Should You Stay for the Military Pension? The Math Might Surprise You

Summary

BiggerPockets Money Podcast Episode Summary

Episode Title: Should You Stay for the Military Pension? The Math Might Surprise You
Release Date: July 7, 2026
Hosts: Mindy Jensen & Scott Trench
Guests: Doug Nordman (“Grand Doug”) & Carol Pitner
Theme: Deep dive into how military professionals can achieve financial independence, the real math behind the military pension, and the trade-offs of “gutting it out” for 20 years versus transitioning out earlier.

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Episode Overview

This episode focuses on financial independence for military service members, specifically analyzing the true value and opportunity cost of staying for the coveted 20-year military pension. Doug and Carol—father and daughter, retired Navy officers one generation apart—offer firsthand insights into building wealth through military service, the different outcomes depending on tenure, and the fundamental decision many service members face: “Should I stay for the pension, or pursue wealth faster another way?”

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Key Discussion Points & Insights

1. The Military as a Platform for Financial Independence

• Military service can be a “gift” to a FI/RE (financial independence/retire early) journey: with pay, non-taxable housing and food allowances, and lifetime benefits for those who stay long enough.
• The value of VA disability compensation and health care is significant but not guaranteed for all.
• Only about 15% of those who enter the military make it to 20 years and receive a pension. (07:02 C/D)

2. Two Paths: Early Exit vs. Staying for the Pension

• Carol’s Path: Left active duty after 5 years (joined reserves; left entirely by 2022). Did not qualify for the pension but still receives significant VA disability compensation and health benefits (08:19 D), which began immediately after service and increased as she updated her status to include dependents.
• Doug’s Path: Traditional 20-year career, received full pension, COLA (cost of living adjustment), and lifetime TRICARE health coverage. Notes the pension is powerful but statistically rare; his spouse did not reach 20 years and only started receiving benefits at age 60 after a delay. (04:58 C)

3. Breaking Down the Benefits: Pension and VA Disability

• VA Disability: Often overlooked, applies regardless of years served, starts immediately, and is tax-free (08:19 D).
  • Example: Carol's initial 40% VA disability rating brought ~$1,000/mo, rising to ~$1,700/mo after adjustment (09:08 D).
• Healthcare: Retirees and some reservists can maintain affordable, robust coverage for themselves and families through various TRICARE plans, which are “golden handcuffs” that can keep people serving longer (28:18 D).
• Pension Value: For a retiring O4 (Lieutenant Commander/Commander), the pension is $3,400–$4,800+/mo (48:16 C), inflation-adjusted, with some portions tax-exempt if combined with VA disability.

4. Why Most Don’t “Gut It Out” to 20 Years

• Promotion bottlenecks, “the needs of the service,” medical/bureaucratic detours, family strain, and attrition mean even at 15 years, only ~45% can/choose to finish the last 5 (55:26 C).
• Quality of life, flexibility, and family time often outweigh the financial calculus in deciding whether to leave (51:27 C, 54:50 D).
• As Scott observes: “If you’re at 18 years, you are federally protected to be allowed to stick it out to 20. But lots of things can pop up.” (55:29 C)

5. The Wealth-Building Mechanics (Surprising Simplicity)

• Most on ships/deployments lack time to spend, leading to forced high savings rates and compounded wealth if invested well (automatic TSP, IRA, taxable brokerage; 33:20 D, 35:10 D).
• “Dual military” (two earners) can save 40–50% right away, reaching FI much faster (37:12 C).
• Avoiding lifestyle inflation and consumerism is the “secret sauce,” not just a high military income (33:54 C; 37:45 A).
• Carol's Case: $600k+ portfolio amassed by simply not spending, investing in TSP/Roth IRA, and automating contributions, not by earning huge military paychecks (35:10 D, 36:00 D).

