If you haven’t picked up on this by now, I don’t intend to work for pay after I’m done in the military. If I end up getting out before I qualify for a military pension, I’ll move on to a Plan B or C or D. But right now my Plan A is to retire on a military pension.
Exactly what rank and year I retire at is, of course, still to be determined. But since I’m an officer, I’m going to lay out my possible scenario here. I’m going to go with retiring at 20 years, even though that’s not necessarily my plan. Why? Because the pension would only go up in size from there, so a 20-year pension is kind of a “worst-case” scenario (fully recognizing how awesome any pension is!).
Today I’ll be looking at a potential budget I could live on if I were receiving a 20-year, no disability, retire as an O-5 (Lieutenant Kernel 😂🌽) pension. Next week I’m going to look at what an enlisted member’s retirement budget might look like (you can find that here). There are wayyyy more enlisted members in the military than officers, so I can’t leave them out! But their pay is lower, so their pensions are lower. That’s going to change what a possible budget would look like. And, if I can get some folks with dependents to share their numbers, I’ll try to do a multi-member family version too! Reach out to me if you want me to do a case study for your situation.
So, is it really possible for someone to retire on a military pension? Spoiler alert: yes.
Note: All numbers in this post will be based on 2017 dollars. All tax talk will be based on 2017 rules.
The Military Pension
I’m not going to get into the nitty gritty details of the military pension system here. Suffice it to say, under the current High-36 system, retirees get 50% of the average of their highest 36 months of pay if they retire at 20 years. That’s based on the current formula:
2.5% x Number Of Years Of Service x Highest 36 Months Of Pay
So, for someone retiring right at 20 years, it’s a 50% pension. That isn’t 50% of total pay and allowances, just basic pay. But it’s still a very respectable amount. Once people start retiring under the new Blended Retirement System, the formula will be different. The earliest that can happen is over 8 years away, though, so we’ll stick with the legacy system’s formula for this post.
Scenario: Lieutenant Colonel retiring at 20 years
Assumptions:
- State income tax rate 0% (some states have no income tax, others don’t tax military pensions, so this is very doable)
- Do not own a home outright at the start of retirement
- Single-no-dependents
Remember that for this one, I’m looking at what my own situation would be. These numbers are based on what I personally spend in different categories. Your numbers would be different.
According to this military pension calculator, an active duty O-5 who retired on January 1st, 2017 with exactly 20 years of service would be receiving a pension of $50,918 annually. That’s $4,243/mo.
Before we even get started, let me say I recognize the ridiculousness of questioning whether a single person can survive off nearly $51,000 each year. I know it’s possible. It’s more than the median earnings of full time employees in the United States.
However, I often run into military members who insist a military pension is not enough money to live off. Just in the past year, I had two people literally laugh in my face at the thought of my pensions + rental income + investments being enough – an amount much higher than the pension alone. According to them, it would be nigh impossible to live off less than $100,000 annually.
This is a dollar by dollar breakdown of exactly how it could work. Because while not everybody may want to live on just a military pension, I want to show that it is possible. Options, people. Options.
Let’s break it down
Taxes: $489/mo, $5,870/yr (note I used this calculator for estimating taxes. I find it to be nearly spot on every year)
At $50,918 annually, after accounting for deductions and exemptions, I’ll be in the 25% tax bracket. That’s because with a $6,350 standard deduction and $4,050 personal exemption, I’m looking at taxable income of $40,518 – still in the 25% bracket. Yes, there are things I can do to get into a lower bracket, but based on normal rules that’s where I’ll end up. Besides, there are Other Factors (see bottom of post).
Running Tally: $489/mo, $5,870/yr
Housing: $1,580/mo, $18,960/yr
This is based off living in what is currently my rental property. My current PITI (principal, interest, taxes, insurance) is $1,033. Utilities including water/sewer/trash ($55), gas ($80), electric ($120), cable/internet ($120), and cell phone ($40) comes to $415 total. A sinking fund for home repairs is $100/mo. $1,033 + $415 + $100 is $1,548/mo. I’m rounding up to $1,580/mo to account for unexpected expenses.
