The Easiest Way to Get Rich in the Military – Take the Leap and Just Stay In
Because of the value of the government pension, staying in is the easiest way to get rich. And when I say “staying in” I’m not talking about becoming the Surgeon General of the Navy. I’m talking about doing a reasonable job as an officer for at least 20 years. Let’s look at the most common scenario.
A 20-Year O5
Let’s assume that an officer was commissioned in 1999 at the age of 22, and stayed in 20 years until 2019, making it to O-5. According to the DoD actuarial tables, the value of a 20-year O-5 pension is $1,458,837.
Yes, just by staying in for 20 years you are already a millionaire and you’re only 42 years old. Depending on how much you saved in the TSP, you could be a multi-millionaire or darn close to it.
You Can’t Screw It Up
People try to time the stock market, wind up buying and selling investments at the wrong time, take loans from their retirement accounts, don’t save/invest enough, and find all manner of ways to screw their finances up. But when it comes to the military pension and the value it provides, the best thing about it is that you can’t screw it up.
Stay in for 20+ years…do a reasonable job and promote at the normal times…you’re rich. It’s that easy.
Joel Schofer's Career Planning Blog 
December 16, 2020 at 11:01
Can you do a calculation of a hypothetical pension for a reservist with and without prior active duty service? I can’t find any.
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December 16, 2020 at 11:08
I really can’t because the AD years and the Reserve years, which are based on “points,” are handled differently. My wife is actually in this exact situation with combined AD and Reserve time and have NO IDEA what her pension will wind up being.
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December 17, 2020 at 00:09
When doing a combined AD plus reserve calculation you have to calculate the multiplier for active years and reserve years separately. The active multiplier is 2.5% per year (or 2% for the new Blended). Reserve multiplier is based on points; take the total number of points and divide by 360 (not 365). Then you can add the multipliers together.
From there you have to look at the expected high 3, average that out and multiply by your unique multiplier. That would be your expected annual retirement income based on the pay chart you used. Using the 4% rule you can ball park the “present value” based on the annual retirement income. Instead of using the 4% rule you can look for an annuity calculator to see what present value would give the same annual payout.
These methods are not as nice and and clean as the pre-made government table, but it is a decent ball park estimate. I can send you my spreadsheet if you like as a guide.
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December 17, 2020 at 09:24
Sure! Thanks. jschofer gmail com
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December 16, 2020 at 11:15
If you go to the military compensation page you can do the comparison on their page. https://militarypay.defense.gov/Calculators/High-3-Calculator/
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December 17, 2020 at 18:59
Keith can you send me that spreadsheet too?
PradhanNYC gmail com
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December 17, 2020 at 19:47
Hi Keith can you send me that spreadsheet?
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