6. How Valuable is That Pension, Really? The Math

• A $45k/year pension (for life, inflation-adjusted) is “worth” $1.1m using the 4% rule, or $1.5m at a safer 3% withdrawal rate (50:12 A).
• BUT: Probability-adjusted, considering only a ~30–50% chance of making it from mid-career to 20 years, the actual expected value is lower—sometimes by half or more—due to forced moves, ‘bad’ assignments, burnout, or unforeseen events (60:37 A).
• Scott: “If there’s a 30% chance you’ll make it, then the pension…is now worth $500k. That’s a number you can achieve by saving $50k a year for eight years and investing that at a very average…non-interesting return.” (59:27 A)

7. Real Estate and the VA Loan: Opportunity and Caution

• Real estate can be ideal for military families (steady income, low down payments, “house hacking” potential), but house hacking or buying at each station isn’t for everyone (38:32 A, 38:46 D).
• “There’s an entire Facebook group called Military Landlords…exactly what it sounds like. All the folks who’ve become landlords, accidental or on purpose, while in the military…” (41:41 D)
• Tax considerations for capital gains on sales of primary residences are more generous for military than civilians (39:59 D/B).

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Notable Quotes & Memorable Moments

About Military Financial Opportunity

• “Only 15% of people in the military make it to 20 years. And the only way you get the pension as soon as you retire is if you do 20 years of active duty.” (07:02 D)
• “The military is the perfect cut of the United States. Individual habits are something you’re going to find in the military…some of them just kept those habits, but others of them actually used their benefits.” (13:18 D)

On the Value and Odds of the Pension

• “One of the best off-ramps is going to the Reserves or the National Guard…some of the camaraderie and income…without all the suck.” (27:18 C)
• “If you’re at 15 years, maybe it’s a 40–45% chance you’ll continue serving until retirement. If you’re at 18, you’re federally protected…but lots of other things can pop up.” (55:29 C)
• “I do this math all the time for military families…I am not a member of the command retention team. I am here to help you plot your exit ramp.” (60:37 C)

On Wealth Accumulation

• “I had no free time. I’m not spending my money, not given the time to spend my money…so I started automating it.” (35:10 D)
• “Our Norfolk apartment was equal to one BAH and our living expenses were only about $30k a year. So one paycheck covered all expenses, the other went right to our TSPs, Roth IRAs, taxable accounts.” (37:28 D)
• “If you don’t get off to a start, if you don’t have that financial literacy…you end up getting a very consumeristic lifestyle because you just have no incentive to save.” (33:54 C)

On Leaving or Staying

• “It’s a mystery to me why he’s still showing up for work.” (52:05 C)
• “The big obstacle is not the money. The big obstacle is quality of life, family, work-life balance.” (51:27 C)
• “It’s a personal choice…your family does have a vote.” (61:38 C)

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Timestamps for Important Segments

• [03:30] - The value of the military as a platform for financial independence
• [07:02] - Only 15% make it to pension eligibility
• [08:18] - Carol’s surprising VA disability compensation experience
• [13:18] - The full spectrum of personal finance habits in the military
• [27:18] - Why the pension is not a given; reserves as an “off-ramp”
• [33:20] - Forced savings, not high pay, fuels military wealth
• [35:10] - Carol’s wealth-building: “I had no free time…I started automating it.”
• [37:12] - Dual-income military couples and ultra-high savings rates
• [38:46] - Cautions and variations of house hacking/real estate acquisition
• [50:12] - Quantifying the military pension (synthetic net worth)
• [54:50] - opportunity cost & probabilities for actually reaching pension
• [59:27] - Probability-weighting the true value of the pension
• [60:37] - How to do the math when deciding to stay or leave

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Episode Tone & Delivery

The conversation is lively, data-driven, and laced with gentle humor and inside-baseball military anecdotes. Carol and Doug’s real-world stories and honest assessments anchor the analysis. Scott pushes the math hard, while Mindy zeroes in on practical “what could go wrong?” points. The guests candidly discuss the emotional and personal costs, not just the dollars.

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Conclusion: Who Should Listen

This is a must-listen for active duty service members, veterans considering their options, or anyone helping military families make major life decisions. The episode offers a rare blend of candid reality, actionable math, and in-the-trenches experience about what really works (and what doesn't) on the path to FI through military service.

