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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 While defined benefit plans have mostly been replaced by defined contribution plans such as 401(k), 403(b) and 457 plans, the military still offers a pension.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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Nice personal essay. I, too, made a decision at the 14 yr point. But after getting sage advice from a wealthy uncle, decided that I could “stand on my head for 6 years” for the substantial lifetime payout. As a navigator, only two relocations during the last 13 years of USAF service don’t compare with your numerous ones and I was young enough at retirement to enjoy another great 18 year career. My second biggest disappointment with the USAF came when I submitted a suggestion in 1990 that the USAF retire people on the anniversary date of their start of service date instead of the last day of the retirement month. It would have saved our government (read that as taxpayers) about $8 million/year and netted me about $800K). The suggestion was rejected, but implemented about two years later.
John, a friend (and military retiree) pointed me to your post. Thanks for thoroughly documenting the issues and giving other military families the freedom of mind to make their own retention choices.
I wrote a similar post: stay on active duty as long as it’s challenging and fulfilling, but take it one obligation at a time. “Don’t gut it out to 20.”
Many thanks for serving…great article.
Thanks for your service. Thanks for being so candid. Great article. May God continue to bless you and your family.
Thanks for your service and the support of your wife and children. Best of luck in your new-found career.
As a US Space Force officer approaching 17 years in service and your same age, I admire the maturity and moral courage it took for you to make this decision that accounts for the long-term implications for you and your family. I fear that many of our military peers would not be wise enough to come to this same conclusion if they were in your same situation, for fear of losing the pension. As Jesus teaches in Luke Chapter 12, however, life is more than just money. It seems like you have prioritized the more important things in life.
Great read and thanks for your service. Life decisions are not always financially based……it’s important we do what is best for families. God Bless you and your family.
You actually need to spend 8 years in the Reserves to retire, not just the 6 to get to 20. It takes 5-6 years of reserve duty to make up for the 2.5% per year credit for active duty (depending on how long your ADT periods are). I would also encourage you to complete qualified correspondence courses which can add to your retirement points total.
I made a similar decision but a lot earlier. At the 7 year mark I was an Air Force captain filling a major’s slot at a great base. I wasn’t eligible for promotion for several years and being passed over 3 times meant you were out …. after investing 13 or 13 years. Why was I worried about being passed over with near perfect efficient ratings? Because the rules changed. Only the top 20 % could get a perfect ER. I was a support officer competing against TEST PILOTS….. guess who the top 20% would be. Also the wind down of the Vietnam War was responsible for the RIF of many based on their ER.
So I decided to stay long enough to get my MBA evenings complements of the GI bill. Another benefit as you alluded to … my wife was happy and we started a family.
Just for the record I am very proud of my service
Consider this an upvote for your decision and the logic behind it. You’re still quite young, but really, never too young to start a new chapter if you have the relative financial ability to do so. This really is a decision borne of good prior choices, or even better worded, investments. Investing in yourself and your Army career, still retaining a pension (albeit less that you may have determined mathematically with the stay put option), so this is really a decision between two financially acceptable options (you didn’t mention any “new” retirement saving options should you leave and take a new position). As a member of an Army family this is relevant to me, and I would hope my military family member would approach the scenario as you have. And of course, thank you for your continued service.
thank you – I admire your courage and commitment to your family.
counterpoint – the only people I know that have been able to retire, have military or government (Forest Service, etc) pensions. On the average salary today, it’s not possible to save enough for retirement..