Retired At 40: How Much Is A Military Pension Worth?
A few weeks ago I was reading an article in Money magazine about a couple who retired at 40. While they do live frugally in relatively low-cost St. Louis, the primary reason they were able to retire is that they each served for 20 years in the military and now receive a pension of $58,500 per year. They will receive this amount, adjusted for inflation, for the rest of their lives! On top of that, they get health coverage forever as well.
Obviously there are some extra issues involved in working in the military. National duty, risk of injury, possibly lower pay, and constant relocation, just to name a few. But let’s just focus on the financial aspects here. I knew military pensions were good, but I didn’t know they started as soon as you retired. I figured they’d kick in at 60 or 65, not right away.
Today I saw the article again and thought to myself… How much is that pension really worth? How much would a civilian job-jumper have to put away to replicate it?
Converting A Pension To A Lump Sum
A pension income is essentially what is provided by an immediate annuity. You pay a lump sum, and in return you get a constant stream of payments for the rest of your life. According to the quote estimates at ImmediateAnnuities.com, a policy that provides $58,500 of lifetime income per year starting at age 40 is worth a million dollars. This is without inflation adjustments, as I couldn’t find an instant quote for that. There are a ton of different options to these annuities, and there are tax implications to boot, so I’m just giving a ballpark number here. (You can estimate your own lump sum number by multiplying your desired income by 17.)
In addition, I can’t even properly estimate how much the lifetime of health insurance is worth, but it has to be worth at least another $100,000-$200,000. The article lists their net worth at about $500,000, but really it is the equivalent of around $1.75 million for someone with no pension. At 40 years old, well done!
Converting Lump Sum To Savings Rate
So let’s take an even million dollars. According to this simple savings calculator, if I assume an 5% annualized return on my investments (after-inflation), to end up with a millions dollars, that would be the same as saving $2,500 every single month for 20 years (in today’s dollars).
One way to to look at this is that their pension benefit was like receiving an additional $30,000 per year on top of their previous income. Of course, they had to have the resolve to stay for 20 years, which does not sound like an easy task at all.
February 17th, 2008 at 6:29 am
Please change “worked in the military” to “served in the military”
There is a world of difference.
February 17th, 2008 at 6:34 am
I read that article as well, but that won’t be the case for us. None of us has a pension, so everything will come out of our own savings. If we have $500K at age of 40 (we actually already have that much), we still won’t think about retirement because we don’t have anything to replace our income. That means we have to withdraw from our savings. In that case, a $500K asset probably won’t last as long as we want.
In addition to annuity, the income replacement funds that Fidelity and Vanguard introduced last year may be another option.
February 17th, 2008 at 6:50 am
Hank - Fair enough, I can do that.
Sun - Actually, I have a few young relatives and friends who are on their way to a military pension, and many more who are on their way to a government or municipal pension. It just doesn’t exist much in the private sector anymore. I know that in many state and city governments they are cutting off the new workers, but assume the military pensions still exist?
February 17th, 2008 at 8:46 am
That makes me a little jealous knowing that I have to save up a ton of my own money just to retire ok. But they provide a service for the Country that deserves the pension they get.
Thanks to all that serve or have served our country.
February 17th, 2008 at 9:10 am
Vanguard sells inflation adjusted annuities through AIG. Instant online quote for $58.5k/yr joint annuity w/100% survivor benefits for two 40 year-olds is $1.9 mil.
TIPS yields are very low right now, which may be driving up the price of the annuity.
February 17th, 2008 at 9:34 am
I read the same article and what suprised me the most was with just a little bit of part-time work the couple could really increase the security that they have (both had jobs that transfer to the private sector well) — and reduce the risk and concern. The longer they wait, they potentially lose the ability to market themselves effectively.
However, it is their decision and their desire to balance their home life with their kids. That’s the great part about America. We get to make our own choices.
February 17th, 2008 at 9:53 am
The article says that they were both enlisted and both retired with 20 years of service. So the $57,500 they are receiving is actually two retirements, each of which is based on their individual pay while on active duty. The amount paid out in retirement is 50% of the average of the 3 highest paid years of service. Assuming (probably inaccurately) that they retired with the same rank and same high-3, divide the total by 2 to find that their individual retirements are worth $28,750.
Consider also that officers are paid quite a bit more. With 20 years in officer ranks, a decent officer could easily retire as an O-5, for whom the average of the last 3 years (most likely to be the highest 3) would be about $7100/month, which amounts to a retirement benefit of about $3650/month or $43,800/year. Double that for a couple that both retired as O-5s.
Not a bad deal.
Oh, and if you happen to think that $7100/month is not that great for a professional with 20 years of experience, note that it does not include the subsistence allowance ($202/month) or housing allowance (varies by location, but $2745 in DC area for an O-5 with dependents). The best part is that both allowances are tax free!
Sorry for any slight ranting tone, but I get pretty tired of officers complaining that their compensation is sub-par when compared to equivalents in the commercial sector. Enlisted, on the other hand, especially those with highly specialized skills, are quite underpaid.
February 17th, 2008 at 10:44 am
Wow, this is why I keep telling myself I need a government job. My uncle is retired Navy and his pension was comparable, I think, after 25 years or so. It would be great to have that kind of guaranteed income at 40.
February 17th, 2008 at 11:25 am
I got a quote for an inflation adjusted annuity. Assuming they each receive half of the amount (so it’s equivalent to two single-life only inflation adjusted immediate annuities), the husband’s is worth about $820,000 and the wife’s about $870,000.
That’s about $1.7 million total!