Further Resources

• militaryfinancialindependence.com
• Book: Raising Your Money Savvy Family for Next Generation Financial Independence by Doug & Carol
• Facebook group: “Military Landlords”

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“The big obstacle is not the money. The big obstacle is quality of life, family, work-life balance…Take it one obligation at a time.”
—Doug Nordman [51:27]

“If there’s a 30% chance…then this pension is now worth $500k. That’s a number you can achieve…by saving $50k a year for eight years and investing that at a very average return.”
—Scott Trench [59:27]

Transcript

[A]

Our guests today are Carol and Doug, who both retired early using military benefits and the military career that they had and are going to live or have lived most of their adult lives in a state of financial independence. So we're gonna be talking about the remarkable opportunities you have if you're in the military to build wealth, either with stocks or with real estate. And we're gonna be talking about one of the biggest decisions that career military folks face, which is how to value the pension that you become eligible for at 20 years. You know, it's a very valuable asset. What are the probabilities of you actually achieving it and how does it compare to the opportunity cost of going into the private sector?

[B]

Hello, hello, hello, and welcome to the BiggerPockets Money Podcast. My name is Mindy Jensen and with me, as always, is my commanding podkifter co host, Scott Trench.

[A]

Thanks, Mindy. Great to be here. We've talked about Coast Fi, Barista Fi, Fat Fi, Chubby Fi, and today we're talking about Semper Fi. Just kidding.

[B]

That's not the right one.

[A]

Marines. We've really got two Navy retired naval officers here on the show today. We are so excited to have Doug and Carol back on the podcast. It's been six years. We're going to hear more about their specifics on their portfolios and how they each retired early, one generation apart in the Navy. So welcome back, you two. Thanks for joining us.

[C]

Thanks, Scott, and aloha. And I'll, I'll put a spoiler in right now. Six years later, everything's better than ever.

[D]

Exactly.

[B]

All right, that wraps up this episode of the Bigger Pockets Money podcast.

[C]

Any other questions?

[A]

How about you, Carol?

[D]

It's great to be here. Thank you for having us all back again. And six years, I mean, when you're raising kids, it's one year, six years, four months. It's all the same, right?

[B]

So, Carol, you retired early, following in your father's footsteps. How early did you retire? What year did you retire? And, and what is the more traditional timeline for your position?

[D]

I left active duty as soon as my contract would allow me to leave five years in. And so that was summer 2019. And at the time, it was just my first exit point. I could leave active duty and I could go to the reserves. My dad, we're going to call him Grand Dug because it's a lot easier to keep him separate from, you know, my husband being the dad to my daughter and so forth. But Grand Doug left when he did his full 20 year active duty career. And one of the things he's always told me was, hey, if you have an opportunity to leave, you don't have to get it out till 20. And he's wrote a great article about that as well. If you Google don't get it out to 20, you'll find his article online as well. So, and so when I left at my five year mark, there are a couple of factors in play. My husband loved his job. He's also active duty Navy. He's still active duty Navy. But it was getting harder and harder for us to find duty stations that would work for both his career and us living together. And so it was really easy for me to say, you know what, I don't think this Navy thing's for me anymore. I'd rather stop down to the reserves. That way I can move wherever you want to go next in your career and we can go from there. And so when we left in summer of 2019, I say left as in I left active duty. And then we immediately moved from Virginia to California. And to make things more complicated, I also found out I was pregnant at the same time. So now the morning that the movers are coming, I'm going into medical to make sure that, yes, I really am pregnant. And then we embark on a 23 day road trip to California while I'm pregnant, the first trimester, and then we finally make it there and our daughter is born in January 2020. I'm so sorry, my fellow Californians at the time, we got locked down hard on March 17, 2020, exactly two months into this newborn thing. And so the best part about the financial independence thing was that I just became the stay at home parent. I didn't have to worry about trying to work and manage a newborn at the same time while my husband was still doing his active duty job.

[A]

Before we get into like the update for the story, I want to ask a question about military fi in general because I feel like the military is such a gift to a financial independence journey. After you get through that first, you know, contract period depending on, and it gets better the longer you stay for a lot of reasons. And yet the military guys all grumble about it the whole freaking time.

[D]

Yes, absolutely.

[A]

Is that what you've observed as well?

[D]

Yes and no. Because you're always going to be told something like the needs of the army, the needs of the Navy, So they're going to keep you as long as you are useful to them. And so we have seen situations where people were told at 16 years, 17 years, hey, you're not A benefit to our service anymore. We can't promote you or you've reached high your tenure or we're closing out your rating and you need to either leave or you need to do something different. A lot of the benefits come from the fact that to an extent, your housing is paid for, your food is paid for, and you have health care. I think healthcare is probably the biggest win for the military. But a lot of people would also argue that your health care is still a number, that you're still dealing with everybody else in line, that maybe it's not as timely as you would expect it to be.

