Should I Get Out Early?

Fifteen-year retirement isn't here for everyone, but it could be soon. What does it mean for servicemembers?

In exchange for retiring early, officers and noncommissioned officers receive lowered retirement benefits. The formula is fiendishly complex, but this is the upshot: While someone retiring after 20 years will receive half their annual service pay, after 15 years it's only slightly more than 35%.

Here are a few questions to ask yourself:

• How are your job prospects? Early retirement looks tastier if you think you can land a high-paying job in the private sector. Finding a job can be trickier than a few years ago, notes military career coach Kathy Malone. "Eighty percent of the job market right now is hidden -- you're not going to see it on Monster.com," she says. Start networking now to get a feel for hiring in your chosen field.
• How long will you work? Early retirement can make more sense for younger personnel, who have more work life left to boost earnings in a new job.
• Do you need medical benefits? Early retirees retain full health benefits. So if health coverage is more important to you than a paycheck, it might be time to cash out.

Ultimately, the military's early retirement plan is much like those of private industries that seek to downsize: The carrot of quick cash is balanced with the threat of forced layoffs. With U.S. involvement in Iraq and Afghanistan winding down, many people are likely to leave the service one way or another.

Financial planners agree that the key element in deciding if early retirement is right for you is whether you have somewhere to land once you leave the military.

Getting just 35% of your military base pay, not counting food and housing allowances, is "a pretty paltry sum" for most people, says J.J. Montanaro, a CERTIFIED FINANCIAL PLANNER™ practitioner with USAA, but it can be a nice supplement to a private-sector paycheck. "Start making those phone calls and trying to line up that next opportunity," says Montanaro.