Join the Military to Retire Early?

Today’s guest post is brought to you by Doug Nordman, author of “The Military Guide to Financial Independence and Retirement”.

If you’re reading this blog then you’re thinking about financial independence and early retirement. You’re aware that two of your biggest concerns are dealing with decades of
inflation during retirement and finding cheap health insurance. You may have to contend with these challenges for four or even five decades!

U.S. military retirees have solved these problems. After 20 years of active duty they earn a pension that’s adjusted every year for inflation, just like Social Security.  Military retirees also have cheap Tricare health insurance, which currently charges under $50/month for your entire family.

I can understand how the military looks like the road to riches. The answer seems so simple:

  • Join one of the services at age 17.
  • Save your income and endure frugality for a couple decades.
  • Retire at age 37.

The military even teaches the skills needed for early retirement. Servicemembers learn the discipline to live frugally, save money, and persist until they reach their goals.

[Yeah, I know, right now you military readers are snickering (or groaning). Control yourselves
for a few minutes while we explain this to the impressionable young recruits. Why did you guys join up? If you’re not getting rich, then why would you put up with this life?]

First we should explain the “riches”. The U.S. military pay tables show how much servicemembers earn in taxable “base pay”. The total compensation package also includes tax-free allowances for food, housing, and uniforms. Additional pay and bonus money is earned for longer service obligations, advanced training, and deploying to combat zones. Even more incentive pay is awarded for volunteering in submarines or the special forces. Some pay can be sheltered in the Thrift Savings Plan (the federal version of a 401(k)). The military does not match contributions but in special situations (like deploying to a combat zone), military pay is tax-free and servicemembers can deposit over $50,000/year in the TSP.

Military pay varies widely with training and experience. New enlisted recruits (at paygrade E-1) earn only ~$18K/year in base pay– plus food, housing, and uniforms. Depending on housing expenses (which vary by location) the total compensation package is nearly $30K/year. The first few promotions and pay raises happen within two years, which is relatively rapid compared to most civilian careers. After a 4-6 year commitment that E-1 has advanced to the E-5 paygrade to earn ~$32K/year (plus the other allowances) for total compensation of $45K-$50K. They’ll have competitive technical skills for a civilian career and may also be halfway through their college degree.

Courtesy of the U.S. Navy
Courtesy of the U.S. Navy

Officers (college graduates) start at a total compensation of about $55K/year. After six years, they’ll be O-3s earning total compensation of about $80K/year.  They’re also in strong demand for civilian careers in management or engineering. Nuclear-trained officers in the submarine force can volunteer for an additional service obligation that will raise
their total compensation
to $130K/year.

Next there’s the benefits. Medical care on active duty is free, and the family copay is only $12.  Dental insurance is cheap, as is $400K of term life insurance.  Disability benefits are included. Vacation is 30 days per year.

You get plenty of free training– frequently during off-duty hours!  Active-duty tuition assistance and the GI Bill will even help pay for you or your family to get a college degree.

How does this compensation stack up against a civilian job? For the first 20 years of service, about the same. The military expends an incredible effort to encourage servicemembers to stay in uniform, and money is a powerful incentive.  Analysts adjust pay & bonuses to stay competitive with the equivalent civilian careers. For most of the last decade, Congress required the military’s annual pay raises to close the gap with the Employment Cost Index and is now expected to keep up with it.

And after 20 years of service you’ll earn that righteous retirement. There’s your riches!

Yes, but the pension only vests at 20 years of service. It only starts immediately after retirement if that 20 years was all active duty. You can also complete 20 years in the Reserves or National Guard (“a weekend a month and two weeks per year”) but that pension  usually only starts when you reach age 60. All pensions are calculated on base pay, not total compensation. For most servicemembers a pension is barely a quarter of their total compensation.

If the E-5 stays in the service then at retirement they can reasonably expect to be an E-7 earning $85K/year, which would equate to a retirement income of nearly $24K/year. The submarine officer will get at least one more promotion (and several pay raises) to retire at over $40K/year.