[A]

Well, I think there's two other components to this too, which is a pension and disability, which seems very, very prevalent. Disability, I understand, comes with a disability in there, but that seems to be very common across that. Can you tell us a little bit about those two benefits and how they work for your shorter tenure, for example, and your longer one? Doug.

[D]

So, Grendog, I think you should go first to talk about your pension and then I'll talk about my VA benefits afterwards, because I think my VA benefits were more of a shock to everybody than the traditional pension.

[C]

Absolutely. My spouse and I both have dual active duty military careers. She left just short of being eligible for her active duty pension. So I took an active duty pension at the traditional 20 years. Only 15% of the people who joined the military in any service, any specialty, only 15% get to the pension, one out of six. And in my spouse's case, with a reserve pension, she started that actually at age 60. She left active duty in her 40s and then waited another 15, 16 years before she reached the start of her reserve pension. We had this big gap in between me starting my pension and her starting her pension. The pension is absolutely great, has a cost of living adjustment, the same one as the Social Security formula, and it keeps up with inflation fairly well. We also, of course, have VA disability compensation. Now everybody is encouraged to put in to file for their VA disability rating. And then you get certain benefits depending on the amount of issues that have cropped up over the years. And it's surprising stuff. You leave the military, you do not feel broken, and then you start looking at things during the physical process, the separation, as you're retiring, and realize maybe it's a little worse than you thought. Also, there is health care for life if you retire, if you retire from the reserves, there's health care once you start your pension, usually at age 60, and the VA steps in, in many cases, depending on your disability rating, to Take care of health care there. I'll point out that this is a disability rating and the VA is compensating for an impaired ability to provide for your family. It doesn't mean you're in a wheelchair or on a short fuse and liable to explode in anger at any moment. It just means that you're dealing with issues that you probably would feel from a difficult employment at Google or at Ford or at Goldman Sachs or just about any other career.

[A]

One point there that I think is really important is you mentioned the word pension at the outset and then again later. But you said only 15% of people are getting the pension here. I'm very confused by that. Can you explain how that works?

[D]

Only 15% of people in the military make it to 20 years. And the only way that you get the pension as soon as you retire is if you do 20 years of active duty. And so out of everybody you would see in like a room full of uniform folks, only 15% of those people are going to make it to the eight where you would get a pension. And I'm exactly a version of that. I did not make it to 20 years. I've already completely left the military as of 2022, and so there's really no chance of me making it to 20 years and getting that pension.

[A]

Carol, tell me about your exit, what your benefits or situation looks like as a result of your service.

[D]

So when I exited at the five year mark, I immediately was still not ready for the pension. I only had five years in. When I go into the reserves, a lot like my mom, that can keep your counter running. And so my counter is technically at six years and some change for total military, but that's still too short for the 20 year pension. What surprised me was that I didn't think I was broken. I didn't really think I had a lot of problems. I can remember that one time that I slid down a ladder well and did something to my knee. I can remember that other time that shipboard medical took almost three weeks to diagnose this brain to wrist. Didn't really think that was that big. But I went onto the va.gov website anyway and I submitted my disability claim just, just to see what would happen. And to my surprise, I got 40% right out the gate. I'm like, oh, okay, 40%, that's not bad.

[A]

What does 40% mean?

[D]

The VA math is not real math, but 40% is an indicator of what your level is for privileges and what your level is for payments. Once you're above 30%. You actually get paid every month in tax free disability compensation. And it's not only for you, it's for you and your dependents. So one of the first mistakes that I made was once I got the deposit, I assumed that because my husband was still active duty, that my daughter and I were his dependent. And what I didn't realize is that the VA doesn't care. I also had dependents in my husband and my daughter. And so it turns out that I was being underpaid on disability compensation. As soon as I submitted that, I admitted that I had a husband and a daughter. They're like, oh, yeah, dependents. Here's a bigger number. I'm like, whoa, okay, I'll take it. This is almost $1,000 a month now. This is nice.

