Serving in the military puts a very unique spin on the quest to achieve financial independence. There are some benefits that the military provides that most people simply cannot attain in the private sector. Because of all of this, I wanted to do a quick blog post about what these benefits are and how to make the most out of them.
The Pension
The first is a lifetime pension that starts relatively early. This is pretty huge for anyone who is trying to retire early. The military will begin to payout a retirement pension of at least 40% of your base pay once you retire. Now, you could bring this up to as high as 60% if you went past 20 years. The military pays 2% per year, with the minimum eligibility for retirement being 20 years and the maximum being 30 years. 30×2=60… you get the math.
What’s really significant about this is the fact that it begins to pay out the moment you retire from the service. That means a Soldier who enlisted at the age of 18 will begin to receive a lifetime annuity at the age of 38! However, I think the best age to retire from the military is 42, you’ll see why when I start to talk about college benefits.
Another unique benefit of the military retirement system is the Thrift Savings Plan. Under the new Blended Retirement System, the military will automatically contribute 1% of you base pay towards a TSP account. The military will further match you, up to 5% of your base pay. The military provided match becomes fully vested after three years (the length of a typical first tour) and can be taken with you even if you decide not to pursue a 20 year career!
Healthcare become free (almost)
Another unique benefit from military retirement is healthcare insurance for life. Healthcare is one of the most expensive things for a family in the United States. On average, Americans spend over $10,000 on health insurance each year. By retiring from military service you can keep those cost well under what other Americans are paying, and focus more of your funds on staying financially independent.
The kicker here is that if you want the free version of the retiree healthcare, you’re going to pay for it with your time. First of all, to even use the free version, you’ll need to live within driving distance of a military installation. Even then, military retirees are the lowest priority for all health care services. So once you get to the hospital, you’ll end up waiting in line behind every active duty servicemember (and their families) for healthcare. In the end most people switch to a private practice and utilize Tricare are a supplemental insurance.
Education is free (for most)
Currently, all enlisted servicemembers are eligible for free tuition assistance through the military. This is a great resource for anyone who is wanting to pursue a 20 year military career and retire with at least a Bachelor’s Degree. Depending on the current policies, servicemembers may be eligible to receive additional money to help pay for books. There’s even some specific reenlistment incentives that allow servicemembers to go to school full-time for an entire semester. And all of this doesn’t even touch the Post 9-11 GI Bill, which they could use to fund a Master’s Degree after they’ve retired.
Officers can fare pretty well in this respect as well. Although tuition assistance isn’t free for officers (it requires a 2 to 1 additional duty obligation) it’s still a great resource for someone who is planning on making a career out of the Army. There are even some loan forgiveness programs that will take care of your student debt after you commision. Not to mention a multitude of Master’s Degree producing programs that officers can compete for once they’ve become a senior captain.
It’s working for me.
My wife and I have both earned our Bachelor’s Degrees and our MBAs through the military. I paid for my Bachelor’s using tuition assistance while I was still enlisted. Then after I commissioned through the Officer Candidate School, I used my GI Bill to pay for my MBA. My wife paid for hers in a very similar way. At this point in my career, I could actually get another Master’s Degree paid for by the Army by competing for some of the degree producing programs.
I’m currently 7 years away from retirement eligibility. If I stay on my current career path, I will retire as a Major at 42 years old, and receive roughly $4000 a month without getting out of bed. This combined with our lack of student debt puts us in a very good place to be financially independent at the end of my military career.
Although the military isn’t for everyone, mine is just one example of how the military can help you achieve FIRE early in life. If you have any questions or comments please just leave them below. Thank for reading, and I hope to see you in TheBreakaway.
