Value of a Military Retirement

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KYDoc
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Value of a Military Retirement

Post by KYDoc » Tue Jun 19, 2018 1:10 am

As I approach mid-career in the military (9 years), I find myself reconsidering whether I want to make the jump to the civilian world as a physician or spend another 10 years in the military and retire with a pension and cheap health insurance. I could definitely make a little more on the outside but probably not enough to compensate for the pension. I opted for BRS so a I get a 5% match on my base pay and my pension would be 40% of the average of my base pay for 36 months prior to retirement. Using projected pay raises, my low pension would be $54,571/yr and my high pension would be $59,000/yr, depending on if and when I get promoted to O-6. This is in 2029 dollars. And the annual pension would increase every year with cost of living.

To make the comparison as fair as possible, I figured all my military pay including special pay, BAH, BAS, 5% TSP match and the tax advantage of the BAS/BAH (not including COLA because I won't always get that). My calculated civilian-equivalent income then would be about $201,000 after 10 years of service. I then tried to calculate how much more I would need to make above $201K over the next 10 years to save up enough to approximate the value of a military pension. I assumed that any extra savings would be in a taxable account since I am already maxing out my TSP and 2 Roth IRAs so I discounted the extra income by 24% to adjust for taxes. I won't make enough to be in the 32% bracket. Yeah, tax rates are probably going up again in 2025 but I didn't figure this into my calculations.

A long introduction brings me to my questions:
1. How would you price the value of a pension? One option would be to look at the cost of an annuity which would likely be $2M at age 50. I don't like this idea because I would probably never buy a pension as I find them too pricey. Second, you can't leave your annuity to your spouse unless you pay extra for it. I like the idea of withdrawing from my own investments better. This leads me to my next question.

2. Say that you could choose from a pension that would pay you $59,000/year for the rest of your life (adjusted 2% per year for inflation) or a nest egg that you could draw an equivalent amount from (with the same 2% annual increase for inflation) for many years. Assume also that your family would be taken care of in either scenario through your other retirement savings. What would be the minimum number of years you would require the nest egg to last before you would take the pension? I have been using 40 years. If I can save enough to make pension-equivalent annual withdrawals from age 50 to age 90, I'd rather have the nest egg even if that means losing out on a few years of what the pension would have paid when I'm 90+. If my nest egg would only last me 20 years (until age 70), I'd probably opt for the pension. What do you think is the break-even point?

3. What rate of return would you use during the 10 years of savings (from age 40-50) to calculate what my final nest egg at age 50 would be? I've been using 7%. I'm currently invested pretty heavy on stock index funds to bonds in an 85:15 split.

4. What rate of return would you use during the years after age 50 during the distribution phase? I've been using 5%. I would most likely increase my bond exposure after age 50 but still anticipate having plenty stocks. But since the pension is guaranteed income, should I reduce my rate of return even further to approximate this? Otherwise, I'd be biasing my model against the pension since I'd be taking on more risk with my nest egg than I would with my pension. So maybe 4% is more reasonable?

5. What value would you give to cheap health insurance? Tricare Prime for retirees is $578/yr for a family with no deductibles. I probably won't stop working completely after age 50 so I will probably have access to health insurance through my employer for at least the next 15-20 years if I get out. On the other hand, I feel like I should give it some value in this calculation because it is such a good deal. Of course, we may have have some form of nationalized health insurance by that time anyway which would reduce or eliminate the value of Tricare Prime. Especially for any of you that have had to make the transition from Tricare to standard health insurance, what price would you give for the value of Tricare Prime?

Thanks!
KYDoc (now residing in Alaska)

stan1
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Re: Value of a Military Retirement

Post by stan1 » Tue Jun 19, 2018 7:34 am

I don't have much to add to help other than asking "what's best for you and your family" since you make no mention of this? How do they feel about potential relocation and deployments? Do you enjoy the job or are you ready for something different? The military is bureaucratic in some ways but my friends who have transitioned from military to civilian physician careers are frustrated by the administrative and profit motivations in medicine. One friend left a prestigious partnership and returned to military medicine as a contractor then a civil servant because he felt there he could better serve his patients.