[B]

And that starts now, not after 20 years would have passed.

[D]

Exactly. It started right away. Well, when I say right away, I mean I got like back pay of about 6. And then it kept going forward from there. And so even yesterday, I got my last payment from the VA Disability Compensation. It was like just shy of $1,700 a month now for me. And that's partly because I increased my rating. I actually went to what's called a veteran service organization, VSO Shout out to dav, by the way. They do a great job. And they helped me look at a couple of things in my record that actually brought me up to 60%. And when I went over that 50% tier, it actually got me into what's called priority one VA health care. So my primary care right now is actually the VA clinic that's about 15 miles from my house. And I'm not dealing with TRICARE right now unless I want to. I'm not dealing with military treatment facilities because in many cases, the VA is a totally separate system from the DoD system. And so as a result, I have healthcare lifelong just for myself because I only serve 6 years on active duty.

[B]

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[A]

I'm fascinated by the military Journey to five because it seems like so many military guys seem to have such bad finance situations in a general sense. And then this other sect seemed to just like emerge from military service in their like late 30s, early 40s, totally, completely done, more secure than anything else you could ask for.

[D]

Here's the way that I view it. The military is the perfect cut of the United States. You're going to find anything that you find in the United States you're going to find in the military. And that means that individual habits are also something that you're going to find in the military. For me in particular, I was in charge of some really smart sailors. I mean, these are folks that are handling the computer systems and the guidance systems for things like missiles and guns and radars. I mean, really technical stuff. But the main reason that a lot of them had joined the Navy was because they were in credit card debt. They were in some situation in their teenage years or their early 20s, and they were now dealing with 27, 28, 29% credit card debt. And they knew that thanks to the Civil Service Members Relief act, the scra, as soon as you enlisted any pre existing debt, they automatically dropped the interest rate to 6%. So their goal was just to have some experience, to have some military benefits, to get that common paycheck, maybe travel the world, but also to help bring down that debt as much as they could. Some of them didn't quite change their habits. They still bought the hot rod, they still overspent on credit cards. Some of them just kept those habits, but others of them actually used their benefits. One of my sailors actually bought a house near the shipyard that we were in and rented out two of the rooms to two of the other sailors in my division. And so now he was doing an exact house hack, exactly what you talk about in bigger pockets. And so it was one of those things where if you are in the military, you already start with baseline benefits that are awesome, but you yourself have to take some initiative, whether that's talking with a mentor, talking with your peers, or just being pushed into that situation to actually do better.

[A]

I'm not as knowledgeable as you guys, of course, but I spent a lot of time on this. I actually went to the Naval Academy and gave a brief to the midshipmen on, hey, here's a hypothetical how I would go about achieving financial independence if I was a midshipman. It was two or three years ago and I was shocked at. They all think they're not getting paid like they think that the Navy in like West Point, these guys like this are not good like professions because they look at their income, their taxable income and they're like, no, it's not very high and they're right. But if you actually add in bah basic allowance for housing, which is a non taxable, just like your disability, and the basic allowance for sustenance, basically which these, these guys get right out of college, that goes stacks on top of their pay and it's totally non taxable and it's just a refund to them if they spend nothing on housing. They just get the same amount either way and it's like thousands of dollars and it depends, you know, depending on marital status. And then there's no health care, there's no pension. You can contribute to your 401k but you're vesting a pension for free. All the insurance types you can get are very cheap, but they have the VA loan. It's incredible. I did the research and I think there's like two colleges, Harvey Mudd and Harvard or something like that, where the median graduate earned more than the Naval Academy grad. West Point was like just a hair below. I thought it was really interesting. I think that, that that's, it's like one of the best possible ways to build wealth. And then I built it again for the enlisted men and I was like, the enlisted guys can actually come out ahead of the officers in a very reasonable scenario because they're getting paid for those four years that the officers have to go to college for, even with the free college. And then if the tenure goes on to 10, 12, 15 years, the officers blow past them because it makes so much more. But I thought that was really interesting. It sounds like you've done similar analys. Am I getting close with these?

