The Million Dollar Military Retirement

The Million Dollar Military Retirement

For those on Active Duty planning to put in their 20 years, you’ll receive a nice pension as early as age 37 for the rest of your life! This is a rare commodity in our current economy. Now that pension and the benefits that come with it are typically not quite enough to stop working upon retirement from Active Duty but it does provide a substantial steady flow of income. For example, an E-7 retiring in 2016 with 20 years of service can expect to receive $26,298 annually. With an average life expectancy in your late 70’s, you’ll be receiving that pension for about 40 years equating to $1,362,546.30. That’s right, over a million dollars across an individual’s lifespan!  Not too shabby.

Is That Enough?

Preparing for retirement can seem like a wasted effort when you’re under 40 but it’s actually the best time. If you don’t know what the power of compounding interest can do for you, check it out here; you can earn 10 times your initial investment by letting your money grow over a longer time period. Getting started early is a major factor in your retirement lifestyle and will determine the age you achieve it.

Many individuals on their way to the 20 year pension take no other action and just plan to enjoy those annual payments. What if you put away a little bit of your own money as well? That way by the time you go to retire you’ll be in much better financial shape or if you decide to get out before receiving the pension, you’ll at least have something to show for it from a retirement aspect.

What Can You Do To Set Yourself Up For Success?

Take advantage of the Thrift Savings Plan (TSP)! This is a retirement account which allows you to invest in the stock market or bonds direct from your paycheck. I’ve been investing in the TSP for over 12 years and have had great success. Its expense ratio (built in cost to you) is the lowest of just about any investing fund you’ll ever find. The TSP is another amazing benefit that many uniformed members don’t properly take advantage of. The way it works is you just have to set it up one time and decide on a specific percent to take out of your paycheck each month and then your financial office will process it; from there it’s on auto pilot. You can start with as little as one percent of your Base Pay and even contribute from Special, Incentive and Bonus Pay.

“You Can’t Take Your Money With You When You Die”

I hear this philosophy that you’re wasting your time saving your money because “What if you die tomorrow?” “YOLO” Well sure that’s a possibility but investing a percentage of your income is not going to have a massive impact on your current lifestyle. Start with a comfortable amount and gradually increase it; you’ll hardly notice they money missing from your spending ability. Set it up now and let it work its magic because your future self will thank you.

Roth or Traditional TSP?

There are two types of TSP accounts you can deposit your money into. Each type has its own benefits. With a Roth you pay taxes now and then your earnings grow tax free but with the Traditional your money is invested prior to being taxed and you’ll pay taxes on it once you withdraw it. Many people believe that the Roth is a better option because they assume taxes will only go up. You could always split your investment between the two if you can’t decide what’s best for you.

Where Does The Money Go?

You’ll want to log in to the TSP and select which funds to invest in within your selected account(s). By default it will be investing in bonds which you really aren’t benefiting from until you’re at retirement age because they are very low risk, low reward. As a young investor you want to be aggressive with high risk, high reward investments. Because of your time horizon, you don’t need the money in the near future so you can ride the waves of the stock market as they go up and down. Let your money work for you and reap the benefits down the road.

There are multiple funds available to you within the TSP so if you find it all a bit confusing, I highly recommend using the Lifecycle Funds. What this does is it automatically invests your money according to your age. As you get older and near retirement it will move to the less aggressive funds because you don’t want to take significant losses when it’s coming time to withdraw the money.

When Can I Access The Money?

This is a retirement fund with tax incentives to encourage individuals to take control of their own retirement instead of relying on Social Security so you typically can’t access the funds until age 59 ½. That’s fine because your money will have a lot of time to grow so by the time you need it you should have a nice little nest egg to carry you through the golden years. There are some cases where you can access the funds early in case of financial hardship but you will pay a tax penalty so avoid relying on your retirement account as an Emergency Fund.


The Thrift Savings Plan is an amazing investment vehicle with dirt cheap costs available to uniformed services members and I highly recommend you take advantage of it. Put away a little of your own money in combination with your pension you can really enjoy that financial freedom you deserve. You won’t have to stress about paying the bills or deciding which child of gets to go to college. Money doesn’t buy happiness but things sure get a lot more complicated when there is a lack of it. Design your comfortable retirement lifestyle today.

Are you using TSP now? What are your thoughts? Let me know in the comments below.

Learn More at and run your own retirement calculations here.

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