The numerical analysis you are looking at over 50+ years is too dependent upon assumptions and future factors you have no control over (inflation, taxes, future returns, health care policy, veterans benefits, future compensation, mortality). Change the assumptions and you'll get a different numerical answer. That's why I'm going back to what do you and your family want.

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BL
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Re: Value of a Military Retirement

Post by BL » Tue Jun 19, 2018 8:04 am

It does sound more like a lifestyle choice than a financial choice, as you should have "enough" no matter which way you choose.

It is possible that you would have more lifestyle financial pressure to "live like a doctor" in civilian life; in that case you might need more income to maintain that lifestyle. That might cause you to choose jobs for the income as opposed to choosing job and location wherever you please with the retired pay and benefits to support you and spouse survivor (maybe at 55%) forever. Do you value other benefits like Space Available travel opportunities? Surviver Benefits can't be beat!

There is probably a way to join Reserves or Guard in your state to set up a lower pension and benefits starting at age 60. That could be a compromise if you can't decide otherwise. Not sure if working for VA or government would have similar benefits for retirement (combined pension) and health care.

Seems like you already made a sort of decision when you decided to accept a lower pension in exchange for TSP contributions. That may have been a good compromise at the time when undecided.
Last edited by BL on Tue Jun 19, 2018 3:23 pm, edited 1 time in total.

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Charlie Foxtrot
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Re: Value of a Military Retirement

Post by Charlie Foxtrot » Tue Jun 19, 2018 10:10 am

Hi KYDoc,

I retired from the Army in 2002 at the age of 43 under the old pension system (50% at 20 years active duty), so I'm not really familiar with the new pension plans. However, having that pension has been a tremendous help over the years, a steady stream of guaranteed income no matter what my job situation was or what was happening with the market. I gather from reading your post that you must be around 40 years old and you only need 10 more years to be retirement eligible. My gut reaction is to advise you to stick it out and get the pension and the substantial pay raises you will get with future promotions. Ten years is such a relatively short period of time! Assuming you retire from the military around age 50, it's very likely you will want to continue in civilian practice, but having that pension allows you to be more selective about where you want to live, what kind of position you will accept, and how much you want to work. If you're sick of military life, however, that's another matter...

I agree - I don't like annuities either. However, your statement "If I can save enough to make pension-equivalent annual withdrawals" for 40 years is a pretty big IF! It would be hard to do that for even 20 years. There are so many bad things that could happen to you financially over a 20-40 year period (including an untimely death). The pension in 10 more years takes that risk completely off the table.

A 7% rate of return for an 85:15 split is not unrealistic - if only that could be guaranteed (like a pension in 10 more years!). :D

Agreed... A 4% rate of return after age 50 would be more reasonable - if only that could be guaranteed. :D

I can't give an intelligent answer on your health insurance question. I was covered by my civilian employer after the military, and when I retired for good last year at age 58 I have been relying almost completely on the mostly free VA medical care, with Tricare Select as a backup (free to retirees but we have larger co-payments than Tricare Prime).

Good luck with whatever you choose to do and thank you for your service.
"Man plans... God laughs"

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Re: Value of a Military Retirement

Post by travellight » Tue Jun 19, 2018 10:17 am

I would tend to favor the pension; and your assumptions seem reasonable.

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Re: Value of a Military Retirement

Post by Exafchick » Tue Jun 19, 2018 12:51 pm

I retired from active duty after 21 years in 2007. For me, having the guaranteed income from my pension allowed me to find a job I wanted to do instead of taking one because I had to. I retired to an area that is not so great economically so the pension really helped me ensure I could live where I wanted to. It will also be nice having the pension when I finally retire for real because I plan to move out west and having the pension will allow me to make the drive as slow as I want so I can stop and see friends and/or sites. Plus, the healthcare is hard to beat!