February 17th, 2008 at 11:30 am
I think I’d be really bored if I flat out retired at 40. But I’d love to retire and get a pension from one group and then go one to do part-time work I enjoyed. Or volunteer. Or make lots of quilts. Or write.
I hope they have fun with that. I’ll just do my best to get something like that when I get older. Micah will probably teach into his 70s if possible…philosophers love to teach.
February 17th, 2008 at 11:49 am
This is awesome! Congrats to the couple. I lived in Missouri before and I know $60K is pretty good there. They have a great retirement amount, and a nice portfolio net-worth.
February 17th, 2008 at 12:22 pm
In trying to stay with the money theme.
I served in the AF from 94-99. Everything I have accomplished since then is because of that time. 100%, no doubt because of that service time. Everything from undergrad to MBA while all my friends punch clocks at a factory. A pension would have been great but there are millions of us who are better off financially because of serving without drawing a pension. Not to mention able to buy a house through the VA loan program. I could not put a dollar figure on all that it has given me. That would be a nice study for someone’s PHD.
By the way. The most taxable income I ever made was around 16k in one year (yea there is a a lot that is not taxable but not that much).
saladdin
February 17th, 2008 at 12:53 pm
I work in academia and I have a wonderful pension. Our University HR department tells faculty/staff with pensions that if we consider switching jobs to a job without a pension we should be asking for at least 25% more salary to make up for the loss of a pension.
Making $70k in academia with a pension, I’d need to make $87,500 in the private sector (or any sector that doesn’t offer a pension). HR tells us to take that additional 25% and invest it in IRAs, 401ks, etc. That’s to make up for the loss of the pension.
Use that information for what it’s worth.
February 17th, 2008 at 2:01 pm
Adding an inflation adjusting component usually multiplies the cost of the annuity by 1.5 to 2.0. Vanguard offers inflation-adjusting annuities underwritten by AIG. For a 50% survivor benefit, joint life payments, that $58,500 per year would be about $1.76M.
February 17th, 2008 at 2:08 pm
That pension is a pretty nice perk, although I don’t know if it would be worth the 15 moves and 3 deployments over the 20 years. If anyone deserves to retire in their early 40s, it’s these two.
I’m quite impressed by their savings record - $400K saved over the years on an enlisted military pay is excellent. Particularly with three kids, and having paid for IVF for two of them, not cheap.
February 17th, 2008 at 3:02 pm
God bless our soldiers in uniform and the risk they take every day putting their lives on the line for the USofA.
That pension is good but have you seen what the private sector can make in Iraq? Check it out. Minimum 100k up to 300k per YEAR depending.
February 17th, 2008 at 3:11 pm
My husband is a Marine and we have currently been in the Marine Corps for 4 years. My husband’s commitment is up this year and we are suffering from terrible indecision as to stay in or get out. Assuming my husband made it to Colonel, in 16 more years we would have our financial freedom and healthcare for life by the time we were 45. Im just not sure if the “cost” we may have to pay for the next 16 years is worth it. We both realize that the military is the kind of thing that you are either in it for the long haul or not– much like the couple in the article, if you quit half way in you have wasted so much time (financially speaking) making a lower salary than you could have in the civilian world. That means you will have a lot of catching up to do once you get out.
Unlike the couple in the article I don’t think we would opt to never work again- it would just be nice to have the freedom to work as much/little as we wanted and do whatever we wanted (I see myself as a Starbucks Barista and my husband at the Apple store.
)
February 17th, 2008 at 6:04 pm
First let agree with the posts that state paying for a soldier’s pension is a tax I’m honored to contribute to.
I will have one of the state pensions that is sometimes criticised. I will concede that my pension, when I finally retire, will be lucrative compared to what many will retire with. (Medical insurance will be on me). However, what many people seem to ignore is this. I have contributed, on average, $4500 per year, every year, to my pension. I had no choice. During those years when things were tight, it didn’t matter. The contributions came out.
When I started in my career 25 years ago, like many other young people, retirement was the furthest thing from my mind. I didn’t make my career choice based on what I would get when I quit. I just wanted to do the job. Now, of course, I’m glad I stayed. What I will receive, along with what I have saved (non-matching, by the way), made all the shift work, weekends, holidays and mandatory overtime worth it.
Ron
February 17th, 2008 at 6:18 pm
The breakdown of the income is is the article: Todd’s pension $36,900 and then Julie’s pension $21,600. But I can definitely see having an inflation adjustment being worth another $500,000 or more. Their package with medical may be worth up to $2M easy.
I agree with Lisa that it is a tough decision. Like in many decisions the money isn’t everything. But I think knowing what these pensions are worth will help you make that decision with all available information.
For those of us without pensions, the more I think about it the more I think that immediate annuities are an under-appreciated part of retirement planning.
February 17th, 2008 at 8:05 pm
We are all paying for their finafcial freedom with our taxes.
War profiteers are getting it even better - but keep on supporting them as well.
Show me ONE thing which the military has done to build better America!
No military in the world builds and operates for bettering their society - it only does this indirectly, by providing jobs to people (who sometimes have no other choice for bettering their lives but to enroll) and pouring money (read - YOUR taxes) into private corporations which are designing and selling the military ULTRA expensive toys that go BOOM!
We are completely fooling ourselves if we think that a military is doing any “Service” to anybody in any country.
Even when performing “rescue” missions for people stranded because of floods and such - this is not their primary purpose, but a last resort effort. Why? Because it is extremely expensive to get them involved in anything.
Let’s not even start the discussion about mismanagement and losses and corrupt middlemen in military ranks, etc. etc. etc. all of which are done in “Service” to our country. To repeat again - WITH OUR TAX DOLLARS!!!!
