Military Retirement/Pension vs. Higher Income

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Nthomas
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Military Retirement/Pension vs. Higher Income

Post by Nthomas » Sun Sep 04, 2016 9:29 am

I am a military physician making approximately 150K/yr and invest 41K/yr between TSP, IRA's and taxable. If I stayed in, I would have 9 more years until retirement at age 52 and would receive about 4k/yr thereafter from the pension. However, that is 150k/yr x 9 yrs vs. taking a higher paying job now for 300-400k/yr which may or may not be there after that 9 years. So it would be 9 years of 150-250k/yr LESS with a guaranteed pension vs. taking a much higher paying job now and saving/investing a much higher amount (at least 100k/yr) than I am now. No pension with the civilian, higher paying job. Any thoughts on the better path?

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Taylor Larimore
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Re: Military Retirement/Pension vs. Higher Income

Post by Taylor Larimore » Sun Sep 04, 2016 9:39 am

Nthomas:

Welcome to the Bogleheads Forum!
Nthomas wrote:
Any thoughts on the better path?
Having a job we enjoy is more important than the money.

Thank you for serving our country!

Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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dm200
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Re: Military Retirement/Pension vs. Higher Income

Post by dm200 » Sun Sep 04, 2016 10:01 am

Nthomas wrote:I am a military physician making approximately 150K/yr and invest 41K/yr between TSP, IRA's and taxable. If I stayed in, I would have 9 more years until retirement at age 52 and would receive about 4k/yr thereafter from the pension. However, that is 150k/yr x 9 yrs vs. taking a higher paying job now for 300-400k/yr which may or may not be there after that 9 years. So it would be 9 years of 150-250k/yr LESS with a guaranteed pension vs. taking a much higher paying job now and saving/investing a much higher amount (at least 100k/yr) than I am now. No pension with the civilian, higher paying job. Any thoughts on the better path?
What is your lifestyle/professional "satisfaction" as a military physician?

tibbitts
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Re: Military Retirement/Pension vs. Higher Income

Post by tibbitts » Sun Sep 04, 2016 10:17 am

Nthomas wrote:I am a military physician making approximately 150K/yr and invest 41K/yr between TSP, IRA's and taxable. If I stayed in, I would have 9 more years until retirement at age 52 and would receive about 4k/yr thereafter from the pension. However, that is 150k/yr x 9 yrs vs. taking a higher paying job now for 300-400k/yr which may or may not be there after that 9 years. So it would be 9 years of 150-250k/yr LESS with a guaranteed pension vs. taking a much higher paying job now and saving/investing a much higher amount (at least 100k/yr) than I am now. No pension with the civilian, higher paying job. Any thoughts on the better path?
My thought is that financial considerations have absolutely nothing to do with this decision.

ralph124cf
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Re: Military Retirement/Pension vs. Higher Income

Post by ralph124cf » Sun Sep 04, 2016 10:20 am

Take the higher paying job and stay in the reserves. That way you will end up with a guaranteed inflation adjusted military pension at age 60.

Ralph

pshonore
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Re: Military Retirement/Pension vs. Higher Income

Post by pshonore » Sun Sep 04, 2016 10:28 am

Is your pension really 4K after 9 more years of service? Are you active duty? At what age can you collect?

Dontridetheindexdown
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Been there, done that, would do it again!

Post by Dontridetheindexdown » Sun Sep 04, 2016 10:34 am

Everyone, regardless of rate or rank, thinks seriously about getting out half-way through. I am thankful every day for the man who prevented me from getting out with 10 years to go. Back in those days, our military was a lot more hands-on.

First, do the math. Your non-contributory defined benefit will be at least $56,000 per annum, plus subsidized health insurance for you and your dependents for the rest of your life. My first day in the military (1970) I was taught "don't pay attention to scuttlebutt." I don't know who gave you the "about 4k/yr" estimate. It is just plain wrong. More likely, you will receive more than $70,000 per annum by the time you retire, and you will never have to shop for health insurance.

Second, the military remuneration and benefit structure is far flatter (more equalized, if you prefer) than the private sector. Those with less than average skill/education are compensated more highly than their private sector counterparts, those with higher than average skill/education (you) are compensated less highly than your private sector counterparts. Whenever you return to civilian life, your remuneration will correlate directly with the receivables you generate, discounted by overhead costs. If you are physically and mentally able, you can make the "big money" no matter what age you return to civilian life. More importantly, you will be positioned to practice medicine exactly as you please, and not have to chase after dollars. Your military pension and health benefits will allow you to do whatever you like - open a private practice, join a group practice, work for an organization, establish your own medical mission - whatever you like.

Third, and most important, we humans age rapidly during the second half. Middle age is a lot younger than most people are willing to admit. If you lock in the military retirement, you will be better positioned physically, mentally, and emotionally to face the vicissitudes of the second half of life.