TravelforFun
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Re: Value of a Military Retirement

Post by TravelforFun » Tue Jun 19, 2018 12:57 pm

How much less in pension you would get if you got out of the military 10 years early?

TravelforFun

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Re: Value of a Military Retirement

Post by Grt2bOutdoors » Tue Jun 19, 2018 12:59 pm

Priceless. Any well funded defined benefit is. Private sector workers need to accumulate a whole bunch of money to equal a DB/DC Plan.
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BolderBoy
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Re: Value of a Military Retirement

Post by BolderBoy » Tue Jun 19, 2018 1:25 pm

Are you enjoying being a physician in the military? Or are you merely putting up with it while you ponder the pension and lifetime healthcare bennies?

If the former, then no question - stay for the retirement perks. If the latter, well...

As mentioned earlier, it seems more of a lifestyle question.
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pennywise
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Re: Value of a Military Retirement

Post by pennywise » Tue Jun 19, 2018 1:57 pm

I'm not familiar with Tricare Prime (which seems to be an HMO version of Tricare) but my father, a veteran, has Tricare for life and it's a pretty incredible and unbeatable guaranteed health care plan. Basically anything Medicare doesn't cover, Tricare does on a pre-authorized basis.

If you have the potential to stay on Tricare and then Tricare for life that's a HUGE potential benefit. Given the volatility of the health care and health insurance system in the US, to know that you and your family's medical care needs are fully covered for the rest of your life is worth more than a little weighting in the decision as to whether or not to stay in.

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corn18
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Re: Value of a Military Retirement

Post by corn18 » Tue Jun 19, 2018 2:30 pm

20 years in the Navy. 50% high 3 for pension. Tricare for life. Total value of the pension is around $1.2M in today's dollars. Total value of the Tricare is TBD but I would put it at $500,000. Carefree planning for retirement with a COLA military pension and SS that covers all expenses and predictable healthcare costs = priceless.

That being said, don't stay for the pension or the health care. 10 years hating your job is not worth it. I have made more money in the last 2 years than I made in 20 years in the Navy. But man, I had a blast. I complained a lot while I was in, but what a ride. Wouldn't trade it for $50M.

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Re: Value of a Military Retirement

Post by CnC » Tue Jun 19, 2018 2:59 pm

TravelforFun wrote:
Tue Jun 19, 2018 12:57 pm
How much less in pension you would get if you got out of the military 10 years early?

TravelforFun
None to the best of my knowledge. His pension payout would amount to $0.00. The military rule of 20 years and 50% salary for life is a very hard line as far as I know.


According to my AF buddy if you leave at 18 years you can end up with no pension at all.

https://themilitarywallet.com/reader-qu ... ement-pay/ link for additional information.


Imo unless you hate it, it would be insane to throw away your pension 11 years in. It would be basically like giving up a 401k with 500k if he left. Like literally throwing it in the trash.

It is almost always a terrible idea to throw away hundreds of thousands of dollars.

kelvan80
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Re: Value of a Military Retirement

Post by kelvan80 » Tue Jun 19, 2018 3:11 pm

TravelforFun wrote:
Tue Jun 19, 2018 12:57 pm
How much less in pension you would get if you got out of the military 10 years early?

TravelforFun
Zero. Have to do 20 years to get pension. The new system does match up to 5% though so you take something with you.

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Re: Value of a Military Retirement

Post by mickeyd » Tue Jun 19, 2018 3:14 pm

KYDOC have you considered the advantages of leaving active duty and joining the army reserves? With all of that AD time, your retirement pay (at age 60) would be pretty stout. Just an idea.
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mxs
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Re: Value of a Military Retirement

Post by mxs » Tue Jun 19, 2018 3:26 pm

KYDoc wrote:
Tue Jun 19, 2018 1:10 am
depending on if and when I get promoted to O-6.
O-6 is insanely hard to achieve in certain branches/areas/career fields. If you make that in 20 years, that will be fairly impressive.