Running Tally: $2,069/mo, $24,830/yr
Insurance: $100/mo, $1,200/yr
Though I expect I won’t need life insurance once I’m financially independent (the point is to replace income) I’m still budgeting $50 for it each month. If I need it, it’s in the budget. If not, that’s extra money. As a military retiree, I’d qualify for incredibly cheap healthcare, as low as $24/month if I stick with the military networks. Copayments are so low that I’m not even worried about budgeting separately for them, at least not while I’m young and healthy. I’m planning $100 total for these.
Running Tally: $2,169/mo, $26,030/yr
Transportation: $315/mo, $3,780/yr
I will pay for cars in cash, used (2-4 years old), and drive them for 10-12 years, so my transportation costs will be low. I’ll set aside $100/mo for future cars, a practice I’ve had in place since 2007. Car insurance on a used, economic but safe car is cheap. On my last car, I was paying $55/mo, but it was almost 12 years old at that point. Assuming a newer car I’m planning $90/mo for insurance. Gas and other transportation (like Lyft) should run about $75/mo. $50/mo for repairs and maintenance should cover the rest of my transportation expenses. That’s $315 total for the month.
Running Tally: $2,484/mo, $29,810/yr
Travel: $500/mo, $6,000/yr
As a retiree, I’ll be able to take advantage of cheaper “slow travel,” where you can maximize your dollars instead of hustling back and forth and paying $$$$ to get everything done in time. I’ll be looking into opportunities like house sitting to save money. And as a military retiree, I’ll have the time and ability to pursue Space-Available travel, so flights will be potentially nearly free and staying on bases will be cheap. All of that, plus travel hacking, will hopefully add up to a lot of travel for not a lot of money!
Running Tally: $2,984/mo, $35,810/yr
Everything Else: $1,000/mo, $12,000/yr
This is everything else that a person needs to pay for: food, entertainment, clothing, pet stuff, charity, gifts, etc.
Running Tally: $3,984/mo, $47,810/yr
That leaves $3,108 each year for things I’m forgetting or larger-than-expected expenses. That’s a pretty good buffer, in my opinion.
Other Factors
I do plan to have other income in retirement. Right now, my two main sources of income outside my job are my dividends in my taxable brokerage account and my rental property. Assuming I still have each of those things when I retire, my actual income would be more than $50,918. Again, the budget I showed above is what my minimum budget would look like.
I also have all of my investments that aren’t currently throwing off an income – the principal of my taxable account, the equity in my rental, my TSP, and my IRA. All of that is icing on the cake if I receive a pension. If I don’t, or if something happens that lowers the value of the pension, it will be how I derive enough income in retirement. This is my Plan B.
You’re right, MD. Of course you can live off your military retirement. The real question is, will you? Most people won’t because their lifestyles have inflated with their paychecks. That’s the vast majority of military retirees that I’ve run into. Me too…?
However, most people whom I’ve encountered live very comfortably as long as they’ve done the right things while they still served, like save in the TSP, invest in one or more rental properties, finished their degrees, and worked very hard to establish a good reputation.
I actually have a post coming up about how to use raises strategically so you can live comfortably now and in early retirement! You’re right – it’s easy to do if you make the right moves.
Mil$ – Just found you today as I read through the Financial Independence Retire Early (FIRE) blogs and tweets I’ve subscribed to over the past few months.
Thank you for the post, it resonates with my actual situation today – recently retired, budgeted for having/not having to work, and long term FIRE “status.” The accountability these posts and calculators allow leads to awareness that is comforting and revealing at the same time.
Since I just started the military retirement, your post allows me to complement you on your continued progress – having the plan you’ve detailed above is outstanding.
Two additional tools:
1. KeepThrifty:
https://www.keepthrifty.com/2017/01/30/introducing-retirement-freedom/
2. Minafi @ Minimal Investor
https://minafi.com/interactive-guide-early-retirement-financial-independence/
Ginzu,
Congratulations on your recent retirement! That must feel wonderful. Keep us updated on your progress – it’s always good to hear from someone who has actually “been through it” and isn’t just planning for the future.
I posted about the Minafi Interactive Guide a few days ago – amazing tool – but I’m not familiar with the KeepThrifty one. I’ll check it out tonight. Thanks for sharing!