If you prefer, you can message me direct for some serious military "career counseling." Otherwise, just suck it up and keep marching!
Last edited by Dontridetheindexdown on Sun Sep 04, 2016 10:52 am, edited 1 time in total.

orca91
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Re: Military Retirement/Pension vs. Higher Income

Post by orca91 » Sun Sep 04, 2016 10:43 am

Nthomas wrote: If I stayed in, I would have 9 more years until retirement at age 52 and would receive about 4k/yr thereafter from the pension.
Well, I certainly wouldn't stick it out for only $4k a year after. :happy

I assume you meant $4k/month for the pension.

With only 9 years to go before being able to retire,..... stick it out!! That will go by quick and the job security, medical, retirement, TSP, and other benefits that go along with it. You're too far in to give it up with only 9 years left.

BrianMc
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Re: Military Retirement/Pension vs. Higher Income

Post by BrianMc » Sun Sep 04, 2016 11:34 am

NThomas (Doc),

I was in a similar spot 10 years ago EXCEPT I chose to get out of the military at a 50% pay cut to move into a "service-style" career I thought I would really enjoy (and thankfully, I still do...no regrets moving to my current profession). I am not a Doctor. Lots of good advice provided to you thus far and the decision to stay in or get out is not easy. You chose to serve your country as a Doctor in the uniformed services. That hasn't crossed the minds of most MDs, so a huge thank you! Some of the best docs I've ever met were in the Navy.

The one regret I do have is not looking into the Reserves. After 10 years in the military, deploying OCONUS and stateside (was gone 50% of the time), I'd had enough and wanted a clean break (I didn't even talk to the reserve recruiter at the time). This was ignorant. I thought the only reserve opportunities were the one weekend per month, two weeks per summer, which would not have worked for me at the time. Boy was I wrong! There are so many different opportunities in the reserves (and some good deals at that)! Truth be told, I may look to jump back into the reserves, maybe even to another branch, if they're willing to take a guy who, 10 years later, may not be as mean and not as lean. :D

Whatever you decide, be proud of your service. Best wishes! -Brian

orca91
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Re: Military Retirement/Pension vs. Higher Income

Post by orca91 » Sun Sep 04, 2016 11:46 am

Being a physician is well over my skill level when I was in... I mean WELL OVER. :happy

But, I wonder what kind of Reserve opportunities there would be for a physician? I imagine they would be deployed stateside or otherwise often and almost as full time as when they were active duty. I have no idea really, but doesn't seem there would be many one weekend a month Reserve duties for a physician.

Having done some Reserve time myself, even on the enlisted side the higher in rank one gets the less of a one weekend a month job it gets to be. Between texts and emails and phone calls... seemed like I was always taking care of something or another all month long.

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Re: Military Retirement/Pension vs. Higher Income

Post by BTDT » Sun Sep 04, 2016 12:10 pm

Have a friend who was in your situation. Retired as 06 and worked weekends at emergency rooms. Completely retired several years later and has a gentleman's farm, and races motorcycle's for fun. Seems very happy with life.

I think you meant 4k+/month in retired pay. I'm retired and found medical big advantage especially with Medicare (Tricare for life), also many states exempt most if not all military retirement from tax along with VA benefits. Very low cost prescription drugs is another benefit.Don't forget to throw in the SS you are paying the max on. That will add another $3500/month at age 70 with inflation adjusted dollars. Note- These benefits are pretty much fixed income, and very difficult to be taken away.

Bottom line- tough call. I was a pilot and chose to stay for 22- no regrets as I fast approach 70 and look back at my three retirements :sharebeer
If past history was all that is needed to play the game of money, the richest people would be librarians.

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Nthomas
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Re: Military Retirement/Pension vs. Higher Income

Post by Nthomas » Sun Sep 04, 2016 12:25 pm

orca91 wrote:
Nthomas wrote: If I stayed in, I would have 9 more years until retirement at age 52 and would receive about 4k/yr thereafter from the pension.
Well, I certainly wouldn't stick it out for only $4k a year after. :happy

I assume you meant $4k/month for the pension.
Haha yikes...yes 4K/mo not yr!

Thank you for all the responses. I really appreciate all of the different perspectives and opinions. It's a very difficult decision. It would be easier if I knew they would not force me to move again and if there were no surprise deployments. Moving is so hard for everyone but esp kids.

Leemiller
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Re: Military Retirement/Pension vs. Higher Income

Post by Leemiller » Sun Sep 04, 2016 12:27 pm

If you save approx $1 million more in the nine years of higher income you can fund yourself at 4K a month more and you get to keep the $1 million - well your heirs do at least. Might be more of a lifestyle choice, but you may also consider health care benefits at 52 - that would tip the needle pretty far in the other direction if early retirement was a goal.

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Re: Military Retirement/Pension vs. Higher Income

Post by friar1610 » Sun Sep 04, 2016 2:55 pm

I'm retired USN (not a doctor) and really appreciate having the pension and medical benefits. I don't live anywhere near a base, so don't take advantage of commissaries, exchanges or base gyms. I remember one Navy doc told me that he really liked practicing in the military because he never had to worry, when he wrote a prescription, that the patient wouldn't be able to afford to fill it. He also liked not having to hassle with insurance companies. Of course, I'm sure there are down sides to military medicine that don't exist in the civilian world so maybe it's all a wash.

