Standing Down

AFTER 14 YEARS ON active duty with the U.S. Army, I recently walked away from being a fulltime soldier. At age 39, it’s the only professional life I’ve known. I plan to complete my 20 years of service in the U.S. Army Reserve, which will earn me a reduced pension.

It would be hard to argue this was a smart financial decision. While defined benefit plans have mostly been replaced by defined contribution plans such as 401(k), 403(b) and 457 plans, the military still offers a pension. In fact, it’s arguably the gold standard of pensions, one that’s indexed to inflation and backed by Uncle Sam.

If you remain in military service for 20 years, your pension will amount to 50% of your highest 36 months of base pay. For each additional year of service beyond 20 years, that percentage increases by 2.5 percentage points. The plan is so good that Congress recently tweaked it to save costs. Those who join now only have access to the hybrid Blended Retirement System, which shifts some of the burden to save for retirement onto the individual.

The size of a military pension varies substantially, depending on rank and years of service. Given my active-duty career path, I estimate a 50% pension would have equaled roughly $58,000 per year in today’s dollars, plus I could have drawn that amount starting at age 45. Pensions for Reserve and National Guard servicemembers are far less generous, and hinge on the amount of time spent in uniform working on weekends, mobilized to assist during natural disasters, fighting in combat zones and so on.

My pension will depend on how actively I participate in the Reserves, but I conservatively estimate I’ll draw roughly 39% of my salary. That means I’ll receive some $42,300 a year once I turn age 60, or $15,700 less than if I’d stayed on active duty for another six years, plus that payout will start 15 years later.

The obvious question: Why forgo the comfort, security and immediacy of that pension money? There are many reasons I made the switch. But in the end, it boils down to this: Like everyone else I know in the military, I never joined for the money, and the drawbacks of continued service began to outweigh the positives. Over the past several years, I’ve been compiling a mental list of pros and cons. About a year or two ago, I noticed the cons were starting to win.

I won’t trouble readers with an exhaustive list, but I’ll highlight several issues that signaled it was time for a change. My family had lived in four places in two years. Moving and military life are, alas, synonymous with one another. When you have older kids, those moves get harder, as they repeatedly have to say goodbye to their friends. On top of that, my wife has a career of her own that she constantly interrupted to support my military service. Few outside the military are aware of how much spouses and kids sacrifice to support their servicemember’s career.

Another reason to leave active duty—something I never would have considered in my 20s: It’s been a humbling experience to watch my body begin to fail me. I’ve witnessed some senior leaders who expected their subordinates to perform physically at a level that they themselves could not. I felt uncomfortable knowing that, given the litany of injuries I’ve experienced, I was in danger of becoming that type of leader. The Reserves doesn’t have quite the same physical demands, and I’m grateful for that.

Finally, I looked at the opportunity cost both from a personal and career perspective. For those unfamiliar with the military, it can be a rewarding but isolating existence. The constant moving means you build wonderful friendships within the military but develop no roots in a local community.

I have many friends who continue serving on active duty because they love what they do, and I admire them for their conviction. While I’m grateful for the incredible opportunities I’ve had in uniform, including lifechanging experiences and opportunities to contribute in meaningful ways, I also realize that my ability to switch to civilian work—and have a career trajectory that I’d find meaningful—would get more difficult the longer I stayed in uniform and the older I got.

Forgoing the $870,000 in pension income I could have collected between ages 45 and 60, along with the $15,700 extra every year thereafter, might seem foolish to some. Indeed, I have a few family members and friends who have expressed incredulity at my decision.

Recognizing that I lack the benefit of 20 years or more of hindsight, which may indeed prove me a fool, I provide this insight into my decision-making process: Few of us would ever describe ourselves as a slave to money. Why then become a slave to a pension? If we intuitively know that the work we do is more important than the sum we’re paid for it, why do we use our prime working years to pursue a monetary objective, rather than one that’s professional or spiritual?

John Goodell is general counsel for the Texas Veterans Commission. He has spent much of his career advocating for military and veterans on tax, estate planning and retirement issues. His biggest passion is spending time with his wife and kids. Follow John at HighGroundPlanning.com and on Twitter @HighGroundPlan, and check out his earlier articles.

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