MD
MD – I had to come back to the post to view additional comments after your tweet stating the article is setting record views. Albeit the comments need to reflect Service Members thoughts…that is a challenge for more comments.
I am in month #2 of terminal leave, matching many of the numbers your assumptions write out. The big difference, a family of four, ownership of a rental income property around the 5 sided puzzle palace (Pentagon), new home purchase in a 0% state tax on military retirement income…The new budget is working itself out while it collects 6-12 months of data. Always a bit of a fudge factor after every PCS but the ballpark is easy to identify.
Next article idea for you: “What amount would FU money be?”
Hint – It is much lower than thought when expenses have been well below income during a career.
I look forward to your articles.
– Ginzu
Thanks Ginzu! I love hearing that it’s working out for you. Any interest in sharing how your family is making it work as a guest on the blog?
I’ve added your idea to my list!
Mil$ –
(if I may be so bold as to give you a nickname on top of your nickname).
I think I’d like sharing a bit, albeit for accountability, sharing of ideas, and the ability of the community you have built to war game the range of possibilities out here in the civilian world.
You have my email, send over a dozen questions or so that peak the Mil$ Community interest. I’ll respond to the best of my ability.
– Ginzu
Ha! I like that better than MD, which always makes me think of physicians. I’ll take it!
I’ll reach out soon. Thank you!
Really good info! I’m an Officer as well and this budget gives me a good idea of what I can look forward to. My husband and I talk about this a lot!
Thanks Riley! I’m glad it’s helpful. It’s something I think about a lot, too! Hahahaha
This post hits home for me! I’m at the 17 year point and planning on retiring at a Lt Col, but who knows. I’ve went all in on rental properties buying several as the way to supplement my income in retirement. 3 years feels like a long time to wait! Great post.
Thanks Rich! I think about upping my real estate game basically every day – it’s such a good way to earn low-effort income.
I’d be interested to see how this changes with 3 dependents. My spouse is a realtor so no reliable income and we have 2 kids who would be 7 in this retirement scenario. Thanks MD
Thanks Heather! I’m working on a case study for a family of four next week. If you want me to look at your particular situation, you can always email me and I can run a case study on your situation too!
I’m doing it. Single, retired as a LTC with 22 years. I worked for one more year post-retirement while I got a handle on my actual expenses. I was laid off when my contract ended last year and decided not to work anymore at 46. I bought a new car with cash when I retired and bought my residence in cash during my one year of post-Army work. I am supplementing my pension with a small monthly withdrawal from taxable accounts and I have a pretty nice chunk in TSP (including some Roth and some tax exempt). I expect to collect social security and a small inheritance at some point down the road. Also have the GI Bill in my back pocket if I decide I would like to go back to school. I spent 4.5 months in Paris over the Winter/Spring. I’m living very comfortably and market growth has seen my nest egg grow. It’s more than possible.
Wow, 4.5 months in Paris? That sounds amazing. I’ll put that on the bucket list!
I love hearing all the stories of people who are actually out there doing what I’m just writing about. It gives me confidence that I’m not deceiving myself, hahaha. Thanks for sharing your story!
Mil$
I spent 4 years in the navy and left as an e-5 not bad, all of my pears said i would be working in mcdonalds after i left. took the new york city fire dept test scored 95.5, 5 points military, 5 points residents credit, total 105.5 final score, got on the job immediately, retired with a pension of $106,000 per year as a firefighter almost $10,000 monthly, equal to o-8 admirals pay. i still chat with my navy buddies, that stayed in the navy and retired. none of them,not one of them are retired at all, even officers i know all had to go back to work, none had pensions of more than $3000.00 monthly, my point is get your military experience and get the hell out. there are better opportunities out there once you’ve obtained and honorable discharge, additionally go where the money is if where you live does not have this kind of opportunity, go where the money is. an honorable discharge is gold, any good job will hire you first guaranteed. many people i worked with were also ex military and make even more that i do. this is reality folks, take it or leave it my buddies are eating their words. good luck to all. andy
lol…I’m glad it worked out for you. I’ll just say what I always say – the money is not a good enough reason to join or stay in the military. I’d submit it’s not a good enough reason to leave it, either.