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Re: Value of a Military Retirement

Post by Maverick3320 » Tue Jun 19, 2018 3:41 pm

There is definitely a middle path here. I can't speak for other branches but in the Army National Guard our physicians get drill pay and a $25,000 bonus every year. You would then go into your pension at age 60 with a ton of "points" from all your active duty time, and still have access to Tricare Reserve Select (~200 month for comprehensive family coverage). Our physicians can (and almost all do) promote to O6 in any physician slot, which means they can generally stick around in the same unit until retirement. A lot of our medical positions are also in non-deployable units. Dollar amount aside, I think this would be much more of a lifestyle choice though.

In terms of valuing the pension: I put everything in today's dollars and then use a 4% rate of return (to account for inflation). I also just figure that I will live until age 90. You could try using something like the retirement scenarios in Personal Capital, but there are so many unknown variables here that you might end up with paralysis by analysis.

kelvan80
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Re: Value of a Military Retirement

Post by kelvan80 » Tue Jun 19, 2018 4:04 pm

mxs wrote:
Tue Jun 19, 2018 3:26 pm
KYDoc wrote:
Tue Jun 19, 2018 1:10 am
depending on if and when I get promoted to O-6.
O-6 is insanely hard to achieve in certain branches/areas/career fields. If you make that in 20 years, that will be fairly impressive.
I believe doctors start at O3 or O4 so it's not as difficult.

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Re: Value of a Military Retirement

Post by friar1610 » Tue Jun 19, 2018 4:31 pm

pennywise wrote:
Tue Jun 19, 2018 1:57 pm
I'm not familiar with Tricare Prime (which seems to be an HMO version of Tricare) but my father, a veteran, has Tricare for life and it's a pretty incredible and unbeatable guaranteed health care plan. Basically anything Medicare doesn't cover, Tricare does on a pre-authorized basis.

If you have the potential to stay on Tricare and then Tricare for life that's a HUGE potential benefit. Given the volatility of the health care and health insurance system in the US, to know that you and your family's medical care needs are fully covered for the rest of your life is worth more than a little weighting in the decision as to whether or not to stay in.
I just want to add that as a Navy retiree who has used Medicare + TRICARE for Life (TFL) for 8 years, it's a great arrangement. Other than Medicare Part B premiums and drug copays, I don't think I've paid anything for health care except as noted below. The TRICARE Mail Order Pharmacy (TMOP) is also excellent and for maintenance scrips you can get up to 90 days for one copay.

Just a couple of caveats:
- there is no dental or optical coverage (other than coverage for a refraction every 2 years). So you pay for glasses.
- copays on prescriptions have increased over the years and I suspect that trend will continue
- I suspect that somewhere down the line there may be an annual TFL premium to be paid, perhaps on a means-tested basis. The military lobby organizations do a great job fighting this battle on the Hill, but someday....?
- And, of course, you still have to pay the Medicare Part B premium
- Depending on where you live and/or move to, there may be a challenge in finding providers who accept Medicare assignment but this is true of all Medicare beneficiaries.
These are all minor caveats in an otherwise excellent system.
Friar1610

golfCaddy
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Re: Value of a Military Retirement

Post by golfCaddy » Tue Jun 19, 2018 5:37 pm

Here's the updated Trinity study.
https://www.forbes.com/sites/wadepfau/2 ... 5f10b06860.

