Military retirees have one of the best pension plans in the US. After only 20 years, military retirees can retire with 50% of their basic pay, full medical coverage, and a slew of other benefits that will stay with them throughout the remainder of their lives. It is not a stretch to say that a military retirement is worth millions over the life of the retiree.
Considering that one can begin receiving retirement benefits around age 40 and potentially receive the benefits for another 40 years or more, this is an extremely good deal. But is it enough to live off for the rest of your life?
Can you live off military retirement?
For most people retiring from the military services after 20 years, the answer is most likely “no.” A military retirement is fairly generous compared to most civilian retirement plans, and can even be worth millions over the life of the retiree. However, the immediate cash flow is probably not enough for most people to retire immediately, especially for many retired enlisted military members who bring in $20,000-$30,000 per year.
Living on military retirement pay becomes even more difficult if you have a mortgage, credit card debt, a car loan, and other regular payments. I many cases, a military pension is a great financial blessing, but it may not be enough to live on.
Making it work – living off military retirement pay
Not everyone can make a living from a military pension, but there are some people who are able to do it. One example is an enlisted couple who both retired from the military and had their story featured in CNN Money. They both are military retirees who will receive a combined $58,500 per year in military retirement pay, in addition to other military retiree benefits such as medical care. This is not a bad sum of money for not doing anymore work for the remainder of their lives!
Even with their retirement pay and health benefits, there are some potential roadblocks to their plan not to work anymore. Their retirement pay currently covers their fixed costs including their mortgage and other regular bills. But it won’t give them a lot of freedom if they need to support their children through college, or have many unexpected large expenses arise. Even something like taking a family vacation will need to be carefully planned.
I think it may be possible for them to do it, but I imagine that after awhile they will want to find some source of work to keep them occupied. It may not be a traditional 9-5 job, but it may be a part time job, or a hobby that provides them income.
The most important thing about their situation is this: their military retirement pay and benefits are giving them the option and freedom to decide whether or not they work. The freedom of bringing in $58,500 per year without doing anything else gives them the opportunity to work, or choose more rewarding work if they decide to do that. That is a beautiful thing!
How to stretch your military retirement pay
The key to being able to retire on your military pension is paying off as many loans and credit cards as possible before you officially retire from the military. Debt is the quickest way to enslave yourself and tie up your future pension checks. But eliminating your debt gives you the opportunity to use your money for more important things, such as your regular living expenses, vacations, and other enjoyable activities.
Another important factor in military retirement is the addition of other sources of retirement funds, especially those which will be available to you later, when inflation erodes the relative value of your military retirement pension. That is why it is important to open a Roth IRA, Thrift Savings Plan, or other investments. You can open a TSP account through your military pay unit or you can check out the best IRA brokerages for good places to start your civilian retirement plan.
Comments
Liked the article. The problem with MOST active duty military and military retirees is they live beyond their means and paycheck to paycheck. Most people are spenders not savers and until they figure that they need to save for their future…they will continue their lifestyle of living for today. No amount of money can sustain a lifestyle if you spend more than you earn. $20-30k a year in reirement benefits can sustain the living expenses for a family of 6 if it is spent wisely. I know because I am reired and spend my $20-30k wisely. No debt. Thanks for the info!
Very good info. Although it might be a little misleading to say that retirees get “full medical coverage” as though we’re not charged for it. If we want to retain our “full medical coverage”, we have to pay premiums (just like civilians). Granted, our premiums are cheaper (about $150 a month for medical and dental combined) but it’s not quite free. Believe me, when you’re talking about a $2,000 a month income, those little $150 a month chunks add up.
A smart retiree will look at his retirement income as, say, a house payment with utilities. Now you just have to find a job to cover the rest of your expenses and you’re set.
Great info, but do you really want to get another full time or part time job after 20-30 years of serving your country? With the governments around the world destroying our money supply, inflation is certain. Thus your retirement is worth a lot less than what you thought.
What if you learn to be an entrepreneur before you retire or separate? Cash flow is what you should be seeking. This is the aim of the New Rich. Cooperation with your fellow man, your brother. Entrepreneurship is also about serving just like in military service.
Most financial planners and most people always talk about IRAs, 401ks, savings accounts, etc for your retirement. That is only one asset class, Paper. There are many others like commodities(gold,silver, oil, corn, etc) real estate and businesses. To be really diversified you need all asset classes, not just paper.