$106k retirement as a retired firefighter? I call BS unless of course you are now suffering with some kind of serious disability caused by your firefighting career. I am a retired FF as well and I earn roughly $58k. Prey tell, how in the world are you pulling in $106k as a retired FF. I am all ears.
Sounds like you did well Andy, congrats. But worth noting, 106k/year isn’t quire O-8 retired pay. Your drawing equivalent of O-6 retired pay. I’m at 26 years and very happy I stayed (and am still playing). Will probably hang up the spurs at some point with a similar retirement and have no regrets.
-Pogi
You’re missing healthcare – tricare retired reserve or whatever.
Hi Nate! Healthcare is covered under the insurance section. $24/mo for Tricare Prime Group A, since I plan to live in an area where I can take advantage of that, then an extra $26/mo for incidentals and a healthcare sinking fund. Keep in mind this is only my initial costs – it would likely go up later in life, but then I would also have other money (like social security) to help pay for it at that point.
Also, the $50/month for life insurance could be used for healthcare instead, since I don’t anticipate needing life insurance once I am retired.
Thanks for writing!
Something else to look into is the cost of medicare when you turn 65; a requirement that is not free! 🙂 Something to write about after you’ve researched it.
Yes, as I wrote – once I reach that age, I will have an additional source of income (Social Security) to cover those costs.
I started as an enlisted, then went through the Enlisted Commissioning Program to get my commission. Retired in 2002 after 23 years and now work as a defense contractor. I live VERY well right now – my income (now a VP and chief engineer in my company) is high. I’m socking away money right now, but still don’t have what I want (notice i didn’t say need) to retire. My retirement is just shy of $50k from the Navy. I could easily double that with my existing investments without saving a penny more. I may have this unrealistic thought that I want 200k a year in retirement. Rambling intro and sorry. The missing piece in all this is location for retirement and housing. I live in a $700k home in Northern VA. Will definitely not live in this house when I retire – too expensive, too big, etc. I have seen lots of articles on “best places to retire”, but even the ones focused on military retirees seem to have view towards places where military retirees will continue to work. When I retire from my current job, I will not work again unless it’s to keep me busy. Has anyone done a real study on good places for military retirees that take into account the factors that matter to fully retired vets – like health care, low housing cost, safety (low crime), climate, etc, etc? If I can live in a location that reduces my outlay for housing (primarily) but still have a good blend of the other factors, I won’t need as much to retire and can stop stressing over it. Would love to know if such information is out there somewhere.
Well…this is a really good question.
I’m not sure such a study really exists. I found this one (https://wallethub.com/edu/best-states-for-military-retirees/3915/) which at least focused more on the things you want and less on job opportunities. But it doesn’t meet all of those criteria for sure.
I might have to create one!
We have been fully retired for four years now. My husband retired as an O-4 twenty-two years ago. The following 18 years we finished putting kids through college, paid for weddings and traveled to see grandchildren. We are currently settled in the low tax state of Delaware after establishing our nest egg. There is thought to move West again before we stay put for good. We saw the world while he was AD. Now we are enjoying the US.
Since my husband retired before all of the great pay raises, his pension is considerably less then what you plan on living on. With a nest egg (we don’t do rental properties) and social security, we live pretty well. We don’t stress about much. Sometimes you just have to save what you can and then just let go and enjoy the green after a summer rain!
It sounds like you guys have a great balance!
Mil$ –
I am currently a LTC with 17 and 1/2 years. I plan on working until my 20 or 21 year mark. I have also invested and saved since I was a 2nd LT. I know that once I hit the 20 year mark…each additional year I accrue an additional 2.5%. Do you think that it is worth it to stay in the military much past 20 years? I will likely get a fair disability rating as well due to years on Jump Status and lots of ruck marching which have taken a toll on my knees and lower back. Any recommendations on when the best time to retire as a LTC is?
Maybe a step back from retiring from something and retire to something else. The finances ae in order, a pension at 50 to 55% of base will keep you fed, housed, clothed and entertained for life…sink in, for…life. Additional thoughts I posted with Mil$ in her blog in this very forum under (https://militarydollar.com/2017/11/01/an-interview-with-an-early-retiree-ginzu/)
– Go to see a VA rep on post to start your medical documentation for a claim ASAP.