[C]

Oh yeah, you're absolutely right. And, and let's, let's start off by saying there's got to be a reason why the Department of Defense is being so nice to us. And there's an element of survivor bias that we never hear about other than gold star or families or services for wounded warriors. And there's also an element of, yes, you might have a 40% or a 60% VA disability rating. Those are clubs that nobody wants to be in. And those are ratings that in the long run will limit your longevity. I mean, you look at Carol and me, and neither one of us seems to be any more disabled than anybody else of our age, our demographic, and yet we have the statistics to show that people that have the VA disability ratings that we have are probably going to have a shorter lifespan. Do we regret that? Well, if we'd thought about that when we were in our 20s, maybe we would have made different choices. However, we value our military service and we also know that we do get compensated for things like that. All the numbers that you've mentioned, the, the housing allowance, the basic allowance for subsistence, the VA disability compensation, all of that is in federal law. And the VA disability rating process, every little criteria for that is also laid out in federal law. It's very difficult to parse all that and to figure out how you're going to be rated and how you're going to be treated for that. However it's standardized, it's a very difficult labyrinth to navigate. And we talk about how the people that most need the support of the VA disability rating system are frequently the ones who are also least able to navigate the process. And Carol probably knows a few people already that have a VA disability rating of 100% permanent in total. I've got many friends in that category as well. We talk about this all the time because again, it tends to affect your. Not only your longevity, but, but how your family has to approach your care in your elder years, so to speak. Not that I'm, you know, trying to lay the ground here for Carol for any expectations. However, there is that issue and, and I have a number of posts on, on my site talking about making sure that you do this stuff now while you still have the memories and you still have the capabilities that your family doesn't have to try to reconstruct it when you're no longer able to. I would also make a comparison to corporate industries, banking, manufacturing, construction, engineering, all of those. Imagine if they had the same federal system in place for a disability rating and compensation. I think maybe some of the workplaces would change the way they do business now.

[A]

I just want to say I'm always being a little glib there. This is like you guys are risking your life for our country, right? You know, there's real danger that you can get yourself into in these, in many of these things. And there's lots of sacrifice that's made across it. And I'm glad that that results in some of these, these benefits that are very powerful. You could argue that there should be a lot more in many of these cases. So definitely don't want to like, say, hey, this is not. This is too much. I just think that when you study numbers all day, every day for financial independence, these light you up because they're very attractive in Making the other parts of the financial independence journey very easy from a spreadsheet perspective. And that's where I was coming from on those numbers, not the. This is crazy. There's a real attraction here. And I'll also say that when I went to the Naval Academy and talked to these guys, these are kids that are really committed to what they do. They want to be there, they're going after it, they're working hard, they're fit, they're strong, and they really matter. Like, they're going to be on these billion dollar ships one day, commanding them and leading them. It's pretty special.

[D]

First off, I got to thank you for going to the Naval Academy and actually doing that talk. If there is one thing my husband was really, really unhappy about coming out of the Naval Academy, is that the financial talk, the only financial talk that he got for the Academy was, hey, you don't want to invest in this TSP thing. They're just going to take your money and put it all into the G Fund. If you. Yeah, exactly. Mindy's face right here. For all Those watching the YouTube video, the exact same face I made when my husband explained that story to me.

[B]

Oh, my goodness. I mean, well, I mean, technically that's true. If you put money in the tsp, they're going to put it in the G Fund unless you tell them to put it in something else, right?

[D]

Not anymore. They changed the rules a couple of years ago. And so now what they'll do is they'll put it in the Life cycle fund that tracks closest to your age. I believe it's age 65. And so that's one of the two major changes that TSP did. The first thing was they automatically bumped it up to 5% once you're of the enough service to be able to make the contribution. And then they also changed it out of the G Fund and into the L Fund. That mostly tracks your age. So those are two of the big changes that were made. It's awesome that someone like Scott is going to Naval Academy and saying, hey, this is the talk that, you know, Midshipman Carroll had from Midshipman Grand Dug so many years ago was invest in your tsp, put some money in your Roth IRA if you got some room. If you don't have the time to spend the money, then invest the money. Because that was the big problem I had in my military career is I had no free time. 2015 was the first year in which I really earned money. And I actually have some numbers here that I put together in 2015, the actual number that showed up on my W2 for my paycheck was $35,000. But when you look at everything, bah bahas. At the time, I was earning something called the overseas housing allowance, which is only about $1,700 a month. It was actually $68,000. So I was getting taxed for $35,000. It was either 10,000 or 12%. I can't remember that bracket anymore. But the actual money I was receiving was $68,000. And that happens to be pretty close to the current median, even after all these years.