Incredible!!!
February 17th, 2008 at 8:53 pm
The US also does something no other industrial nation does: we pay pensions to our part-time servicemembers (National Guard and Reserve).
The Reserve pension is pro-rated, essentially, so that someone who spends a couple years called up (as most who have been in since 9/11 have) or spends a long time in military schools (pilots, technicians, linguists, Special Forces) gets the same credit, essentially, for that time that a regular does.
The reserve pensions do not pay on retirement; they pay at age 60. You lock in the pension by serving 20 or more years, but are not required to transfer to the Retired Reserve until age 60, when you begin to draw payments. (Until recently, 60 was also the end of the line for serving on active duty. It’s been extended to 62 for those AARP members who can’t get enough of a good thing).
Your pension is set by a formula involving base pay on date of transfer to the Retired Reserve. Therefore, many who leave on getting their “20-year-letter” continue to remain nominally available in the Individual Ready Reserve, which lets their final retired pay be based on the inflation-adjusted base pay as much as 20 years later!
Of course, you can get called up from the IRR. Seldom happens, but all the guys I knew who went IRR were called after 9/11 and went to Fort Bragg to work at SF school and free up younger guys for the war. Most of them were held on active duty for two years (which is a statutory limit).
Because the final rate of the pension is inflation-adjusted, and because I’m not done yet, I’ve never bothered to calculate the NPV of my pension.
February 17th, 2008 at 8:55 pm
I am 48 years old and I consider myself “retired” for all practical purposes . By that I mean, I only work for myself and I only do what I really want to do.
Personally, I wouldn’t be able to take a military or a government job, no matter what benefits are.
At the moment, I make money as a professional balloon artist. Later, I might do something else. I was educated as a Medical Doctor in Russia but I have a lot of interests and I just explore different things as I go.
According to Social Security Admin, my full retirement will be at 67. That is when I will be eligible for for a full SS check, if any… LOL.. That’s almost 20 years from now! If I live that long and still can, I will be working long past 67. My mom is 76 and she is working and, from what I can tell, her work is a great source of joy, inspiration and happiness for her.
February 17th, 2008 at 9:33 pm
I retired as a CW3 from the Army in 1990 after 20 years of service, and my current retirement check is $2050.00 per month. It’ not a lot, but it certainly pays my house payments, utilities, and car insurance. I am proud to have served, and still consider myself a member of the Armed Services.
But, lets not forget that I had a wonderful, loving wife follow me around the world, as we moved approximately every 15 months. She kept her nursing career on hold for almost the entire time (as most military spouses do), waiting nearly until my retirement before she took a “real” job. She is now on track with her job, Roth, and 401k. And I too am doing OK in the civilian world. We both still scrimp and save 30% of our paychecks to fund our “real” retirement (which for me will be at 59-1/2 and 55 for her).
I think that it is wonderful that both the husband and wife mentioned in the article were Soldiers, but keep in mind that it is not the norm. Most military spouses forgo any type of career (and retirement savings), until late in the game. And I salute them all-their sacrifice is tremendous!
BUT, if I die, she receives nothing from the military.
February 17th, 2008 at 9:38 pm
Hey congrats to the dedicated vets. The “annuity” is definitely a solid benefit. Though it bears noting that the health care package may not be all it’s cracked up to be. The VA hospitals have had some high-profile issues as of late.
Add to that the host of long-term issues that are suffered by active soldiers (DU bullets? Shell-shock? Agent Orange exposure? Exposure to chemical weapons? etc.) and 20 years served may be 19 years and 365 days too many. Goodness, you could just be a cook in the field and suffer long-term effects from exposure to many of these things.
Of course, it’s also worth noting that all of this money is coming from public pockets. As the US debt becomes more crushing, this pension and medical load is going to become more critical.
If you’re a young person reading this now, please know that government promises are not for certain. 20 years of service may be a great step on the path to financial freedom, but it’s also 20 years of being paid to catch bullets, and you’ll be contributing to a massive on-going government debt.
If things get tough, big expenses (like pensions), often get put on the chopping block (just look at big private corps). The government will be much more lenient to do this, but you don’t have to search far for stories of veterans who definitely aren’t doing too well even with the “free health care”.
February 18th, 2008 at 1:22 am
My wife serves in the military and is scheduled to retire at age 43. Fortunately she has one of the best jobs in the military which requires no hazardous duty and relocation only if she chooses to. I will pass your math on to her and perhaps try a little of my own…
February 18th, 2008 at 5:00 am
Where to begin… There’ve been so many good comments so far, so this will end up more as a stream-of-consciousness response than anything else.
1. Yes, military benefits are great. There is no denying that. If I stick around for the full 20 years (I’m approaching the “Tipping Point” of 10 now), I can count on about $3800/mo (present value) pre-tax for the rest of my life. Health benefits are not free, though. In fact, the cost of insuring through Tri-Care (the government HMO) is getting more and more expensive for retirees, and the same can be said for prescription medications; the costs of both of these have tripled in the last five years. While the financial retirement is guaranteed, no promises can be made about the affordability (or convenience) of government-provided health care… After all, it’s brought to you by the same people who provide you with the DMV.
2. As several people here have indicated, 20 years of service is no walk in the park. The days of deploying three times in a 20 year career are long gone. I’ve been gone three times in the last five. Fortunately, I’m in the Air Force; my deployments last for 120 days rather than the 15 months that Army guys are committed to (though the Air Force now has 6-month deployments and hundreds of 12-month requirements in Iraq that must be filled). I deployed when my daughter was 4 months old and returned when she was 8 months. I left again before her first birthday.
