Retire in 5 yrs or stay in another 15?

[fetorahjesuslibertarian]

@msmat I appreciate the response. You brought up a good point that justifies my belief in the original post that staying in the military a few more years is our best option. I was pointing out that that salary wasn’t enough to make it worth leaving the military for us. I didn’t even mention our 4 day weekends, 30 days of leave and the ability to leave work to take kids to the doctor.

 

[msmat]

@fetorahjesuslibertarian Absolutely. I am extremely fortunate to have a boss that doesn't micro-manage my time (I'm WFH) but it's still not the same as being on AD.

 

[msmat]

@fetorahjesuslibertarian

For us, we are leaning towards staying in the Army as long as we can. My wife is also a Warrant Officer and will retire as at least a CW4.

I missed this part. yeah, you'll be fine. Probably won't have to work unless you want to.

 

[everyman]

@fetorahjesuslibertarian When I run the numbers for an O-5 retiring at 20 versus at 28, it's roughly $2M+ better to retire early by the time I hit 62.

 

[fetorahjesuslibertarian]

@everyman Does that involve you working until 62 or working until ~51 or whatever the comparable age if you had stayed in the military? I only ask because I am still trying to figure out what is best for us. It’s very likely that there is something I’m not considering.

 

[everyman]

@fetorahjesuslibertarian So right now I'm investing 20% of my base pay. If I retire at 20 and get a civilian job that pays $140K+, I'll continue to invest 20% of that pay, plus I'll also invest 100% of my military pay. So I'm assuming that I'll keep the same lifestyle which is covered by my civilian job, and I'm just going to send my military retirement straight to Schwab until I actualy retire.

So today, 20% of my base pay is $24k or something like that, but once I retire, I'll be investing roughtly $80-90k per year. If I stay in the military an extra 8 years only investing $24k/yr, even with the increased retirement percentage it never catches up to the compounding returns of investing $90k per year for 8 years.

 

[annyfins]

@everyman It somewhat oversimplifies things, but it's also not wrong.

Should include BAS/H when making that comparison. So your pension is less than 50% of AD pay+allowances at twenty years.

However, I still think it makes sense for most to retire at / close to 20.

 

[texasjo]

@caca Eh, I guess, but I'd rather give the military $50k a year for 10 years in order for them to guarantee me $100k a year for the next 30-50 years.

Edit to clarify I was just referring to guaranteed retirement income. In OPs post they have a modest TSP account and are only contributing half of the max. Unless they aggressively start saving/investing immediately, there are decades of lost compounding interest. Having a guaranteed pension is worth it if you can't save enough to have a serious TSP/investment nest egg. If OP gets out in 5 years, starts a 200k year job and allows lifestyle creep to run rampant then they'll really be wishing they had a guaranteed $100k pension.

 

[l86]

@texasjo It's more like passing on $50k for 10 years just to get an additional $50k per year later. Break even is at best 10 years post 30 year retirement. But factoring in opportunity costs of not taking $200k second career it probably doesn't make purely financial sense.

 

[texasjo]

@l86 Assuming they use the extra funds wisely and invest to make up for the lost pension.

 

[jewlyen]

@texasjo He could retire, get a job making exactly what he's making now, and pocket the $52K a year.

Or he could work for what he's already making, and get zero extra a year, with the goal of getting more later.

Any investment calculator you run will tell you that investing the $52K a year, even in a fully taxable account, will be worth far more than the additional $50K a year in 15 years.

 

[texasjo]

@jewlyen You're not wrong, but this assumes fiscal responsibility.

 

[woken123]

@mellowyellow I'm not trying to be morbid and I can't access your file to double check, but are you taking into account that if you stay longer you'll have fewer years to collect?

You're missing out on half a million of retirement to get what you say is and additional 1.8 million. Are you taking into account that you'll not collect as many years at the higher rate due to likely having a similar age at death?

 

[mellowyellow]

@woken123 Updated the link: https://docs.google.com/spreadsheets/d/1rU9GOcJdgD8pk5-zLP4qxpPfOH1-wKprPvkqr16Ym5k/edit?usp=sharing

This is something that I had considered. The big takeaway for me would to "not have to work" when I am 50.

 

[l86]

@mellowyellow Your intangibles don't capture any of the civilian upsides or military downsides. For instance, TSP is easily offset by a 401k and likely bested by a company match.

When I made my retirement decision one of biggest factors was stabilizing the kids and providing them the opportunity to finish middle through HS in same place. As the kids hit HS PCSs become much more difficult on them. I've seen many peers choose to geo-batch for a year or more so kids can finish HS or compete in a sport etc... Not to mention, the potential of getting a remote or extended TDY at a critical time in their adolescence. My brother went off the rails in HS and my father's frequent absence on deployment and TDY meant ge wasn't around to attempt to help.

 

[woken123]

@mellowyellow Thanks for the updated link. One thing I would note is that retirement pay caps at 75 percent of base pay and doesn't accrue past that but obviously your base pay can still increase.

This is really a personal choice to he honest. But I feel like you're stacking your own deck in favor of staying in. The true delta is not going to be as large as you have made it out to be.

You don't need to generate 180k a year of income to make up that gap. You need to generate 1.8 million over a FIFTY YEAR time horizon. That is really very doable for someone in your position in my opinion.

If you want to stay in you should but don't stay in for the money. The people underneath you will appreciate it and you'll be able to make up that delta more easily than you think.

Additionally your calculations don't take into account disability. Which for me I know I've been at about 90 percent or maybe 100 since about 12 years in. That money won't increase if I stay in longer and I can't draw it until I retire. Is giving up 36k a year in disability worth a larger pension down the road? For me it's not but my situation isn't yours either.

 

[msmat]

@mellowyellow

This is something that I had considered. The big takeaway for me would to "not have to work" when I am 50.

If you have a paid off house this might be possible. If not, you're going to be disappointed. The only retired military I know are COLs and some LTCs with 30+ years. And they live pretty frugally. Life is expensive.

 

[jamieredheaduk]

@woken123 Also, solemn reminder that GEN Odierno (Army) died about 5-6 years after he retired.

HANG IT UP PEOPLE! Enjoy the perks you earned!

 

[annyfins]

@jamieredheaduk Flip side of this are the retired flag officers who die in their 90s. Not a lot of them, but every time I read about them, I was, "Shit that's a lot of retirement money."

But, yeah, I think we hear more stories about people dying a year or two after retirement.

People need to enjoy life, friends, and family. The military/your employer will replace you within days/weeks of your passing.

 

[l86]

@mellowyellow You've got to consider the burden on your 5 kids and spouse from deployments, PCSs, increased work responsibilities etc.

Math most likely also supports taking $200k second career if that's realistic. You'll also save $ not moving frequently and be able to establish roots and equity in one place. With pension and that income imagine how fast you can increase your stash.

In the meantime max retirement accounts (TSP, and Roth IRA for you and Spouse) you can access them penalty free in early retirement contrary using 72t, rule of 55, contribution withdrawal from Roth etc

Even with SBP most you can provide spouse after death is 55% so you will need retirement funds and/or term life insurance to replace your income after death.