[C]

And that's intentional. That's set by the Department of Defense and approved by Congress. And the pay tables, the idea is that the total package, the regular military compensation calculator, will have the average officer or enlisted at that age and experience level getting about 95% of the median salary for what they could earn doing a similar occupation out, out in the, in the regular corporate world. And there's a whole bunch of hand waving going on behind that to make it look about right. But it's essentially retention. If retention in one area, in one service and one specialty is, is declining and cratering, well, eventually somebody's going to come along and start throwing bonus contracts and incentive pay and other benefits. Well, benefits that don't necessarily show up in a pension, but show up in

[D]

bonus income and blood money.

[C]

Yeah, blood money. Okay, sure, sign a contract, get some money. But you got to give us three to five years. And the whole idea is that you'll raise retention there enough to solve your immediate problem of manning whatever ship or submarine you're trying to get the mission done with. So these things are able to be looked at if you have the understanding, if you have the experience, if you have the financial literacy to figure out where this comes from. And just like you're doing, Scott, I'm aware of at least another dozen other people who are regularly going to ROTC programs, colleges and service academies to get give these same talks. Now, whether the midshipmen at your talk were all able to stay awake, it sounds like you had a pretty compelling presentation. Normally there might have been periods like that 45 years ago where I would have just dozed off and not even absorbed any of it. But I'm glad to hear it's much better now.

[A]

There was some interest, so I got some. I got like a golf clap.

[C]

Planting seeds, right? Once you plant that seed, you got to wait for it to grow again.

[A]

Going back to the, the numbers excitement around this, right? It's like a modeler's dream, right? Because everything is right there. The pay is right there. It's all going to be adjusted for inflation. You can see it on the calculator. You know exactly what your career trajectory is going to look like within a few years. You know, unless you're exceptional. You know, that may move, move through it or get, or get lucky or whatever it is to get, to get ahead, to get ahead in there. But it's like very clear, like, here's how your progression is going to go and what things are going to look like. You can just map it out into a spreadsheet, no problem for what your career is going to look like. And that's your worst case scenario because you're going to get some kind of like hazard pay or special duty or whatever that's going on there at some point in time as well. Or I'd never heard this term blood money. You sign your blood money contract for another three years and your $15,000 bonus or something like that.

[D]

Oh, way more, Way more.

[A]

Okay.

[C]

A really, really big pickup.

[D]

Yes. When I was what was called a surface warfare officer, nuclear SWO nuke. And so my nuke bonus was $15,000. That was. Congratulations. You packed what was then the Richardson test. It was CNO Richardson at the time. And so here's $15,000. We'll see you in a couple of years once you get your SWO penny. But on the SWO side of things, their retention was so bad before the pandemic that if you were selected in the first round for the department head bonus, it was $105,000. If you were selected in the second round, it was $95,000. And if you're selected in the third round, it was $85,000 and they would pay it out to you. I can't remember if it was lump sump or over three years, but you would have to design for a department head tour. As a surface warfare officer, I spent a lot of time watching my department heads on my first ship and my second ship. And I spent a lot of time saying to myself, I don't want that job. This just looks miserable. Why would anybody want to sign up for this? No wonder the bonus is six figures out of the first round. This just looks awful.

[C]

I don't know, Carol. If Scott had joined the Navy, he'd be in a submarine right now.

[D]

I mean, how was your department head tour? Because you didn't look like you were happy either.

[C]

I learned a lot and it was valuable experience and I treasure it, but it was not fun at the time. And I, I did that to serve off my obligation for having gone to get a free, a free graduate degree from the Naval Postgraduate School. So there are various benefits you can get. And the benefit I got out of that was getting a computer science and a weapons engineering degree right at the dawn of the World Wide Web. That's paid tremendous dividends over the years. Again, though, there is a payback. And I don't know if you can tell Scott. Mindy, we have this conversation in our family every week, and right now I can only imagine how my son in law feels when he sits down between us at the dinner table on Sunday nights and listens to this kind of retention discussion.