Beyond 40 years, the SWR doesn't change much. You're managing your money like a perpetual endowment at that point.

ncbill
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Re: Value of a Military Retirement

Post by ncbill » Tue Jun 19, 2018 6:20 pm

kelvan80 wrote:
Tue Jun 19, 2018 4:04 pm
mxs wrote:
Tue Jun 19, 2018 3:26 pm
KYDoc wrote:
Tue Jun 19, 2018 1:10 am
depending on if and when I get promoted to O-6.
O-6 is insanely hard to achieve in certain branches/areas/career fields. If you make that in 20 years, that will be fairly impressive.
I believe doctors start at O3 or O4 so it's not as difficult.
Yep, have a relative who got a great deal in their early 30s - Army sent them to medical school and 15+ years later they're an O-5.

One of my kids attends a service academy & is currently studying for the MCAT while home on leave.

For the OP, as other posters have said, one path to still get a pension is to switch to Guard/Reserves:

https://the-military-guide.com/dont-gut ... nal-guard/

KYDoc
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Re: Value of a Military Retirement

Post by KYDoc » Tue Jun 19, 2018 9:05 pm

BolderBoy wrote:
Tue Jun 19, 2018 1:25 pm
Are you enjoying being a physician in the military? Or are you merely putting up with it while you ponder the pension and lifetime healthcare bennies?

If the former, then no question - stay for the retirement perks. If the latter, well...

As mentioned earlier, it seems more of a lifestyle question.
I do enjoy being a physician in the military. I'm not itching to leave. There are some uncertainties and some things that could make my life much harder. And I don't have the option to scale back in the military; it's pretty much full speed ahead until retirement, more stress and responsibility over time. Not necessarily a bad thing but it does limit one's freedom somewhat. But at this point, I feel like I would need to be bribed out.
KYDoc (now residing in Alaska)

KYDoc
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Re: Value of a Military Retirement

Post by KYDoc » Tue Jun 19, 2018 9:08 pm

kelvan80 wrote:
Tue Jun 19, 2018 4:04 pm
mxs wrote:
Tue Jun 19, 2018 3:26 pm
KYDoc wrote:
Tue Jun 19, 2018 1:10 am
depending on if and when I get promoted to O-6.
O-6 is insanely hard to achieve in certain branches/areas/career fields. If you make that in 20 years, that will be fairly impressive.
I believe doctors start at O3 or O4 so it's not as difficult.
Physicians have a 100% promotion rate at 12 years to O-5. 50% are promoted to O-6 at 18 years. So it's pretty doable by 20 years. :wink:
KYDoc (now residing in Alaska)

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blaugranamd
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Re: Value of a Military Retirement

Post by blaugranamd » Wed Jun 20, 2018 5:34 am

kelvan80 wrote:
Tue Jun 19, 2018 4:04 pm
mxs wrote:
Tue Jun 19, 2018 3:26 pm
KYDoc wrote:
Tue Jun 19, 2018 1:10 am
depending on if and when I get promoted to O-6.
O-6 is insanely hard to achieve in certain branches/areas/career fields. If you make that in 20 years, that will be fairly impressive.
I believe doctors start at O3 or O4 so it's not as difficult.
It is though. The promotions through O-5 are all but guaranteed but making O-6 it's essentially required these days to take on a high level nonclinical position like a squadron commander or SGH where you will have virtually no time practicing medicine.

For the pension, one overly simplistic view would be to see it as equivalent to about $1.5M in retirement savings as that amount at a 4% withdrawal rate is roughly $60k/year or your expected pension benefit.

But as others have said, ten years, depending on your medical speciality, is 1-3 more deployments, 2-3 more PCS, likely 5+ years splitting time between clinic and administration (flt or sq/cc, sgh). If you can't fathom that waiting it out may not be worth it.
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Re: Value of a Military Retirement

Post by SGM » Wed Jun 20, 2018 8:07 am

14 states of the 41 that tax income do not tax military pensions.