3. I don’t know much about civilian work, as I joined the military out of college. However, I am an MBA with 10 years of military intelligence experience and a Top Secret clearance. I’m relatively certain that I could find a job that pays considerably more than my current salary (including all allowances and other below-the-radar benefits, about $100K annually).
4. If I leave before I hit 20 years of service, there is no “partial retirement.” I have no 401K that my employer has matched. Unless I join the Guard/Reserves (to get a smaller pension that kicks in at 60) or become a civilian working for the government (NOT a contractor), I get no partial credit for time served. I can contribute to the Thrift Savings Plan (TSP), but the government does not match contributions from uniformed servicemembers. The TSP has few options: five index-type funds that range from government securities to the S&P 500 to the International Stock Index. TSP has also just rolled out “LifeCycle Funds,” which are composed of the five core funds and targeted for the member’s retirement age.
5. Aside from the deployments and the more strict behavior requirements (a DUI would end my career, and dating a co-worker *could* land me in jail depending on our ranks), frequent moves are a pain. I am in my 7th home since 1999. The loss of friends is difficult for my wife and I, but we are adults; my four-year-old daughter doesn’t go a week without verbalizing how much she misses some friends who’ve moved in the last 6 months. Studies have shown that children of service members often have problems establishing relationships (fear that they will end prematurely), that they suffer from intense conflict-avoidance (”Why argue about this when one or both of us won’t even be here in 12 months?”) and frequently have separation anxiety problems (with a parent that often goes away for weeks or months at a time, who can blame them?) My wife’s non-military friends complain when their husband have to leave for a few days on a business trip; I usually travel for at least 5-7 consecutive days each month, and that doesn’t consider deployments to Kosovo, the desert, or potentially Africa.
6. There is talk of whittling away at retirement benefits for retirees. It hasn’t gone very far (military lobbyists are probably behind only Big Oil, Big Tobacco, and AARP on The Hill), but with the increasing budget crunch, reduced benefits are probably inevitable. A smaller pension that vests at 10 years of service and pensions that don’t pay out until age 60 or 65 are only two of the ideas on the table. The current pension system is left over from an era where the typical American life expectancy was 10+ years shorter than it is today. Additionally, the system was put into place to encourage servicemembers to retire at 20 years so that they could be replaced with younger, more able-bodied (and cheaper) folks. Today, those who leave at 20 are often looked at as “taking the money and running.” (Not that I blame them.)
I understand that few posters here feel that the military pension is the best-kept financial secret ever. However, for those of you that do, age/education/moral standards have been lowered to join our ranks, so it’s not too late if you want to reap the benefits of the United States Armed Forces.
So you can be jealous of my *eventual* retirement package, but “Gates VP” cannot make me feel guilty for “contributing to the national debt.” I’ve contributed far more to the defense of our country and the freedoms that most people never even think about than I have to the national debt. After all, if the military pension were such a good deal, why would fewer than 1 in 5 servicemembers stick around to claim them?
February 18th, 2008 at 7:52 am
“After all, if the military pension were such a good deal, why would fewer than 1 in 5 servicemembers stick around to claim them?”
Because officers don’t realize how good they’ve got it. (Like I said before, enlisted are another matter.) 10 years experience and that much of an expected retirement benefit means you’re probably an O-4 now. Considering that most of the military intelligence personnel are in the DC/Baltimore area, you are probably receiving a huge housing allowance. Before assuming you’ll get more than $100k and jumping ship, I recommend plugging a few numbers into the paycheck calculator (http://www.paycheckcity.com/netpaycalc/netpaycalculator.asp) to figure out how much you would need to earn before tax outside the military to take home the same about of pay after tax that you currently receive. I’d estimate that your monthly take home pay after tax in 2007 was either $6100 or $6400 depending on whether or not you pay state income tax. So figure out how much you’d need to be paid if all your income was taxed to take home that same amount.
My own calculations show that an an O-4 in the DC/Baltimore area would need at least 110k w/o considering the military’s retirement compensation. Add 10k if your new employment includes a generous retirement benefit (the military’s is still better); add more if the new retirement benefit is poor. Also, you may not be paying state income taxes, in which case increase that amount another 5k. And my numbers are still based on 2007 pay, so add 3k for the raise you received in 2008.
So, that’s nearly $130k you’d need. Although I wish you luck, based on my own experience, contractors aren’t paid that much, even with a TS/SCI and military intelligence experience. Somewhere around $110k may be possible, but probably not initially. And I’d bet anything more has a reduced retirement or health benefit. Contractors may cost a lot, but a huge chunk of it goes to the company’s partners or executives, not the guy/girl on the job. But, if you find better, shoot me a note.
Cheers,
February 18th, 2008 at 8:27 am
hey, i don’t know why people are posting how its all an honor to pay a soldier’s pension because of what they do. yes, they protect our way of life, but then so do many other professions, in different ways. in my view, they are getting good pay for dificult work. it’s a volunteer army, so it’s not like they are forced to join (leaving out socioeconomic situations). if they were drafted, then fine, it is an honor, but its their decision to join, and they will reap the benefits and disadvantages of such a decision.
and though i’m sure people will disagree with me, I believe that groups like American Civil Liberties Union do just as important work protecting our way of life (though not facing physical hazards of course).
February 18th, 2008 at 8:29 am
@saladdin
“I could not put a dollar figure on all that it has given me.”
Well I’m glad to hear that, because I can’t put a dollar figure on what you gave us. Its always been my belief that anyone who spends time in the service, and especially those who spend 20 years in the service, deserve every penny of their benefits and more.