– Past 20? A loaded question. I stayed in for a total of 31, boiled down to 23 for retirement pay with the ARNG time. The choices are all yours right now, until they are not.
– 3 year time in grade to max the high 3 pay system. Boils down to a minimal financial incentive in the big picture.
– Do some more math. Set some financial buckets, determine if passive income will be greater than desired expense. Apply the famous Trinity Study (4% “Rule”) to a few COA. Await the new planned TSP Withdraw options coming Sept 2019 for additional options (most likely still a 59.5 age limit, but may allow some type of ROTH ladder transfer options.
I look forward to some of your thoughts.
Mark, for some reason WordPress simply will not allow me to post a robust response to you. Hopefully while I troubleshoot this, the other answers can provide some wisdom.
I had a really thorough 600 word answer that went *poof*
Well, that’s a very individual decision, but my thoughts follow. I retired at 23 years – not because it was 57.5% of my base, but because I was just not having as much fun. When I retired, jobs came to me – I never had to look. Now I work in a job (same one since I retired) where I make far more money than even a 4 star would ever make. But it’s not about the money in my case. I have to like what I am doing and I have to be sure I’m productive and impactful. So forget about the percentages, retire when you think the time is right. If you plan on working in another career, I’d spend more time thinking about what you want to do. It sure is comforting having that retirement check coming in – it was a log road getting to it, but I know I’ll never starve :). Good luck.
I came across this site today because I am at 19 years and 2 months of AFS and 28 years for pay due to my time in the Marines, Guard and Reserves. I am a Field Grade Chief Warrant with Base pay over 7k. I am thinking of moving with the Mrs. to Panama or South America due to the lower cost of living. My concern is medical access from living outside the US in regards to Tricare. I started service in the early 80s, in my 50s now. I have decent savings but not to the extent in which I feel comfortable. I work in Cyber, so I may work for a few years after retirement.
Let me introduce you to the blog of a friend of mine who is living the expat life with her military retiree husband. If you do a search for “medical” in the search bar on this blog, you will come across several posts from other expats who were thinking the same thoughts. I think this will help with that concern!
https://www.poppinsmoke.com/start-here/
Thank you so much.
I can’t believe it’s been two years since my last post. I am staying in for a few years more and in my mid-50s now. My CW4 pay is maxed at 30 years for pay. 2021 pay bump should have me at $8600 a month. My fellow Warrants due to their bodies broke and combat deployments have been getting rates at 100%. That has helped eased their financial burden in regards to taxes. Hurry up 2022!!!
Great thread! I have been getting into the FI realm as of lately myself, I have 13 years active duty and am an E-6 in the AF. I plan to retire at the 20 year mark and never work again. I like to low ball retirement pension say as E-7 with 2k a month so 24k a year. With that being said I have a wife and two kids. I used TA for school which slowly got me my bacholers degree for basically free, saving my GI bill for my kids to use. I have 1 rental which will be paid off very soon, a decent TSP and I hope to do one more real estate deal in the next few years(multi family rental) to finish out my portfolio. It’s crazy to think that by the age of 41 I will have the option to work or not. The important thing is I can spend much more time with my kids as they grow up. Also I too am a big fan of space a travel and will finally be able to take advantage of this. There’s lots of good advice in this post and it sounds like many are on the right path! I wish I started a little earlier or went O in my career, but I am happy none the less and can’t wait to see what the future has in store. Good luck everyone.
Wow Ryan, it sounds like you are crushing it! I hope those around you see what you are doing and ask questions!
Interesting read. I’m a teacher and my pension isn’t as good. After 20 years, I get 35% of my final 5 years of salary. Any additional years adds 2% extra to pension. However I do get free health insurance after 15 years working. For the pension, when can you start to collect without penalty? For me, I can start withdrawing at 55 (huge decrease) but if I wait until 63, it’ll be the full pension.
For military members who retire with an active retirement, we start receiving our pension virtually immediately after retirement. So if you retire at 38, you start receiving a pension at 38. Those who receive a reserve retirement start to receive their pension at age 60, although there are things they can do to move that date up.