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Re: Value of a Military Retirement

Post by Nthomas » Wed Jun 20, 2018 8:25 am

KYDoc wrote:
Tue Jun 19, 2018 9:08 pm
kelvan80 wrote:
Tue Jun 19, 2018 4:04 pm
mxs wrote:
Tue Jun 19, 2018 3:26 pm
KYDoc wrote:
Tue Jun 19, 2018 1:10 am
depending on if and when I get promoted to O-6.
O-6 is insanely hard to achieve in certain branches/areas/career fields. If you make that in 20 years, that will be fairly impressive.
I believe doctors start at O3 or O4 so it's not as difficult.
Physicians have a 100% promotion rate at 12 years to O-5. 50% are promoted to O-6 at 18 years. So it's pretty doable by 20 years. :wink:
Not true any more. I would have to look up the latest results but for several years it has not been 100%. More like 65-70%. If you have done ILE chances for promotion are much higher.

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Re: Value of a Military Retirement

Post by WanderingDoc » Wed Jun 20, 2018 11:25 am

Nthomas wrote:
Wed Jun 20, 2018 8:25 am
KYDoc wrote:
Tue Jun 19, 2018 9:08 pm
kelvan80 wrote:
Tue Jun 19, 2018 4:04 pm
mxs wrote:
Tue Jun 19, 2018 3:26 pm
KYDoc wrote:
Tue Jun 19, 2018 1:10 am
depending on if and when I get promoted to O-6.
O-6 is insanely hard to achieve in certain branches/areas/career fields. If you make that in 20 years, that will be fairly impressive.
I believe doctors start at O3 or O4 so it's not as difficult.
Physicians have a 100% promotion rate at 12 years to O-5. 50% are promoted to O-6 at 18 years. So it's pretty doable by 20 years. :wink:
Not true any more. I would have to look up the latest results but for several years it has not been 100%. More like 65-70%. If you have done ILE chances for promotion are much higher.
Off the top of my head, it dripped down a lot to around 73% in 2016, but jumped back to around 96% in 2017 (for at the zone promotion to O-4). For O-5 I believe its somewhere around 80% now. Its not 100%.
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Re: Value of a Military Retirement

Post by BolderBoy » Wed Jun 20, 2018 11:56 am

KYDoc wrote:
Tue Jun 19, 2018 9:05 pm
I do enjoy being a physician in the military. I'm not itching to leave. There are some uncertainties and some things that could make my life much harder. And I don't have the option to scale back in the military; it's pretty much full speed ahead until retirement, more stress and responsibility over time. Not necessarily a bad thing but it does limit one's freedom somewhat. But at this point, I feel like I would need to be bribed out.
If I were you, I would stay in. You'd find that civilian medical practice is quite stressful and demanding and only likely to get moreso going forward. A friend who was in the USAF medical corp said that the main thing she misses about the military is the accountability.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

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Re: Value of a Military Retirement

Post by ofcmetz » Wed Jun 20, 2018 12:29 pm

KYDoc wrote:
Tue Jun 19, 2018 1:10 am


A long introduction brings me to my questions:
1. How would you price the value of a pension? I price the value of my police pension by going to a site like www.immediateannuities.com . My police pension will produce a similar yearly income to yours but will have only sporadic inflation adjustments once I turn 63.


2. Say that you could choose from a pension that would pay you $59,000/year for the rest of your life (adjusted 2% per year for inflation) or a nest egg that you could draw an equivalent amount from (with the same 2% annual increase for inflation) for many years. . What do you think is the break-even point? When using your own nest egg, nothing is near as certain as a military of government pension. If you asked me to trade a $60,000 inflation adjusted pension with survivor benefits for my wife then I'd want at least 2 million and maybe more for that.

3. What rate of return would you use during the 10 years of savings (from age 40-50) to calculate what my final nest egg at age 50 would be? I've been using 7%. 7% is reasonable if you are talking about nominal returns before inflation.

4. What rate of return would you use during the years after age 50 during the distribution phase? I've been using 5%. Assuming you will be more conservatively invested then I think that is reasonable too.