February 18th, 2008 at 8:39 am
Incredulous:
Do you realize that the military is responsible for most of the technology that you use today? And some people join the military because they are proud to serve, not because they have to. Do you think history has proven that a wealthy country can survive without national defense?
February 18th, 2008 at 11:20 am
In addition to the military and the world of academia (mentioned above) working in state government can also have its ‘benefits’. In Florida, many state employees also receive a contribution equivalent to 10% of their income in a retirement account, free health and dental insurance for them and their family, free life insurance, etc. An average worker making about $45K a year can easily get an additional $20K worth of benefits.
February 18th, 2008 at 12:08 pm
@Vern
EXACTLY! The military is responsible for most of the technology…
What does it mean? Just that - we are satisfying our need for research, ways to better our society, technological improvements that can save lives, or produce energy more efficiently than current technology can - under the WRONG pretense!!!
Instead of one of goals of government, especially after the cold war is over should be ways to better the lives of its own people. Instead – the goal is to preserve and improve on something which only eventually leads to death and destruction around the world.
What’s the one main goal of military?
Wage wars.
These can be small wars, big wars, hidden wars and open ones. If there is no more war – there is no more need for such a huge waste of government money (OUR TAX DOLLARS).
Such money can be used for EDUCATION instead. Wide spread development of technology (and grants) in the energy sector, transportation / infrastructure support (crumbling highway bridges benefit no one) and so much more.
Instead of that – we are pouring money in the military machine, hoping that INDIRECTLY it will turn into the technological improvements which we all hope for.
How much better we would be if we poured this money DIRECTLY into science or whatever else is beneficial to our society.
Don’t get me wrong – there will always be need for military in the sense of keeping our thoughts at easy during the night. We’ll always want to feel that we are protected …from something… the bed bugs maybe? Or the Chinese?
US could do PERFECTLY fine if we slashed our military budget by half:
Close and sell half or more of our external military bases.
Close and sell the property of half of our Internal military bases.
Let those people ready for civilian lives go. They’d do just fine working for private companies. Or will they?
There are ABSOLUTELY no external threats which our current military can effectively protect us from. It’s geared for direct wars, not the individual crazy last kiss of death of some suicide wacko.
What will happen if the Chinese decide to invade? Are you going to be protected? I don’t think so. The only reason we feel protected is because the Chinese do not want to kill their biggest Customer.
I apologize for polluting the comments section with my heretic thoughts obviously. Please do not feel offended.
There are so many people out there who serve or have served in the military under their OWN WRONG PRETENSES!!!
If you truly wanted to SERVE – BECOME A TEACHER! Or a Doctor or a Nurse, or a Firefighter or …
There are countless possibilities once half the money going to the military are redirected to where they really need to go - direct investment in ways to improve the lives of people.
February 18th, 2008 at 1:26 pm
Today about 60% of all federal money is paid to individuals,social security, Medicare, state and military retirement, etc.
Over the next 25-30 years ALL money collected will go to these people.
No money for defense, education, national security,roads, etc.
February 18th, 2008 at 1:50 pm
all this talk of enlisting being the best-kept financial secret around is only going to bring more unqualified, unsavory characters into the military. The fact that the army is now enlisting GED criminals to operate weapons and nuclear powered machinery is preposterous. I read that gang members are now enlisting to get the best home invasion training to use in burglary when they get out. So sad.
My father was experimented on during the Cold War in the AF, and now that he’s experiencing the side effects of exposure to radioactivity (unbeknownst to him), is the VA around to help? No. When we tried to navigate the maze of bureaucracy for disability benefits we just gave up (which saves them money for sure).
I sure wouldn’t use the free VA health care as a recruiting selling point either. The fact that their doctors will actively lie on your file to prevent any future claims of disability is outrageous, not to mention the poor quality care.
None of this should be construed as un-American talk. I just don’t agree with being screwed over behind my back and lied to. Blind faith in a flawed system has nothing to do with patriotism, sorry.
February 18th, 2008 at 5:56 pm
Hey Joe: but “Gates VP” cannot make me feel guilty for “contributing to the national debt.”
I’m not even going to disagree with a thing that you said. No guilt intended. The fact that your service contributes to the government debt simply means that you are incurring an increased risk of not being paid. I think you’re fully entitled to every penny you’re getting.
In fact, you & Pogo are really helping to support my point:
I sure wouldn’t use the free VA health care as a recruiting selling point either.
And the point is simple. Just b/c military service seems like a really great deal, doesn’t mitigate the fact that it’s also very risky business. And those risks go beyond just “catching bullets”.
February 19th, 2008 at 12:02 am
Quick,
There are plenty of contracting jobs available in Colorado, where the cost of living is considerably lower than D.C.. Additionally the financial benefits of being a government civilian (NOT a contractor) living overseas are pretty high.
Gates VP,
The medical piece might change, but—and this might show my naiveté–I don’t there’s a chance in hell that the government backs out of its financial obligation (re: annuity) to me. However, just in case, I am maxing out a Roth IRA for me, a Roth IRA for my wife, and I am putting in an unmatched $15,500 a year into the Thrift Savings Plan. Though we could be living better, my family is getting along just fine on about 70% of my pre-tax salary (I’m also maxing out a Coverdell for each of my two children).
Lastly, to all: as with any occupation, the military’s benefits are a largefactor in recruiting/retention ability. I can tell you unequivocally that if the retirement benefits are cut, the government will need to make up for it in some other way (matching TSP contributions and/or higher salary, for instance) or they will lose the ability to retain talent past the 10-year “Tipping Point.” I for one can say that, with the deployments, frequent travel/relocation, and constantly hearing that the #1 priority is “the needs of the Air Force,” the generous retirement is a huge factor in my coming decision on whether to leave the uniformed services or not.