Piles O Money

That’s enough for early retirement, especially with inflation protection! Even better, if you can save 50% of your gross income for 17 years then you’ll reach financial independence even without a military pension. Best of all, the military will teach you the skills, initiative, motivation, and perseverance to reach that financial independence. If you can hack the military then the rest of your life is easy.

Heck, everyone should join the military.

Yet consider these statistics:

– During most of America’s history, only 1% of the population has been on military duty.

Only 17% of the military’s servicemembers stay for at least 20 years and a pension.

If the retirement system is so good, then why do only one percent of Americans join the military, and five out of six of them quit before 20?

Let’s look at the first glaring issue: workplace mortality. That pension looks pretty good, but a few of your battle buddies aren’t going to live to collect it. Overall the military is a less hazardous occupation than firefighter or police officer. However this is not much consolation if  you’re in the Marine Corps or Army infantry, and future wars may be much more hazardous to all servicemembers.

Next is “wear & tear”.  It’s an active lifestyle with high stress. Chronic fatigue is the norm, as are workweeks in excess of 40 hours. (No overtime pay, either.) Combat mortality may be at an all-time low, but the wounded warriors have ever-more severe injuries and disabilities.

Servicemembers spend most of their time outside of a combat zone, but they still risk their lives every day by training with high-power equipment, explosives, hazardous substances, and hostile environments. It’s not as bruising as professional football, but 20 years of daily abuse takes a toll. One mistake or a moment of inattention can wipe out years of safety.

Although death and serious injury are relatively rare, there’s still the workplace environment.  For example, submariners and aviators have less personal space than convicts in federal prison. Soldiers and Marines regularly train in harsh conditions. If you’re not sure about joining your local police force or being a firefighter, let alone doing other filthy or exhausting chores, then you probably don’t want to risk your health in the military either.

Then there’s the regulations. The military imposes strict rules on personal behavior, some of which would be illegal in a Fortune 500 corporation. Servicemembers are required to maintain ridiculously high standards of conduct, appearance, and fitness. Drug use is out of the question, even on leave or liberty. They’re actively discouraged from smoking or chewing tobacco, having tattoos or piercings, riding motorcycles, or drinking alcohol. Hair coloring, nail polish, and makeup are heavily regulated. There is very little consideration for work/life balance, let alone a day off to take care of a sick kid. Military records are far less private than for civilians. Even military families are subject to constant scrutiny by their chain of command– especially in base housing. The mission takes priority over everything else.

Five out of six servicemembers quit the military before 20 years because they’d seen enough.

Maybe the question should be: Why would you join the military in the first place?

For some recruits the military is the only way out of a dead-end life or a bad environment. Others didn’t know what they wanted to do, as long as it wasn’t college or fast-food shiftwork. In my case it was the irresistible challenge: I could prove myself and be a part of an incredible team. Other veterans joined to learn motivation, commitment, and self-discipline. You’ll have far more responsibility and leadership in your 20s (especially in the Marines) than most civilians will get in their 30s. Even better, you’ll have the training & experience to handle it.

However the initiative and perseverance have to come from within. “Getting rich” will not fuel your motivation through the first service obligation, let alone for two decades. You keep going because you’re making something better of yourself, and your military skills will also help you succeed in life– not just financial independence.

The best reasons to join the military are for yourself and for your country. The worst reason to join is for the money.

Doug and his spouse both reached financial independence and retired from the U.S. Navy in their 40s. They’ve had a total of over 50 years of active-duty and Reserve service. Their daughter is a college senior (on a Navy ROTC scholarship) who will soon be an ensign on a destroyer. Doug answers lots of questions about the military and financial independence at

Root of Good’s comments: 

I want to thank Doug for writing this detailed article outlining the financial aspects of serving in the military, and why (or why not!) it might be a good strategy to reach financial independence and retire early.

I still remember the posters in undergrad engineering school advertising a $60,000 sign up bonus for nuclear sub duty.  Very tempting, but they didn’t get me!  I think Doug outlines the reasons why I didn’t sign up – it is a very serious commitment and goes beyond simply receiving $60,000 (plus a decent base salary and benefits) to do a job for four to six years.  And you can’t bring your family on a nuclear submarine for the months long deployments.

