A Military Retirement is Worth Millions of Dollars

That’s a bold headline, especially if you a retired enlisted military member only bringing in a little over a thousand dollars a month in retirement pay. But it’s true. A military retirement is worth well over a million bucks. In some cases it is worth millions of dollars.

Before we get too deep into this, I want to define what I am talking about. I’m talking about two factors – the long term value in regard to how much you will receive in direct pension over the lifetime of your retirement benefits and the value of the retirement benefits including healthcare coverage, and other benefits. Combined, these benefits are easily worth over a million dollars, even if you don’t have the spending power of a million dollars right now.

How Much is Military Retirement Really Worth?

Let’s look at an example of retirement pay for an average military career. Since military members are eligible for retirement benefits at 20 years, we will use a reasonable rank and service time for our examples.

It is reasonable to assume that the average enlisted member will be able to retire at 20 years having achieved the rank of E-7, and the average officer should be able to retire at 20 years at the rank of O-5. Of course there will be outliers based on when you served, your career field and other factors, but these ranks and service times should apply to the majority of careers (if anything I am aiming on the conservative side because many people choose to serve longer than the 20 year mark, earning an extra 2.5%-3.5% on their retirement pay per additional service year, depending on whether they take the high 3 retirement plan or the Redux retirement plan).

Example Monthly and Annual Military Retirement Pay

As we mentioned, we will look at a military retiree with 20 years service at the ranks of E-7 for enlisted and O-5 for officers. The base pay for these ranks in 2009 is:

  • E-7 Monthly: $3,995.40
  • E-7 Annually: $47,944.80
  • O-5 Monthly: $7,697.40
  • O-5 Annually: $92,368.80

Most retirees at 20 years will receive 50% of their base pay, which would equal the following amounts:

  • E-7 Monthly: $1,997.20
  • E-7 Annually: $23,972.40
  • O-5 Monthly: $3,848.70
  • O-5 Annually: $46,184.40

How much is Military Retirement Pay Worth Over a Lifetime?

The next factor to consider is that military retirement pay will be there day in and day out. There are few places in the world that someone can receive a lifetime pension starting at or around age 40. Many military retirees will receive a monthly cash payment for over 40 years. When you add in cost of living adjustments and inflation adjustments, we’re talking about some serious cash!

Using the numbers above from a recently retired E-7 or O-5, we get the following lifetime payments (note: these military retirement pay numbers are not adjusted for inflation and do not include any COLA increases; this is not a planning tool, but for illustration purposes only. Your specific retirement benefits will vary based on your situation):

  • E-7 retirement pay for 20 years: $479,448.00
  • E-7 retirement pay for 30 years: $719,172.00
  • E-7 retirement pay for 40 years: $958,896.00
  • O-5 retirement pay for 20 years: $923,688.00
  • O-5 retirement pay for 30 years: $1,385,532.00
  • O-5 retirement pay for 40 years: $1,847,376.00

Even without COLA or other inflation adjustments, we can see that we are reaching some serious numbers. Each additional year you serve before you retire can add another 2.5% to your monthly and annual pay, and each higher pay grade you achieve can add hundreds, or even thousands of dollars per year. As previously mentioned, the numbers used in this article are meant to be a conservative estimate.

Value of Military Retirement Medical  Benefits

OK, there is a minimal TriCare payment, but compared to what civilians pay, it is basically a non-issue. Benefits for retired military members are also guaranteed – they won’t drop you after you have required expensive procedures or for pre-existing conditions. Guaranteed medical coverage is a huge blessing in today’s American society. Here is a little more information about kinds of insurance available to civilians: comparing individual and group health insurance. Hopefully that will hep you better understand the value of military retiree medical benefits!

Military sponsored medical benefits are incredibly valuable, especially as you get older and when they cover your spouse. There are very few civilian plans that are similar to this. Most people spend several thousand dollars per year for basic medical coverage, and this doesn’t include out of pocket expenses for doctors visits, medical procedures, prescription medication and other associated costs. It would not be unreasonable to place a value of $10,000 per year on military retiree medical benefits, even for a healthy individual. Add a spouse to the benefits, guaranteed coverage, little to no out of pocket expenses for complex medical procedures, and other factors, and the medical benefits alone can be worth hundreds of thousands of dollars or more over the course of a lifetime (and in some instances, into the millions of dollars for people who receive complex medical care over a long term period).

Commissary, Base Exchange, and other Base Benefits

I won’t even try to assign a value to these benefits because they don’t apply to all military retirees equally. Some people may practically live on base, visiting the base clubs, shopping at the exchanges, using the gyms, auto hobby shops, etc. and other people may not live near a base and may not be able to take advantage of any of these benefits. So this category falls in the “good deal if you can get it” benefit, but not a core part of the equation. But it is still worth mentioning because many retirees save a lot of money each year by shopping on base.

Your military retirement is worth millions

Thousands of dollars coming in on a regular basis quickly add up over the years. Add in increases for inflation, essentially free health care, and other benefits and you can see how the value of a military retirement can quickly be worth millions of dollars over a lifetime.

I didn’t stay in long enough to qualify for military retirement benefits – I separated from the USAF with an Honorable discharge after 6.5 years of service. Part of me looks at the military retirement system with a bit of longing. It is a great system for those who qualify and I would love to be able to receive military retirement benefits for the rest of my life. However, separating from the military was the best move for me at the time and I have no regrets regarding my separation or my military service. I am proud to have served and the military is a large part of who I am today.

*disclaimer about this article: The calculations are for illustrative purposes only and do not reflect the exact retirement benefits you will receive. This is a simplified look at military retirement benefits and does not take many factors into consideration, including taxes, disability benefits, inflation, COLA, and other factors.

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Date published: March 4, 2010.

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Ryan Guina is the founder and editor of this site. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is currently serving in the IL Air National Guard. He also writes about money management, small business, and career topics at Cash Money Life. You can also see his profile on Google.


  1. says

    In numerous articles I keep noticing the following: “Most retirees at 20 years will receive 50% of their base pay, which would equal the following amounts:” Then it continues to show an amount equal to 50% of the base base upon retirement. The it also states the medical benefits.
    1. For “most of us”, the real amount is the average of the prior 36 months of basic pay, which is less than 50% of the final basic pay upon retirement. Accuracy is important. Plus, we received no increase for 2010 due to the COLA calculations, even though our real cost of living rose.
    2. Second, medical coverage must be paid for (although a great rate), and fewer doctors on installations is forcing more to go downtown and pay the co-pay amount.

  2. Cliff says


    Continue to serve in the reserves for 20 years and at age 60 your benefits will be almost identical to someone who served on active duty for 20 years! Now that’s really a great deal!

  3. says

    Cliff, it is a great deal for those who are able to complete the 20 year service requirement. I thought long and hard about joining the Reserves after I separated from Active Duty, but it didn’t work out for several reasons. The Reserves is no longer an option I am considering, but I have a lot of respect for those who choose to continue their service. :)

  4. Eugene T. says

    Another way you might look at it is to establish a capital value of your retirement, i.e., determine what sum of money you would need invested to yield your annual retirement figure.

    Using the 1/2 pay MSgt figures above: E-7 Annually: $23,972.40… and figuring a 2% return (well above bank interest, at this time), you would need a principal sum of $1,198,620 to yield the stated annual retirement…

  5. Dale says

    How will military retirement be guaranteed as Washington is running out of money and it appears the Chinese Yuan will be the World currency possibly by 2014. Washington is looking to turn the military retirement into a 401K program which will save them money. To me this is a caution flag that Washington will not be able to pay retirees. If this is the case….be prepared….war in the streets of America!

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