Don’t get me wrong–I enjoy the military. I’ve met great people, been to interesting locations (Iraq, Qatar, Kyrgyzstan, Kosovo, U.K., Italy—to name only a few), and have had opportunities that most people don’t get. The money is not the only reason I’m here.
But–and my readership of this blog is an indicator of this–I recognize the value of military benefits. I’d be remiss if I didn’t consider all variables when making career decisions.
There are a lot of drawbacks to military service (too many to simply put into a bulleted list), but there are a lot of good things, too. As long as the good things continue to out number the bad, I’ll stick around. However, I am taking care of myself (furthering my education, putting $25K annually toward TSP/IRAs) so that, when/if the time comes, I can salute the Air Force and walk away without the retirement or regrets.
February 19th, 2008 at 4:04 am
Great topic,
The system definitely needs changing, there’s no way the govt. can afford this, or should pay for it anymore. The system is from the 1800s when life expectancy was probably not more than somewhere in the 50s. There is no civ-mil pay gap if you include all the pays. And if you include the tax advantage, medical, retirement, etc…the military can be considered overpaid. True, today many are in harms way, but for the vast majority of the time, people don’t see combat. For those that do, they’re pay is mostly tax-free, given extra money, and other benefits. Most just go to work 7-5 on base like everyone else (except for the occasional watch/duty), sipping coffee in the mornings, munchin on whoppers at lunch, and sleeping in their own beds at night.
btw, I am an active duty officer with 6+ yrs, and could retire on 1 AUG 2021:) But I am set to visit the sand box this year
February 19th, 2008 at 5:47 am
WJ,
I mostly agree that, if a servicemember is willing to put up with the drawbacks for long enough, the benefits are worth it.
However, aside from an increasingly unpredictable deployment schedule, months away from your family (6-man tents and spiders in your boots, oh my!), and actually having your life put in harm’s way (though a vast majority collecting “hazard fire pay” are only in danger of getting hit with a “golden BB”), there’s a lot more to the military than simply a standard 7-5 job:
- Maintaining worldwide deployable status. Yes, sometimes this means cool stuff like shooting a 9 mm, or going to Washington State for 17 days of Survival Training. Other times, it means getting injected with a variety of stuff (painful think Anthrax and smallpox innoculations) that is bot dangerous and illegal to force the civilian population to take. It also often means being on a tight notice-to-move (NTM) schedule; I am on two days NTM in case Kosovo gets ugly, or if any other worldwide contingency breaks out (more likely than not a humanitarian disaster like the Indonesia tsunami, or the Mozambique flooding).
- Again, I don’t know a lot about “normal life,” but it’s not uncommon for me to work weekends or shift my schedule to late nights in addition to 5-7 days a month away from the family. I can’t imagine that most guys with Master’s Degrees do a lot of shift work. When exercises happen, 12-14 hour days are expected; in fact, I almost hope that exercises happen at locations away from home. That way, I can stay at work guilt-free rather than feeling pressure to make it home to eat dinner or kiss the kiddos good night.
It’s all about choices. Some feel that the job security, steady paycheck, and retirement make this a good job. Others feel that deployments, frequent moves, and political BS aren’t worth the goodies and get out as soon as an opportunity presents itself.
Military benefits are no secret: they are publicly-accessible information. Additionally, most people who want in right now can get in; if you are competent and willing to tolerate the tough times, you too can walk away with a retirement in 20 years.
Do I think the military retirement’s a good deal? Absolutely. But if it weren’t, the Department of Defense would have an exponentially more difficult time recruiting and retaining able-bodied (re: deployable) leaders.
It’s the guys that started serving during the Reagan administration that seem to have gotten the best of both worlds: great benefits and few long-term deployments.
Honestly, if my retirement didn’t kick in until I turned 60 or 65, my decision to get out would be approaching “no-brainer” territory.
February 19th, 2008 at 3:05 pm
I wish we would take better care of those in the military who are injured (or the families of those killed) and not allow pensions to be available until a more traditional age. My father-in-law didn’t take his officer reserves benefits until 60 or so, and he figures with medical it’s worth at least 30k/yr, still pretty generous considering he has 2 other pensions. I think our taxes could be more fairly spent than on subsidizing very early retirement.
As to the work hours of “normal” life, my academic husband has a PhD, no pension (403b match), pretty average compensation (less than 50k at almost 40) and works nights, weekends and holidays prepping classes and grading. It might not be shift work, but it’s not 40 hr/wk either.
February 19th, 2008 at 6:42 pm
I did over 20 years as an officer and have a good pension. But, there is no free lunch, I worked long hours at dangerous places under a lot of stress. Also, recall that in the early part of an officer’s career the pay is low (compared to private sector) and it is difficult to get non-military or non-com people for some of these jobs. One must also stick it out for at least 20 years to get a pension.
The military/gov does a lot of things less than perfect, but they also do things that need to be done that the average person is not fully aware of, but are still important.
February 19th, 2008 at 7:24 pm
@wj you must have lucked out and gotten a pencil pushing job if you think military life is 7-5. If you really deploy then you will understand what military life is all about unless once again you find a job in the rear and with nothing to do but criticize the real military. Spend 20 years of your life with 65% away from your family then tell me 24,000.00 a year for retirement is worth it, not to mention the chance you may not make it home. What a joke.
When you retire you pay fro your medical benifits….