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  1. This is a truly interesting piece: thank you both for making it available. I was in line to sign up for the Marines when I was 17, took the ASFAB, but then changed my mind at the last minute and went to college. That was in 1998 and it, in retrospect, likely kept me from being involved in the War on Terror in Afghanistan after 9/11.

    The statistics on the number of military personnel who put in the full 20 years is kind of shocking. But after getting a better insight into the stresses of military life, I can see why many decide enough is enough.

    1. I was coming out of college in May 2001 and I may have ended up in theater somewhere near Afghanistan or Iraq had I pursued that $60,000 sign up bonus. Reminds me how calm everything was September 10, 2001 and earlier.

      1. Heh– first you would’ve spent 15 months in classrooms and then you would’ve lived the next three years standing engineering watches underwater in the Mediterranean or the Persian Gulf.

        But if you’d chosen to stay beyond five years (for another $25,000/year bonus contract) then you would’ve had the opportunity to spend a year of your shore duty as an “individual augmentee” on the staff in one of those countries. The “upside” is that all of your pay would have been tax-exempt and you would have been able to contribute up to $51K in the Thrift Savings Plan.

        Now you’d be crossing the 12-year point and wondering whether you wanted to stay for 20. But it looks like things have worked out just fine for you without the military!

    2. You’re welcome!

      Those retirement percentages are for the entire military. By individual services it ranges from as high as 30% in the Air Force to as low as 8% in the Marines. The Marines would have still helped you finish college but, yeah, there would have been a lot of sand in your future.

  2. Great article. It is a bit late for me to enlist (suppose the army will be thenext rejection for me) and I was never suited for this life. How I know? I am what I call ‘an army brat’ – my Dad retire at 47 as a colonel from the army of a small European nation. We had great lifestyle, and my Dad had a very good pension. I couldn’t even cope with the discipline, though – this is why I became a scholar.

    1. It’s a tough life. I’ve seen plenty of military “brats” that have moved once every year or two and never had a place to call home growing up. It’s a tough life but I guess you get used to the constant life on the move.

      1. Military kids may not put down roots, but they travel the world and develop incredible social skills.

        They generally don’t miss homesteading, although most military families make an effort to avoid transfers during the senior year of high school…

        1. For the military kids, I guess moving every year or two is the “normal” and you just get used to it. It’s basically living in a nomadic subculture within the larger US culture.

          1. Yep; sounds familiar. Not having a place I am very attached from childhood makes me very flexible and adaptable. I moved from one side of Europe to the other and will move to a different continent immediately an offer I can’t refuse arives. One thing I regret though is not having friends from childhood.

  3. I took the ASVAB during high school, and the navy nuke folks wouldn’t leave me alone after that – “we’ll pay for school and give you a bonus, and all this money”. I knew I’d never make it in the military – I’m somewhat anti-authoritarian, and I don’t care how much you pay me, I’d never want to be military. I respect those that do though – they’ve got a tough job, and make a lot of sacrifices I’m not willing to make.

  4. Great article. I always thought joining the military is a great way to retire early. It’s probably better for some personalities than others. I probably can’t make 20 years in that environment.

  5. I’m with you.I graduated from engineering college when the Kargil War was on.And I remember the efforts made to recruit engineering graduates into the services.Lots of talk about regimental honour,being gentlemen for life,learning discipline,being set for life…..
    At the time,I was far from being immersed in personal finance and I doubt I had a single thought about retirement.Just the fact that I have always had an intense aversion to a regimented lifestyle kept me away.
    Its only a couple of years later I heard the real horror stories from the battle front.Young men were told that the only way India would prevail was for them to scale the icy slopes of the glaciers and flush out the enemy from bunkers on the summit line.Suffering the cold on an empty belly and risking death or the loss of limbs in at attempt to secure a pension and some social status seems a poor decision.In no way did I envy those men their experience.At least I had all my limbs and no recurring nightmares.
    The army might make sense as a way to early retirement only if you were born to extreme poverty and have no other way out and your daily life is riskier than a battle-front.

