When to retire from the military, and how to decide

[leoooyu]

@nscr Well done! Love this. I see too many military members not saving while they are in and they get out and they HAVE to work for financial reasons when they could have saved and invested and done whatever they want once they retired.

 

[iffsiisolsos]

@oneinhim Ultimately, the decision to retire/get out shouldn’t be based on money. You should decide to leave when you don’t love it anymore. Any other reason may lead to regret for missing opportunities. If you love it, there will be no regrets for staying in and missing opportunities on the outside.

Most comments have covered it but lifestyle choices will dictate your need for additional income.

Working past 20 has to factor in the opportunity cost of delaying to start a second career. A bunch of people talk about gov work, but there’s plenty of work away from that too.

 

[max003]

@oneinhim My goal is to retire from the military and not need to work. Doesn't mean I won't get another job but I don't want the pressure of needing one. I think if you plan early in a military career you can definitely retire and not need to work. Currently, I am a W2 with 17yr. Paycheck take home income 6k a month. 35% towards TSP. Own 3 homes; rent out 2. Additional $1400 income from rent. All this on one income. Married with 2 children. In my situation I would need to stay until 24 years of service; W3 three high plus 80% disability to receive $6k in retirement. In that time my goal is to payoff 1 of my properties. Budget and planning are key.

 

[erwinx]

@oneinhim Why aren't you pursuing education while in ? Ta is 4500$ a year , literally free school

Im getting my bachelor's right now and I've been in only 2 years. I do have a family and typical time killers but school isn't a huge deal.

If you can stand your job then staying in the fir extra pension is a for sure

 

[godfavour]

@oneinhim The goal is to get into a GS position after retirement. You’re basically switching one suit for another but this new suit has more freedom. Environment stays the same as well as mindset for the job. Depending on how old you’d actually like to be before retirement you can possibly double dip. Plenty of people I work along side are retired military soon to be retired civilians. USAJobs. Bonus points if you have disability.

 

[mia2781]

@godfavour How do you double dip?

 

[resjudicata]

@oneinhim No unless your spouse makes buck. Cant live comfortably off retirement unless you like an O-4

 

[bevm]

@resjudicata An O4 isn't going to live comfortably either.

Survive? Easily

If an O4 retired right now at 20 years?

Under High-3 they would make $4,403 a month

Under BRS the y would make $3,522 a month

Not all, but most FGOs have families and are used to living on 120-140k a year depending on AFSC and incentive pay.

That would be like taking a 60% paycut. Now they could theoretically contribute less to retirment with a guaranted pension that will rise with COLA, but they still have significantly less money than when active.

An O5 is in the same boat but add $500-600 to the figures above.

Unless you're an O6 that stays in for 25ish years, you are definitely getting a job post military.

Even an O6 at 26 years is $7,889 a month. That's 90k, after federal taxes, FICA, etc, that O6 is clearing around 6500 a month. An active duty Captain makes more and their used to making more than double that.

With lifestyle creep and all involved, the only military members who legit retire and don't get a job after service are the ones who take a cost of living cut and sont need to support their kids as much.

 

[gabechosen15]

@bevm

the only military members who legit retire and don't get a job after service are the ones who take a cost of living cut and sont need to support their kids as much

Mil-to-mil, people who aggressively save/invest, and people who live conservatively can all retire.

 

[bevm]

@gabechosen15 Mil to mil both retiring is fairly rare.

Like I said, comfortably? No

Survive? Absolutely

People generally build to a higher standard of living as they get older.

 

[gabechosen15]

@bevm I have to assume you're talking about retiring strictly off their high-3 pension? Most servicemembers I know (granted they're mostly officers which is neither here nor there) are pretty diligent savers. If you do 20 and retire as an O-5 in a dual working household, the pension is certainly meaningful but you would likely have an investment portfolio that can generate more than your pension. Consider the fact that you'll stop putting money away and start taking it out, and your disposable income could likely increase after retirement. It's strictly a function of savings rate in your working years.

 

[needhelp20]

@bevm This is only fairly accurate if you assume a single family income, and falling prey to lifestyle creep. If you have a working spouse and/or spend well below your means, then retirement at O4 or higher is very doable.

 

[bevm]

@needhelp20 No, it's completely accurate as those are all currently calculated numbers.

As far as lifestyle creep, everyone falls prey to a degree. Not necessarily to living paycheck to paycheck even with pay Increases, but as people get paid more they tend to spend more.

