Financial Advice Blog

Let Your Military Retirement Power Your Civilian Retirement

by Community Manager  |  Retired, Army  |  San Antonio, TX  |  ‎12-23-2013 06:00 AM

Last week I was looking at my own finances, as I regularly do. This time I was thinking about how my military retirement was going to fit into my family’s overall plan. 


Because I retired from the reserves, I’ll begin drawing my retirement at age 60. And while I’m in no rush to get there, that extra check is going to be a nice addition when I do. My plan is to keep working well beyond the start date of Uncle Sam’s financial “thank you” for my service. And there lies the opportunity. When my reserve retirement finally kicks in, I’ll actually get to do what I’ve been counseling military retirees to do for years — save a big portion of my monthly check to make my civilian retirement that much better!


What’s your leverage plan?

What about you? Are you planning to or are you already leveraging your military retirement in preparation for your final retirement? Even though that’s my plan, I’ve seen plenty of military retirees working civilian jobs and using the extra income from their military retirement checks as nothing more than a way to finance a bigger house, a fancier car and a generally upsized lifestyle. A lifestyle, by the way, that will require them to accumulate an even bigger pile of retirement savings if they want to maintain it into their golden years.


So how exactly do I suggest leveraging your money instead? Simple. Rather than spend it all on lifestyle enhancements, use at least half of your military retirement income to boost your ultimate retirement savings. In other words, use the money for financial good before it becomes a part of your normal spending routine.


The numbers support it

Let’s look at how this might play out for Joe, an E-7 retiring today at age 40. He would receive a retirement check of approximately $2,000 per month (rounding down!). If Joe finds equivalent civilian employment, lives within his means and allocates half of his retirement to fund a portfolio of investments, such as his new employer’s 401(k) or an IRA, he could see a huge financial boost when he calls it quits from the civilian workforce. In fact, if I assume 2% inflation of retirement benefits and a hypothetical 7% return on the money invested, our savvy retiree would have roughly a million dollars built up to supplement military retirement, Social Security and whatever else he has accumulated by the time age 66 rolls around.


When my first military retirement check rolls in, I think I’ll still probably have six or seven years left before I hang it up for good.  If I live my own advice and save half of it, we’ll accumulate nearly $200K by the time I’m 67.  We could take a pretty cool series of trips with that kind of money…now I’m not just writing it, I’m feeling it!


That’s a pretty powerful way to make the most of military retirement.


Today or tomorrow (or both)

Of course, that half of your retirement check I’ve earmarked for investment could be used to power some serious spending. You could direct the same $1,000 to park a slick $50K sports car in your garage or maybe add $100K to the price tag of the roof over your head. I’m not saying that increasing your quality of life is out of the question, but rather that it shouldn’t be an all-or-none proposition. I’m only suggesting you invest half your retirement check. The key is to get to it soon after retirement because, if nothing else, spending has a momentum of its own.


So, if the shoe fits (like it will for me in about 12 years!), military retirement offers the chance to do some solid work with your savings and investments. Don’t miss out on the opportunity.






by Redtees ‎12-23-2013 07:02 PM
You've nailed it. Saving most and spending a little IS the way to go. I'm glad we did that because the example you used is true.

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