  6. What you have shared is very interesting. Yet, just like anywhere and on anything, you win some, you lose some. I am just curious what it would be like it everyone joined the military. 🙂

  7. I served 4 years and a month in the Air Force. Enlisted at 19 because I wanted to serve my country, escape South Toledo and earn funds for college. The whole time I was in I couldn’t wait to get out. When I told my commanding officer (a lifer) that I wasn’t going to re-up he looked at me like I was insane and said:

    “Hell, man, just 16 more years and you can retire.”

    “Sixteen years!” I replied. “Many murderers spend less time than that in prison.”

    When you’re 23-years-old 16 years seems like a long, long time.

    Once I got out I went to nursing school and became a RN. After graduation I received recruiting flyers in the mail daily. I could have gone in as an officer. I wanted to but I was newly married and didn’t want to give up my civilian lifestyle.

    Sixteen years flew by and I was 39. I’ve kicked myself every year since. Hell, I could have been retired for a decade now.

    Looking back, the four years I was in were some of the happiest. I traveled the world, had experiences that were awesome and made friendships with great people that have lasted a lifetime. My time in the force made me into a better person.

    Man, I shoulda stayed.

    1. I like your prison analogy!

      I look at a 20-year career from the other side, remember what years 11-20 were like, and think “Man, I shoulda gone into the Reserves”.

      The key is to take it one obligation at a time, and to only stay in uniform if you’re having fun. It looks as though you made all the right decisions for yourself at the time.

      Greener grass. Or, for RNs during the years after 9/11, very sandy grass.

  8. I’m at 18 years in the Navy, I plan on doing 25 before retirement. I’m an enlisted nuclear trained submariner, and that recruiter got me good. He showed my parents and I how much money I would make, and the getting paid to go to school thing as well. I fell for it hook, line, and sinker. I enjoyed the <2 years at school, even though it was really challenging. I hated the boat when I got there, I had so much to do and no time to do it. I also didn't have that much time to enjoy myself away from work. Luckily I came to the realization that I really loved my job and going to sea during my "Last Year in the Navy", that was 13 years ago. I now have my own family, and we are doing very well for ourselves. I have my last sea tour coming up in a year or so, then will retire from shore duty. We will be more than financially independent by then, and plan to build a house in a small town in the country. The Navy has been good to me and my family, and we will reap the benefits for the rest of my life.

    1. Glad it worked out for you! I’m sure it was challenging at times (like many careers) but the sacrifice will pay off (literally). Good job and good luck with your retirement.

    2. Hey, JWesleyM, it’s nice to see the good nukes win once in a while. (I was at NSTCP’s Ford Island engineering department for nearly five years before I retired– including two “training command ORSEs”.) You’ll have to let us know what boat you get. If you choose Pearl Harbor, I have family on GREENEVILLE– but I was much more impressed with a tour of the VIRGINIA class.

  9. Fantastic article! This should be a must read for all recruiters to share with potential candidates. You could turn this into one amazing presentation for a group of high school kids wondering what they should do next.

  10. The 30 days of vacation is a little deceiving. Let’s say you want to leave town after you get off on a Friday, take the following week off, and then show back up on that next Monday. For a civilian job you would take 5 days of vacation. For the military you would have to take 9 days of vacation. With my current job I get 22 paid days off a year, and I can get a lot more vacation from that than the 30 I got from the military every year. I did 6 years, and did well while I was in. I would have reached 20 years last January if I had stayed in. I’m still glad I got out. Much respect for those that did 20, especially if you did it with a family. That’s hard time.

      1. Ryan is correct but there are ways around it. For one thing the military gets numerous 72’s and 96’s. 3 and 4 day weekends for all major holidays. Also if you stand a post (many times a sleeping post) you get the next day off. If you stay local that 5 day vacation will be only 5 and not 9. Paid moves with plenty of time off to get settled in the new place.

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