Obviously I'm not factoring in a working spouse because that's a completely uncontrollable variable. Some might not work, some might make 20k, some might make 200k.

In general with the price of mortgages, rent, and general living expenses 3500-4k a month is not much to live on unless you're single or very frugal.

And I'm sorry, most people want more money to spend in order to live more comfortably. Standards of living climb higher as people get older. What you describe is the exception.

 

[needhelp20]

@bevm I wasn't contesting the accuracy of your numbers, just the accuracy of your statement about not living comfortably at an O-4 retirement. It is totally possible between living frugally (as you said) and having additional investments ( brokerage account, real estate, etc). As for it being an exception, well, it's also the exception to have ~$1000 in your savings account. That's not really the bar we should aim for or really be ok with. My comment was simply to point out that a comfortable retirement at O4/5 is not out of reach.

 

[bevm]

@needhelp20 Except it's really not. $3500-4000 is not comfortable.

It's a wonderful survival net, and a great bonus once you have another well paying job.

Your average O4 is married and likely has at least one child.

Some may be less, some may be more but that's the average. 4k a month is 48k a year. After taxes that's 40k a year. It's enough to cover housing, bills, and food.

I have a house with a decent mortgage that was 250k when I bought it, with all my utilities, just for shelter and keeping all the utilities running I pay around $2700. That leaves $800-1300 for food, gas, and really anything else. No room for e en a meager car payment, no room for saving much of anything. I also live in a relatively low cost of living area.

You can maybe get an apartment for less, but most houses go for way more than I paid for and now interest rates are up as well.

So if you think $3500-4000 a month is comfortable it's pretty clear you don't pay for a family worth of bills. It's survivable because it covers the basics. But almost anyone who's not an O6 is still going to get a job post military.

 

[needhelp20]

@bevm You are right that most people will get a job post military. But the ability to live well on 4k a month isn't too hard.

LI also have a house that was just a little less expensive than yours (238k) within 20 mile of a major city (mcol), but mortgage/tax/ins/utilities/HOA are ~1800 for me. $1500 for the rest and that's still ~$700/month left over.

Also, assuming a similar standard of living while on active duty means that you can (should?) have significant brokerage account balances to draw on until you are 59.5. in my zip code, an O-4 makes ~$8800 after taxes per month. The same math from earlier would leave 4400/month to invest, or about $2000 after maxing TSP/IRA. Even if not invested and earning interest, this would result in more than 200k assuming that they started when they made O-4. That is enough for about 1k extra per month until TSP maturity (from 42 until 59.5). And I do pay for a family's worth of bills (3 dependents)

All that said, I wouldn't advocate not working, as I've seen what can happen without the stimulation, both intellectual and social. Just that it isn't impossible financially. It just takes discipline and a plan.

 

[bevm]

@needhelp20 Discipline, lol.

Look man your housing situation sounds better than 95% of most people who buy anything over a 1k sq ft house. Realistically for a house in the 200-400k range plus utilities, plus bills, plus food, gas expenses, etc. You're looking around 4k on average. You come in under that, and that's great, but in general it's higher. If you think anyone is investing 2k a month in order to work towards an extra 1k a month until TSP maturation, I've got a bridge in the Atlantic to sell you.

The reality is with a family comes additional expenses, toys, activities, the occasional eating out, etc. Sure you could hole up like a mole rat and each PBJ sandwichs all day and not allow your family to do anything and survive on that 4k.

But, again, there's a difference between surviving and living comfortably and your hypothetical scenario is not comfortable.

 

[tewingveale]

@bevm You are missing the point that @thatvassarguy08 is trying to make.

If you are an O4/O5 and maintained a budget, built up a decent emergency fund (12 months of living expenses), saved and invested (maxing TSP & IRAs + a couple hundred a month into a taxable brokerage), transfer GI Bill to kids and create passive income stream through rental properties purchase at previous duty stations, then there is absolutely no reason an O4/O5 can’t live off a pension alone.

Unless you live beyond your means while you are on active duty and are leveraged with a lot of debt.

 

[melkos]

@bevm Thanks for the facts. Always food to have solid planning factors

 

[annyfins]

@oneinhim Depending on what you want to do next and career field, going civil service is an option. It can be worthwhile in the long run, to buy back your AD time, to increase your CS pension, even if that means giving up your mil pension. Totally, depends on your individual situation though.