5. What value would you give to cheap health insurance? I've been wondering the same thing because in my case the state will pay 75% of my premiums for life once I retire. Essentially, I'll always pay the same as an active state employee. Looks like this benefit is worth around $10,000 a year right now for me. So maybe this benefit is worth between $500,000 and a million dollars? I'm curious what others think
Thanks!

I put my answers in bold for what they are worth. I think if you somewhat enjoy your job and the military life and benefits then it's a great decision to stay in and get the pension and insurance. I'm not sure I'd stay just just for the benefits otherwise if I just hated the position. I've been wearing golden handcuffs for sometime in a police job that I still somewhat enjoy. Remember once you get towards those last few years, like it or not you will be wearing the golden handcuffs too.

Best of luck.
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Re: Value of a Military Retirement

Post by togb » Wed Jun 20, 2018 12:40 pm

Army brat here. My father retired after 20 years, and then had a second career. He enjoys financial security and great medical benefits. My mother was covered under Tricare, which paid every penny of her (significant) medical expenses.

Good friend from school continued on to the Air Force academy, retired after 20 years, had a short second career with a mega corp.

Just knowing what I do about military retirement, I'd suggest you not walk away from the option. Pensions are rare and valuable. Strong medical coverage is rare and prohibitively expensive. You have access to both.

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Re: Value of a Military Retirement

Post by Nords » Sat Jun 23, 2018 3:40 pm

KYDoc wrote:
Tue Jun 19, 2018 9:05 pm
BolderBoy wrote:
Tue Jun 19, 2018 1:25 pm
Are you enjoying being a physician in the military? Or are you merely putting up with it while you ponder the pension and lifetime healthcare bennies?

If the former, then no question - stay for the retirement perks. If the latter, well...

As mentioned earlier, it seems more of a lifestyle question.
I do enjoy being a physician in the military. I'm not itching to leave. There are some uncertainties and some things that could make my life much harder. And I don't have the option to scale back in the military; it's pretty much full speed ahead until retirement, more stress and responsibility over time. Not necessarily a bad thing but it does limit one's freedom somewhat. But at this point, I feel like I would need to be bribed out.
As MickeyD and Maverick say, spend a little time learning about the Reserves & National Guard. You do have a choice to scale back to a weekend a month and two weeks per year.

Whether or not you use the Reserve/Guard option, the knowledge is valuable. If your career takes an unexpected turn (whether or not it's in your control) you'll at least be able to make an informed choice more quickly.
http://the-military-guide.com/dont-gut-20-leave-active-duty-reserves-national-guard/
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bluefighter1
Posts: 1
Joined: Sat Jun 23, 2018 7:16 pm

Re: Value of a Military Retirement

Post by bluefighter1 » Sat Jun 23, 2018 7:35 pm

KYDoc,

A few years ago I went through the same mental gymnastics and determined staying in was the best choice (financially).

Free health care is priceless - despite having the option to purchase great coverage through my current employer I have stuck with free Tri-Care and self-insured the higher deductible. As a young retiree, even with a family, it's well worth the price/risk.

The thing to keep in mind is the certainty of the military depositing a check in your account every month until you pass, and then giving your spouse that same benefit, albeit at a lower rate, until she/he passes. A portfolio withdrawal rate of 2.5% gives you a >90% of said portfolio lasting essentially forever (we need the risk of each path to be equal to make the comparison meaningful). So, using this number and a $50,000/yr pension payment, aka, withdrawal rate, you'd have to save +/- $2M in the next 10 years ($50,000/2.5% = $2M). To save that much money over the course of just 10 years you'd need to sock away +/- $150,000/yr at 7%. Big number.

That being said, I left before I needed to because I was sick of the military's waning warrior culture, but before my rich uncle was obligated to pay me until death do us part. As many mentioned before me (and I hate to be redundant, but the point is huge. Huge....) No man is promised a tomorrow. You will have no trouble living a wonderful financial life either way, so it comes down to choosing the emotionally meaningful path.

Thank you for your service!

TB

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