink[Defense Personnel Council, interim recommendations (in Japanese)].

Overall take-home pay from severance is covered in Retirement pay tax and take-home at a glance, and the debate over reforming the retirement income deduction is tracked in Will retirement pay be taxed more?.

Summary

• For anyone retiring from April 2026, the benefit through age 60 rose from 6 months' to 7 months' worth of monthly base pay per year (8 months in fiscal 2027, 9 months from fiscal 2028)
• For a Sergeant Major with ¥420,000 monthly base pay retiring at 56, the portion through age 60 is about ¥3.36 million for the first payment plus about ¥8.40 million for the second
• The second payment is reduced based on your income the year after retirement. In the Sergeant Major example, it starts shrinking above ¥4.26 million and reaches zero at ¥6.36 million or more
• The first payment is retirement income and needs no filing. The second is occasional income and requires a final tax return
• Resident tax and National Health Insurance premiums rise the year after you receive the second payment; in the example, tax and premiums together come to about ¥1.3 million. Set aside 10-20% of the take-home amount

Sources

• Act on Salaries, etc. of Defense Ministry Personnel (Articles 27-2 to 27-14) (in Japanese), its Order for Enforcement (Article 22) (in Japanese), Ministerial Ordinance on the Young-Retirement Benefit (in Japanese)
• Order for Enforcement of the Self-Defense Forces Act (Article 60, Appended Table 9: retirement ages) (in Japanese)
• Ministry of Defense, "Outline of the Bill to Partially Amend the Act for Establishment of the Ministry of Defense, etc." (March 2026, PDF) (in Japanese), and its Summary (PDF) (in Japanese)
• Ministry of Defense, "What does raising the young-retirement benefit mean?" (PDF) (in Japanese)
• Cabinet Secretariat, "Reference Material on Improving SDF Treatment and Working Conditions" (PDF) (in Japanese)
• Defense Personnel Council, "Interim Recommendations on Improving SDF Treatment and Working Conditions" (August 2025, PDF) (in Japanese)
• National Tax Agency, No. 1420 "Receiving retirement pay (retirement income)" (in Japanese), No. 1490 "Occasional income" (in Japanese), No. 1490 Q&A on whether filing is required (in Japanese), No. 2260 "Income tax rates" (in Japanese)
• Koto City, "How National Health Insurance Premiums Are Calculated (FY2026)" (in Japanese)

* The benefit and tax amounts are this site's estimates and vary with monthly base pay, years of service, and other income. The income classification of the second payment follows the treatment on the payment record issued by the Ministry of Defense. This article is general information; for your own situation, check with your unit's personnel office, the tax office, or a tax accountant.