Wow that is a really good pension to have. My plan is to retire at 53 which will give me a $68,000 a year pension if I start withdrawing at age 63. Since I have about 12 years to wait, I’ll be a substitute teacher (approx $30,000/year) along with side hustles.
Do you recommend I go the roth option or traditional? Along with my Vanguard IRA, I also have the option to do that for my 457 as well. Most people on MMM’s forum recommend going traditional now and doing roth laddering later in life but they don’t have a pension so I don’t know if that’s the best option. What do you think? Thanks for your help.
It’s a tricky question with a pension. You really have to run the numbers for yourself. If your effective tax rate will be less in retirement with the pension + rollover than your current marginal tax rate, then it’s usually a good idea. But everybody’s tax situation is different so there is no one-size-fits-all answer.
I can tell you that I am putting more into Traditional than Roth right now with the intent of doing the rollover, because I think it’ll be better tax-wise. But I still put a healthy chunk into Roth accounts to take advantage of those special rules, plus I’m hedging my tax bets.
Retired as an prior enlisted O4, 26 years in total so my military pension is closer to the $60/yr mark. I worked in the civilian sector for about 2.5 years making very good money, paid off two 2015 vehicles to become debt free except for our mortgage, then decided to step away from work to be the parent at home while our youngest finishes high school and my wife restarts her career after taking 2 decades off. I now substitute teach at our schools and do odd temp jobs when asked if they agree to my schedule and terms. I was quite apprehensive 11 months ago when we first decided to make this change for our family, but now we’ve settled into it, I don’t know that I’ll ever go back to the traditional grind. I’m quite liking the gig economy and the fact my pension covers all of our needs along with a great deal of out wants, it’s great having the freedom to have a run at this.
Sounds like you are living a great life! I’m glad it’s working out 😁
Retired this summer as an 06 with 28 years. We moved to a lower cost of living area and were set to live on pension and 4% siphon off our investments. Got a surprise from the VA and now receive concurrent receipt of a nice disability check as well.
I worked with lots of 06s and retired 06s in my last 3 jobs on active duty in the DC area. With the exception of one guy, all of them planned to get a beltway bandit/government service job after retirement. They looked at me like I had 3 heads when I told them my plan.
Congratulations, sir! And I know exactly how that goes. There are a lot of people who assume it’s impossible and thus think I’m just flat out crazy. Oh well!
How was the VA process? I hit 20 active in 7 months.
In hindsight, easy – because I listened to the Soldiers that went before, went to the Soldier Support Center and hospital to build the VA packet well before hand. Medical records copied to disk, backed up to a computer, and hard copy of the records that were pertinent to what maybe support for a claim. Upon retirement, I went to the State VA office to register, receive additional claim assistance and then to the VA hospital to keep the appointments – always bringing up the potential claim items. It worked, DEERS records and DFAS were also important database updates to keep current. Bias, but I believe I stayed assertive and patient, communicating what i thought was a plan to continue a healthcare program – careful not to tell the providers their job, but by asking questions that helped me understand.
Hindsight, one costly mistake. The fee for a VA Home loan is substantial, it would have been waived had my disability claim been completed before receiving the loan. One more reason to rent for a term as you transition, recon the area, career decisions and the VA claim settled.
Thanks for the answer and wow that is a great point about the VA loan funding fee!
I’ll echo the previous poster. Get with a VSO (Veteran’s Service Officer) to file your claim. Mine happened to be VFW but you can use any of them (not required to be a member either).
Submitted my claim before I started terminal leave. I gave my new address for the VA to contact me and they farmed me out to contract doctors for the physical/x-rays and such.
If you have any ailments that you haven’t had checked out while you are on active duty, get it checked out and documented.
Thank you sir. Average time for turnaround? I talked to a MSG that said it took two months after he retired that he found out he was VA rated at 100%.
It was about 2 months for me from retirement date as well. Not bad.
I retired from the Coast Guard with a rank of O5, spent 23 years in active duty. My wife and I moved to Chiang Mai Thailand last year. We live very comfortably with my retirement alone. We didn’t have to touch our savings or TSP. Before Thailand, we lived in Panama City, Panama for 18 months. It was a nice place but it was getting to be too expensive for us. We lived very comfortably, but not enough to live with the retirement pay alone. Occasionally, we had to dip into our savings for traveling and other nice things to do. In Chiang Mai, we spend about $3000 per month in total. That includes a luxury 3 bed room condo, a full time maid (5 days a week), restaurant cost (dine out 3 to 5 times a week) and other miscellaneous expenses. Consider live abroad to stretch your pay.