@Incredulous you are an idiot….. STFU
February 22nd, 2008 at 5:22 pm
Technically, it’s not a pension, it’s pay for reduced service as you are on ‘inactive reserves’ for 10 years, then finally ‘retired’ but still subject to recall. This is why the monthly payment does not survive the military member, unless they enroll in SBP (not a good financial deal - buy an equivalent value term life insurance policy instead).
For us, USN/RET E-6 it means about $1600 a month after taxes. The state we live in doesn’t take taxes on Military “retired” pay (PA) so it’s only federal we pay. We were careful about our home purchase so it basically pays the mortgage.
Now, DH did 22 years, 9 deployments (with workups that would be 13 and a half years of 20+ hour days, ’shore duty’ wasn’t much easier), on aircraft carriers in the dead of night and basically on every cruise at least one sailor died just doing their job not in actual ‘combat’. His knees and shoulder are shot from the time on hard decks, and he has scars all over his body from burns while working on aircraft. We actually figured it out one night that he got paid essentially $1.98 per hour of work, no tips. No 401K, though the tax-free pay in combat zones was nice I’d rather have had him not in places where he’d be a target - no choice there though.
We do have the Tricare health benefit and it’s not awful, and it’s free for Retirees too BTW unless you want to use the military hospitals and enroll in “Tricare Prime”. Copays are higher but not as bad as they have been. What we don’t pay is a monthly premium. VA is technically there but difficult to access and for us we would rather give that appointment, bed or RX to someone who has no other option. Tricare will stay in some form, it’s far too economical a recruiting tool, and a way to absorb any excess capacity in the military healthcare system.
Understand though DH was “pre-1983″ when the benefits were better - 55% of base pay at 20 years. Now for retiring servicepeople (those who first enlistment/commission was after 1983) the retirement pay is not nearly as good - only 35% of base pay, not nearly as worth it for all the job asks of you unless you really really love what you do.
As to Voluntary, well it is and it isn’t. For many in the enlisted service, they are there because there are few viable options with a high school diploma out there, especially in the lower socioeconomic stratosphere. For officers, absolutely this is voluntary and many view it as a pathway to professional experience, a way to pay off school loans if you’re in professional or medical service corps, and for some a way to do a really cool job that doesn’t exist elsewhere.
What I don’t see is a tremendous value from private sector non-military contractor employers out there anymore. It’s almost a liability in some areas, which makes no sense. Slap on the ’support our troops’ sticker then bitch about how many tax dollars you have to spend on us. Don’t see that with police or firefighters who do get true pensions and great health benefits after 20 years (also tax dollar supported). Gotta love it.
BTW if you really want to make money in warfare, go contractor and go overseas. Dang cafeteria line workers make many timees more than the service members, totally tax free, better housing and transportation options. AD as the contractors say is for suckers.
JMHO
February 28th, 2008 at 2:33 pm
Incredulous:
Many technological advances in medical care have come about because of the military. The use of combi-tubes, ET Tubes, quik-clot, medical imaging, Hex-tend fluid, chest tubes, and various others have been because of the military. These advances in medical care have saved millions and millions of lives and continue doing so each and every day. So I’m uncertain where your political and economic rant begins and ends on this topic.
The unfortunate side of the military IS the possibility of war. The is the sole purpose. The military is, in-fact, a “killing” machine. There is no other purpose other than to defend against, search, and destroy an enemy. And the reality of that is, in the medical field, the most advanced technology is used on the battlefield and later transfered to the civilian side. You cannot replicate medical treatment and data obtained on the battlefield in any lab, hospital, or clinic.
February 28th, 2008 at 3:08 pm
Lotty,
How many times has your husband left home for four months at a time? How about 15 months?
Don’t worry, though–the government gives us two free 15-minute calls home per week. If work doesn’t interfere. And if there’s a free phone when we are available to use it.
Our troops are doing this for somewhere between 10% and 50% of what contractors in Iraq earn. Most of us consider retirement (1) as a retainer, since we can be recalled on to active duty, (2) as deferred payment after a career of under-compensation, (3) a package that isn’t kept secret from anyone–anyone under the age of 42 can sign up now and enjoy the same benefits.
What’s next, people complaining about the 5-digit re-enlistment bonuses for hard-to-fill jobs? 6-digit “aviator continuation pay” as a means of keeping pilots in the military? Having the military pay off medical/law school loans when the graduates agree to serve 4 years in the military?
The military offers a ton of benefits. And you know what? They still don’t have enough people (except for the Air Force, which is inexplicably cutting personnel during wartime).
What does that tell you?
March 21st, 2008 at 3:08 pm
I’ve recently retired after 28-years in the Air Force. My pension is slightly over $41,000 per year. There are NO medical, dental or life insurance benefits after you retire. You can voluntarily join a nationwide Health Care Alliance which is low cost, but not free. The military is not for everyone, but it’s a good life. And remember this, every single man/women in uniform today is a volunteer. So the next time you hear a service member complain, ask them “why did you reenlist”?
March 22nd, 2008 at 10:19 am
Your credibility with me when straight down the tube when you stated retired military have free health insurance for life. TriCare (tryandgetcare) insurance is on the rise and is expected to increase in the hundreds of percent in the next few years. Meanwhile, annual cost of living increases are in the low single digits.
Please do your homework!
Kudos to Joe for laying all this out for you. I hope you read his piece carefully
Moving along, nothing to see here.