Good luck with your decision.
Friar1610

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Re: Military Retirement/Pension vs. Higher Income

Post by billw » Sun Sep 04, 2016 5:32 pm

1+ Ralph

Grateful1
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Re: Military Retirement/Pension vs. Higher Income

Post by Grateful1 » Sun Sep 04, 2016 5:42 pm

Nthomas thank you for your service. If preserving retirement pension benefits from your military time while having relief from forced moves / deployments is your goal a good option is to look into becoming a physician for the Dept of Veterans Affairs. Despite the politician's continual trashing of the VA for their own political ambitions the VA provides excellent state of the art modern care and one can have a very interesting practice especially if situated in one of the major closely academically affiliated centers. Military time is transferable into the Federal Employee's Retirement system (though you may have to pay a small differential to get full credit for your time it is a bargain as your eventual retirement would be calculated on a higher average of your highest 3 years of earnings.) You would be able to continue to invest through the TSP, etc. Salary is of course specialty dependent. 2 years ago I retired after 35 years of service and am finding my pension, TSP, and continued Federal Employee's health benefits to be very valuable. Feel free to private message me if you have questions. In my prior role I hired several ex-military physicians and dentists during this past decade. It was a win - win for the employees and the institution. It is worth looking into. Best of luck to you in your future.
Last edited by Grateful1 on Sun Sep 04, 2016 6:57 pm, edited 2 times in total.

delamer
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Re: Military Retirement/Pension vs. Higher Income

Post by delamer » Sun Sep 04, 2016 6:00 pm

The other thing to keep in mind is the high federal income taxes that you will pay on the added income if you leave the service. You will be losing 28% at a minimum to taxes, and probably a 33% on a chunk of it. Not to mention the AMT. And there could be state incomes taxes too. There is an app called Taxcaster that will let you estimate your federal taxes with the increased income so you can see the impact.

I am sympathetic to your concern about moving your kids again.

Good luck with your decision.

jack87
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Re: Military Retirement/Pension vs. Higher Income

Post by jack87 » Mon Sep 05, 2016 8:01 am

Nthomas,

I'm a retired military guy (21 years) and as was previously posted all military members face the "stay in or get out" question at several key points during their career. For me those points came after my initial service commitment (5 years), around the 10 year mark, and after my grad school service commitment (21 years). I'm not a medical doctor, but the military paid for me to get a PhD in engineering so I too knew my salary would increase significantly if I left the military.

I'll pass on some advice that I received:

1) It's not a matter of IF you leave the military but WHEN you leave the military for another job. Most of us still need to work after "retiring" from the military.
2) You will know when the time is right to leave the military.

I'll admit #2 sounds a bit like a cliche ... but if you ask a number of former military people I bet most will tell you they knew when the time was right, and it's a decision that involves much more than just financial considerations. A military career is personally and professionally rewarding, but it requires sacrifices by both you and your family (lower pay, frequently moving, deployments and missing family events, ...). All military members make a decision up front that the sacrifices are worth the rewards. But, at some point the scales shift and we no longer think the sacrifices are acceptable. That's when you know the time is right.

Regarding the financial considerations:

- The military pension gives you a measure of financial freedom at an early age. It's nice to know I will always have a paycheck if I want/need to find a new job. Going a few months unemployed would not be an issue. But, the COLA increases on my retirement pay have been dismal.
- You will pay more in taxes after retiring from the military than you ever imagined. Make sure you consider that your housing allowance is not taxed when comparing salaries. Also look at states that don't tax military retirement.
- The relative cost of subsidized health insurance for retired military is a significant retirement benefit. My family tricare expenses are about 10% of the health insurance costs for the plans offered by my civilian employer. Strangely, dental insurance is the opposite and my civilian employer plan is much more affordable.
- In addition to making a higher starting salary in the civilian world, your potential for pay increases is likely much larger too. In my case both annual COLA increases and promotions have raised my civilian salary significantly over the 8 years that I've been out of the military.

Good luck with your decision and thanks for your service!

bogleenigma
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Re: Military Retirement/Pension vs. Higher Income

Post by bogleenigma » Mon Sep 05, 2016 7:43 pm

Nthomas,

Thank you for your service! One consideration that has not been mentioned is a lateral transfer to the United States Public Health Service. In your thread you mentioned that one of your desires, should you remain in, would be to not move and not subject your children to this. The USPHS offers the same benefit structure of the military and the same retirement timetables without the requirement that you move at someone else's whim. My understanding (please correct me if I am wrong) is that you only move if you want to receive promotions/rank. My understanding is that you receive a list of potential deployments for your profession and you get to choose where you want to live. If *I* were in your shoes, this would be the option that I would choose.

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