Cashflow from all these asset classes and when you retire there is no need to work for someone else, making them rich. That is a future to my liking.
When you used that one couple as an example, you did not note if they were retired officers or enlisted. retired officers make that kind of money but not enlisted. My enlisted retired pay is approx. $15,600 a year. out of that comes my medical, insurance, ans surviver benifits. I have to work because my family can’t live on $800 a month.
Why is it always someone is out to make it look like the military live like “fat cats” when that is in fact a lie. Active duty military in the enlisted ranks for the most part, use food stamps, if the live on base, in sub-standard housing and still have to pay for it. We do not live the life of Riely. Our pay is below the national average. This kind of lie reporting needs to stop and the truth needs to be told. If you are going to make this kind of report, tell both sides (Officer and enlisted) and not just one side (officers).
Doug, the couple in question were both enlisted – the husband was a Chief Master Sergeant in the USAF (E-9, with annual pension of $36,900), and his wife was a Master Sergeant (E-7, with an annual pension of $21,600). The article discusses how they were motivated not only in their careers, but in their personal lives, by focusing on making rank, earning money, saving, investing, and learning. There is no simple way to achieve an early retirement – it comes through hard work and sacrifice.
I was enlisted while I was in the military and was never on food stamps, nor were any of the people that I knew. The military has made many increases in pay and benefits over the last decade or so, and very few people now qualify for food stamps, partly because of pay increases, but also partly because of a program called Family Supplemental Subsistence Allowance which is used to eliminate the need for military members to receive food stamps.
Enlisted members paying to live in substandard housing on base? I’ve never heard of this. In my experience, base housing has always been free (as in no out of pocket expenses). Some off base housing requires payment if it has been privatized, but rents are capped at local BAH levels, ensuring military members aren’t paying much, if anything, out of pocket.
This website is devoted to helping military members and veterans improve their financial situations, not portray the military as something it isn’t. For more information, please see Do Military Members Get Paid Enough?, and our response to people who think Military Members Have it Too Good and Whine Too Much.
Ryan,
Great reply. I have spent almost 22 years in the Army as an enlisted Soldier and I can recall only two or three military families who were on food stamps throughout my whole career. All of those families were very junior Soldiers who had unusually large families at a young age. One correction though. Base Housing has never been free because it costs members the value of their housing allowance for a given area. Members who live on post forfeit their basic housing allowance (privatized or not). In fact years ago dual military couples took a double pay cut as both members had to forfeit their housing allowance (BAQ). Now only the senior member loses the allowance when they live in government quarters.
Thanks for the reply, tgarner. The term “free” in relation to military housing is used loosely. It’s true members are giving up their BAH, but there is no out of pocket expense. I knew many people who elected to live off base and BAH wouldn’t completely cover their housing and utilities. Perhaps a better way to word it would be “no out of pocket expenses,” which might be more accurate.
I wasn’t aware of the changes to military couples living on base. That is a nice change!
Ryan,
You are very welcome and thank you for your service as well. I think it just adds to the misinformation when we use the word “free” when referring to any military compensation or allowance. Everything we get in the military comes with a price that cannot always be measure using dollars and cents. Another update on the “out of pocket expenses.” There is a new program for Soldiers who live in privatized housing where they are given an allowance for their utilities every month and that allowance goes to the housing company. If they go over the allowed amount they have to pay out of pocket for the overage. Keep up the good work. its nice to see someone taking the time to dispel the rumors and set the record straight regarding the men and women, the true 1% …who serve in uniform. Thanks
Tony
Why are we supporting such luxury retirement for retired military personnel? Many of these retirees have two homes (purchased with housing allowance for homes rented out during their tours of duty), two cars, beautiful furnishings, golf club memberships, lavish vacations with free (almost) housing on military bases throughout the US and abroad, standby flights to almost anywhere in the world, inexpensive health insurance, privileges at military exchanges, etc, etc. I know of no other employment that offers such luxury benefits. The money spent for these benefits could well be spent in areas that could benefit all the citizens of the US.
@Eliza S: “…luxury retirement for retired military personnel?”
