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.
Other posts you may enjoy:
- The Military Retirement System: How It Works
- The Retirement Process in the Army National Guard
- How to Calculate Your Army, USAR or ARNG Retirement Pay
- Is There Tax on Military Retirement?
- The Top Army National Guard Retirement Benefits
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.
Chuck Holmes
Former Army Major (resigned)
Publisher, Part-Time-Commander.com
Email: mrchuckholmes@gmail.com
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What bothers me the most if someone states they are just staying in the military to get the pension is the fact that they probably are not going to give to the branch what they should. If that is their only reason, I would almost fear going into a war zone with that person being my leader. If staying for the pension is your only reason, I suggest you retire now, but if it is just one of the reasons, with defending the U.S. being first, by all means stay.
I believe you get my point. The money should not be the main priority.
I had no idea how much military retirement is worth and if my husband knows, he’s been keeping his mouth shut! It’s no wonder so many people want to stay in to earn it (it’s a big reason my husband would like to go from active duty to reserves). I like that you acknowledge (out-rightly and from personal experience) that while this is a great option, it’s not for everyone. Too few people are aware of their finances and financial future as it is and the military offers such great options for taking care of yourself and future. But so do other places and maybe the monetary pay out isn’t worth it if the job is sucking the soul from you anyway. A quote I first heard in middle school and have come to appreciate more over the years is “Knowledge is power” and how true it is. We can control our finances, they don’t have to control us.
I always tell people if you are staying in just for the pension, at least calculate how much it will be. That way you can know if there is a better alternative.
The United States’ military’s retirement plans are one of many great reasons to join the military, though I shudder to think that some people stick around just to get a pension. I grew up watching AFN (Armed Forces Network) and there were constantly infomercials about the Thrift Savings Plan and 401K Plan, so I learned from a young age the importance of saving for retirement. Under the 401K Plan, the employer deducts money from the employee’s pay check to contribute a maximum of $17,500 annually to the service member’s retirement fund. The money is tax-deferred until retirement, too, which is great. This is the only military retirement plan I’m familiar with. What are the other common ones?
Soldiers basically get their standard pension after 20 years, and then when they are 62 (I believe) they can start drawing from their Thrift Savings Plan as well.
Wow… I never realized that $4,000 a month equates to $1.6m over time at 3% interest. That’s a ton of money (well, $4,000 a month in savings is a LOT to put away), and I can’t imagine ANYONE needing more than that at the time of retirement. But, of course that isn’t a reachable figure for most, and it’s good to see that $500 a month (arguably, way more reachable of a goal) can net you $200,000 in the long run.
All I said is that you would have to have $1.6 million in the bank at 3% interest to make $4k per month in interest/residual income.