Can Military Service Make You a Millionaire?

Stacks of coins and pile of bills.

Here's a question to motivate you as we begin a new year: Can you retire from the military as a multimillionaire?

A review of the DoD Stat Book recently got me thinking about the possibility. With all the changes in the works for military retirement and a son just launching his military life, I had the incentive I needed to spend a little extra time on the subject.

My conclusion: Financial freedom may be well within the grasp of those that serve our country, even if it's not the primary reason they do what they do.

When you enter the service at, say, 18 or 22, you're probably not thinking about being able to kick back at age 50. But if you want to have any hope of doing just that, you should think about the two big factors that could come into play. First, there's the military retirement check that's long been a staple of military compensation.

This is where those DoD statistics come into play.

Check out page 278. The Defense Department puts the value of the monthly check an O-6 retiring today with 30 years of service at $2.2 million. An E-9's military retirement would equate to a nest egg valued at nearly $1.3 million. The DoD made a number of assumptions, but the idea was to put a price tag or value on the monthly military retirement check a military retiree will receive.

That cost-of-living-adjusted retirement check is a pretty good start on the road to multimillionaire status. But it's going to take more than just that to get there.

The second factor comes in the form of investing for retirement. Sticking with our scenario, let's assume that these career service members were forward-thinking enough when they joined the military 30 years ago to make a 10% contribution to some sort of retirement savings vehicle. The Thrift Savings Plan would work well today, but that wasn't an option three decades ago.

Each year, for the first 10 years of their careers, they increased their savings by 1% until it reached 20% -- at that point, I left it level. Let's just assume that they didn't increase it further each time they got a time-in-service, cost-of-living or promotion pay raise -- even though contributing some of each to your retirement is a good idea.

Where would our hypothetical service members be when they dropped off their retirement paperwork at the end of last year? The O-6 would have about $900,000 to add to the value of his or her pension. The E-9 would have accumulated $500,000. That's multimillionaire, or pretty close to multimillionaire, status.

Sure, I simplified things, and left out taxes altogether, but I think it's a classic military 80% solution. It's good enough to get the job done and certainly illustrates my point.

Those in uniform have access to a relatively short path to financial freedom. If you're making your own personal commitment to retirement, the numbers I used may just be the beginning.

There's only one stipulation: You've got to start today.

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