Eliza, someone sold you the economy size of Kool Aid, and you seem to have drunken deeply from it. I’m a retiring O-4 (LCDR) and expect to clear perhaps $2K a month, with SS kicking in a few years later to take me to the uber-rich demographic of Americans making $48K a year.
Know what, though? For the amount of crap and for the dangerous, life-threatening situations I found myself and the crew in, I and we have earned every flipping cent.
Amen! The only people that have the nerve to say something like that is the ones that sit and live in the US with all the freedom never have they went and fought for anything its just given to them. Military people are special people and should get there retirement and so much more for there service. Thank you to all our troops!
@Eliza…It’s very disturbing to hear people who havent did their research make comments about military pay and/or lifestyle. A person’s life is priceless. Military are underpaid for what they due. Im sure you, Eliza S., dont work a 24 hr shift. Guess what? If you invested yopur money wisely, u could live a “luxury” life, too. However, if you look at statistics or researched online, since you do have a computer to blog here, you would know that MOST military members dont live a “luxury” life. They live a life of not knowing where they or their family will be in the next 90 days or so. Until you get your facts and figures straight, please keep the negative comments to yourself. Thanks and continue to educate yourself on things you disagree with. Knowing is half the better
Elizabeth,
I am shocked and appalled. Why is it that so many Americans place so little value on the service and sacrifice that members of our Armed Forces have given this country. Many of these retirees have two homes because they were forced to move as many as 10-20 times throughout their careers and they could not sell their homes so they had no choice but to rent them out or live on beans and rice for years to pay two mortgages. Most of them have two cars because both parents had to work to support their families during extended training, deployments and separations to fulfill their duties. Housing is not free, they give up part of their pay that is equal to comparable rent in the area, for the opportunity to live on base because it is safer and more convenient. We are the true 1% who are selflessly serving our country right now. What have you done for your country that is not self serving in some way? And just how would you propose to use these funds in any way that is more beneficial that defending your freedom, constitutional rights and way of life? You have no idea of the magnitude of sacrifice, hardship and danger that our men and women face on a daily basis. So before you judge us as undeserving of such “lavish” benefits, I suggest that you spend a day walking in our shoes before you pass judgement on something that you have no capacity to understand.
Just found this and looks like a good source of information for our Military.
I am a retired/disabled USAF E-7 and I was once on foodstamps because a E-4 in England was hard times.
Thanks
Free housing err no! It makes my blood boil when you civilians say we have free housing…we DONT!!! Military pay is broken down into segments, if you live in base housing (for the most part basic and old) you just dont get that portion of your paycheck. It is no different than any civilian job paying your rent or mortgage. If you civilians cant handle the fact that your civilian employer doesnt break down your paycheck, not give you a portion if you live in your employers quarters, then I suggest you shut up and join up!
I’am retired E-6. I make under $17,000 and have lived just off that for the last 3 years. I live on a budget. I don’t have a car, cable or creditcards. I pay rent, gas & power. Everything i own i own out right. I have a LCD tv, broadband internet, computer, satellite radio and a cat. My 2 sons went off to college (NYU class of 2007) and the Air Force so i have a empty nest. I looking into moving to maybe Thailand after i file for SS. There my money will go a long ways plus the weather is nice. I now live in Las Vegas across from Nellis. I have never been to Thailand, but spent 4 years in Korea and 4 years in the Philippines and lived off base, i think i can adjust. Plus i’ll be able to save again.
Good article, sounds to me that the bottom line of this article is to garner some business as a financial adviser.
Thanks for sharing your comment, Enrique. The bottom line for this article is for military members to plan well ahead of their military retirement so they know exactly what they are getting into when they separate from military service. The goal is to be able to have the flexibility to decide on your own terms, not to be forced into a decision.
The examples in this article prove it is possible to retire from the military without having to work again, as long as you are properly prepared to do so. This includes strong financial management such as getting out of debt, investing in IRAs and/or the Thrift Savings Plan, and living within your means.
I know several people who were able to retire from the military and never have to work again, but the vast majority of the people I know have not been able to do so – either because they had debt when they retired, or they didn’t have enough money saved to be able to live off their pension.
There is no right or wrong way to retire from the military – many people choose to work out of desire or necessity, and some retirees miss the responsibility of working. The blessing, however, is having the ability to make the decision without having the decision made for you.