July 20th, 2008 at 8:18 pm
I don’t see how this article got it’s $58,000. As stated before at 20 years of military service one receives 50% of their base salary. In normal progression a serviceman can make as high as E-7 in 20 years. If one is making $21,600, that means her base pay was $43,200 which is the base pay of a E-7 with 20 years. If the other is making $36,900, that means his base pay was $73,800. There are no enlisted personnel that make that kind of basic money. Check out http://www.military.com and look up payscales. The highest enlisted pay is a E-9 (also highest enlisted rank) with 30 years service and that is $66,000 a year. Being in the military myself I know that normally, as stated earlier, E-7 is the highest you can make in 20 years. Therefore even if he made E-8 that would only be about $3000 more than his wife or $24,600 a year, for a combined $46,200.
Also as stated earlier the job is not a job, it’s a life decision. Things like deployment in war zones up to 3 in a 7 year period or probably about 6 in a 20 year career. Did you know that military can not participate in any demonstrations, political rallies, make personnel appearances on behalf of any organization, just quit their job. They give up most of their freedoms to preserve others. Not to mention people shooting at you and in the heat of battle and if you shoot back then kill a person and someone stateside decides you shouldn’t have shot, you loose everything and spend 10 to life in Leavenworth, or you could get maimed for life. Most cops although pay is low get a decent pension. With the cutbacks in the military over the last decade, the jobs that get cut are just added to the remaining workers. It’s not uncommon to see military working 12-16 hour days, 6 days a week, travel away from family months at a time (stateside) and guess what THERE IS NO OVERTIME and you can’t say I quit or I don’t want to come in. IF you do you go to jail. If you do quit (AWOL) you get jail and a bad conduct discharge which follows you like a felony conviction to every future job. As for the military medical, it’s only good until medicare kicks in at 65. It’s like a basic HMO where you share expenses (20% non hospital, $500 or 25% a day in hospital stay). My final statement is to those that complain the pension is too much. If your between the ages of 18 and 35 and in good health, YOU TO CAN JOIN THE MILITARY IF YOU WANT AND GET ALL THOSE GREAT BENEFITS along with the long hours and life is not your own. For those that are older than 35, I’m sure you have heard of the military and could have joined but you chose not to. Careers vary in spectrum, some are great so aren’t It’s your job to research and seek what fits you. You can’t just lay back and let it come to you.
September 27th, 2008 at 10:41 am
To all involved in this string….. Simply stated, tuff shit! Want the gold plated pension? Walk the walk my pension-less friend!
See you in Iraq, Afghan, Africa or the beltway…..
Get over it!
Major, US Army
October 13th, 2008 at 6:39 am
[...] You rely on your pension to be there, but the sad truth is that there are no guarantees. All you can do is minimize your risk, be willing to diversify and find ways that you can easily start earning more than enough to stay comfortable, no matter what the credit crunch brings. With a little time and effort, you can make sure your pension account is safe. [...]
October 18th, 2008 at 2:37 am
28k is chump change….people make me laugh, complaining about this small amount of $$$$$. The brave men and women in our military should be getting twice that, risking their lives, the constant moves, the hard work and long hrs for little pay….how about the poor f#ckers who get blown up in roadside bomb attacks, you know they get a disability pension based on the percentage of body loss/disability…eg. a leg gets 8% and arm 7%….think the whole body only adds up to 54%…what a disgrace! if it was up to me id double their pensions and triple em for injury sustained in combat…god bless our military members!
May 14th, 2009 at 2:53 pm
Incredulous
Do you really think you could live in this great country the way you do today with out any sort of military? No. thought so.
By the way its people like you that i serve this country for and protect your freedom. Do you know what the word means? No. Well figure it out.
June 4th, 2009 at 8:44 pm
Interesting post from ‘08. I’m retired military… glad to have the pension. Have basic medical benefits, no dental, no vision. Spent over 20 years all ’round the world, moved every 2-3 years. During that time amassed over 5 total years of my life “at sea” looking at blue water in stretches of 6-7 months at a time. Worked in asbestos filled rooms in old ships, and often walked through 3 inches of crap filled bathrooms (”heads”) when sewage systems backed up, crazy heat, fumes and working conditions. Lonely times away, it often seemed like you couldn’t connect with those at home just because it was so different. Hard to explain. And I loved it.
Still, too many vaccines and other meds through the years, fractured my back while deployed and who knows what else. Divorced ’cause the first wife wanted someone at home, and then remarried to someone who was glad I was gone.
Spent most of the time in the mideast, gulf, off Iraq, Iran and Afghanistan. Except a couple times, didn’t walk the desert like my good friends in today’s armed forces, but nearly died a dozen times in other places. Never really saved that much money, and no 401(k) until the TSP came around in recent years. By the time you retire from the military it’s time to think of a new career if you can. I’m proud of my service, and proud of those serving today. And even still, I feel guilty for getting the pension, and knowing so many who served and didn’t make it. I loved the people, the comraderie, the service and everything else. If they asked me today I’d go back wherever in a heartbeat.
June 17th, 2009 at 7:07 am
I find this thread very interesting , im a retired Navy man spent 26 years mostly living in San Diego, Ca . I have a blue collar job now , and i get alot of slack from my coworkers that seem to think Military retirees get a free ride after 20 years . What most of them don’t understand is that while they were busy making 80,000 a year doing the same job i was doing for 18,000 . Alot of them forget back in the 80’s Reagon years these guys were pulling in close to 100,000 a year doing blue collar work , now that the wells dried up they bitch . Somebody Please explain to me how a NCO is pulling in 26,000 a year i only get 16,000 . Me thinks they exagerate just a bit .
July 6th, 2009 at 12:32 am
nice site impressed by the retire-at-40 accomplishment. But I really like the perspective Jonathan has brought to the article, by putting different values on the couple’s military pensions.
October 26th, 2009 at 8:29 am
The ACLU? Really? You compare that organization to the US Armed Forces? Get a clue.