This sounds AWESOME, well done! I don’t intend to live abroad full time in retirement, but for sure plan to live abroad for long stretches. I’d love to do 6 months in Chiang Mai, I’ve heard great things!
We been looking retiring in the Joteim side of Thailand.an suggestion
Absolutely not able to retire on a military pension when I retired. It was $4 an hour. I had to work. That was in 1994. With inflation it pays my WA state property taxes now in 2019. I still have to work and have 2 others help with expenses. I own my house by the way.
I retired as an E-6 in 2000 and my “retainers fee” still hasn’t quite reached $20k/year in 2019. We used the money to ensure we could make house payments with it and it was good insurance if I had to be between jobs at any point.
I got a full time job after retirement in the IT industry and it pays well; however after 19 years of doing it I’m tired of working in an air conditioned office year round with no windows.
I’ve decided to build my own online business at home because I don’t think I can take another 5 years of this before being able to receive social security, which will also be inadequate.
If you are interested in building an online business from home before you retire let me know and I’ll help you out.
Les,
Not really interested in a business, thanks! A big part of this website is teaching people how to set up their finances so work becomes optional. I don’t intend to work for pay after I retire from the military.
Mil$
My husband was enlisted. He retired with 20 years. There was no way we could live on the military retirement. Still can’t. Good thing we have SS, also.
It’s something you have to spend years planning and working towards, for sure.
Here’s a post about an enlisted family that is planning to retire off the husband’s pension, their investments, and possibly some part time work for a few years after leaving the military.
https://militarydollar.com/2017/10/02/retiring-enlisted-pension-joe/
Why not rewrite this for a Major with 20 years? I think you’d find a different answer for the people that actually work hard.
Hi John! Um, I’m happy to do another version (not a rewrite, but a new one) for someone who expects to retire as a Major. No problem there. But I’m not going to feed into animosity, so if this is about bitterness over not promoting I’m not particularly interested in participating as I have no role in whatever happened.
Nice article. I retired in 2014 (medically) O-4, 100% P&T just shy of 14 years. Starting pension DoD + VA was $4895. By next year, it will be $5300. I definitely didn’t think it was enough until I found FIRE in 2015. I was grinding along in the GS system at the time and got ahold of Nords’ book. A year later, I quit, moved back to my home state (doesn’t tax military pay, free state park passes, hunting and fishing licenses, and offers 100% prop tax exemption to P&T veterans) and built a house while working part time at a non-profit. After about 3 years I accepted a term employment job overseas. so, the model has been and will continue to be, I think, mini-retirements with sporadic work interspersed. The pension is sufficient to live off and is not too far off your estimates except for some kid related expenses, but I tend to supplement it with savings for capital purchases like house improvements or other things that would substantially increase our quality of life such as travel. The idea of going back to work this past time, was tough, but it was a deal we couldn’t pass up. High pay, incredible travel opportunities, ability for the kids to become fluent in a foreign language etc. Meanwhile, we will use the mini-retirement years to convert as much of our TSP into Roth accounts in those no/low income years so all of our “retirement savings” will eventually be tax free/not subject to RMDs.
It been a while does anyone have any updates on this thread. I’m approaching my last three years and plan in doing the same.
Just did some beer-math on this, myself. I expect my pension to be ~$60k if I leave when eligible. If I stay, I’d be giving up that $60k in the first year to generate an extra $3k/yr. If we can overvalue the portfolio you’d need to generate that with a conservative 3% withdrawal rate, that extra $3k/year is equivalent to an extra $90k in your portfolio. At 4% WR, it’s worth $75k. So, if you subtract out the $60k, you end up with a net gain of $15-30k.
That would be assuming you worked for equivalent pay outside of the mil. If you can earn that extra $15-30k or more outside of the military, you probably should. Else, you should decide if the extra earnings are necessary or desired more than early retirement.
The math is just a way to put your decision into perspective.