So, how much is a military retirement worth? I figured this is an important question for every Soldier to ask themselves BEFORE they decide to stay in or get out. I know lots of Soldiers who tell me they are staying in to get a pension, but they have NO IDEA about how much they will get when they retire. I personally can’t even fathom that. If you’re only staying in to get a pension, figure how much it will be, so you can make sure it’s worth it! I believe we all have a responsibility to educate ourselves about the benefits that we have earned, or will earn.
I must also admit that there is a HUGE difference between an Active Duty or AGR pension compared to a traditional National Guardsmen or Army Reservists pension. For someone serving full-time, retiring from the military really is an awesome deal, especially when you realize that you could potentially retire from the military in your late thirties or early forties, start collecting your pension the next month, and then go on to have another career, and even earn a second pension!
For the Reservist, they do have to wait until they are 6o to start collecting their pension, but the time will go by anyway! It can still be a good deal, but you have to do your research. I say that because the average Reservist who hasn’t spent any time on Active Duty won’t get much of a military retirement. They might top out at $200 to $500 per month depending upon their final rank, years of service and points. It’s better than nothing, but it still isn’t much.
So sticking around JUST to get that small amount might not be your best course of action. If you love serving, that’s one thing. But if you’re only sticking around to get that retirement check, make sure it’s worth it. I suggest you check out the retirement calculator and experiment with a few different numbers to get an idea of what your future military retirement pension could be. Here is the link to the retirement calculator.
Why I Like Military Retirements
The major reason I like military retirements is that they offer a PASSIVE income. That means that you do the work one time and then get paid on it forever. There aren’t many organizations or businesses left in the world where you can work for 20 years and then start drawing a pension the next MONTH! For Soldiers in the ARNG and USAR, you have to wait longer, but it’s still a great deal.
I want to use a hypothetical example with you to show you the power (and value) of a military retirement.
- A $500 per month military retirement is worth $200,000 in the bank at 3% interest
- A $1000 per month military retirement is worth $400,000 in the bank at 3% interest
- A $2,000 per month military retirement is worth $800,000 in the bank at 3% interest
- A $4,000 per month military retirement is worth, $1,600,000 in the bank at 3% interest
I used these hypothetical examples to illustrate how much a monthly military pension is worth. Most Soldiers (or civilians) will NEVER save that much money during the course of their lifetime, especially in our current society. That’s why “staying in” is such a good option for so many people. Every year you serve and work toward a pension is like putting money in the bank. Combine that with contributing to your Thrift Savings Plan and you have a winning one two combination!
Now, I understand you still have to pay TAXES on your military pension, but it’s still a pretty good deal.
The Bottom Line
Retiring from the military is not for everyone. That’s perfectly okay. However, every Soldier should understand the monetary value of a pension before they make the decision to stay in or get out. Everyone should experiment with the retirement calculator to get an idea of how much they would get each month, based upon their expected rank, years of service and points. That way they can make an educated decision about what to do with their career.
What are your thoughts? What do you think about the value of a military retirement? Leave a comment below to let me know what you think. I look forward to hearing from you.