[B]

Does he have any plans to leave?

[C]

Oh, yes, he does.

[B]

Okay.

[D]

He's officially classified himself as what's called high risk in his community. He's reached the point where he's gotten his master's degree in computer science thanks to the Navy. He's a Naval Academy grad, so he also got his bachelor's degree from the Naval Academy. So the military has paid entirely for his schooling at this point. And then on top of all that, he's had a job for almost, what, years? That's 20, 26, 12 years. We were both year group 14. So except for a sequestration or a budget shutdown or one of those situations, he's gotten paid for the last 12 years. And for my husband and I, we were both teenagers when the recession happened, so to have a college degree and a guaranteed job was a huge benefit. But the problem is we've also been millionaires for quite a while now. And so he goes to work after dealing with accidents on the highway that are slowing down traffic and maybe the base gates aren't functioning properly, so he has to go in the long line to have his ID checked. And maybe he walks in the building only to find out that three of his sailors got arrested over the weekend and two of them are considering divorce. And, and at some point he looks at everyone and says, so what am I doing here again? Why do I want to keep going on this? I could be surfing right now.

[C]

Does any of this sound familiar to the other Vickerpocket's money guests? It resembles your work environment.

[A]

I did talk to another officer. You think about these things from the outside. You're like, oh, you only have eight more years and you get a full pension. Like that sounds great. But then you realize this is at your 30s. And yeah, this guy was a captain in the Army. And he was like, it's really hard because there's these guys in the barracks and they're 18, 19, 20 years old and some of them are really not good actors. And then you gotta, you're, you have to deal with their shenanigans on a regular basis. And that's the job in this particular scenario. And that was very taxing on this particular individual.

[C]

I have talked about this for years about don't gut it out to 20. Once you feel like you're no longer challenged and fulfilled and you're not having fun, that's a great time to consider your exit. You know, take it one obligation at a time and be ready to get out at the end of everybody obligation. And one of the best off ramps is going to the Reserves of the National Guard. That's a good way to have some of the military camaraderie and some income and some of the lifestyle without all of the suck. However, maybe going full civilian is the right thing to do. And so her spouse, our son in law is looking at that option. He'll probably end up going into the reserves and seeing how he likes life there. But every time he comes home from a drill weekend, he's got his spouse showing him what they're banking bank accounts look like.

[D]

The big draw for my husband for staying on active duty is unfortunately, Grendel, you're a little bit out of date on this. There is a way to have Tricare through the entirety of your life. And the way it works is you do active duty until you decide to leave for the reserves. And then when you're in the reserves there's actually something called Tricare Reserve Select.

[C]

Oh yeah.

[D]

So while you're in the reserves then you can buy Tricare and for your family rate, it's close to like $260 a month for a family right now. It is like bonkers low compared to most of the civilian world. If it was just you by yourself, it's hundred dollars. I want to say it's somewhere around $80 per person right now. And then this is where there's been an update that most people aren't aware of. Tricare has something called Tricare Reserve Retiree and it covers the period that they call the gray area. And it's the gray area between you've completed 20 years, age 42, 40, 38, whatever that age is, you've completed your 20 good years of service and now you just need healthcare from the time that you are starting your gray area up until your pension starts at age 60 and so you can still buy that Tricare as well as someone who already did your 20 good years and is eligible for the pension, but is not going to receive the pension for what could be another 22 years. The big attraction is that even though I have VA healthcare because of my service and my husband is going to have VA health care because of his service, unless one of us is 100% permanent in total, our kids cannot have VA health care without that rating. And so that's the big attraction of reserves, is being able to buy Tricare for our kids until they age out.

[C]

And again, these are all good prices for tricare. It's some of America's cheapest, least expensive healthcare and it's a wonderful deal. But again, it's those golden handcuffs that you can feel wrapping themselves around your wrists to keep you showing up for drill weekends or staying on active duty and gutting it out to 20.

[D]

We call them gunmetal handcuffs. You know the color gunmetal?

[C]

Yeah. Okay, very good. Yeah.

[A]

Let's bring this to a financial concept problem, right? So I think there's two parts to this. One is, is how did you accumulate, Carol, the wealth you have now to give you this option? And then two, now we have a financial, an analysis we have to do. This pension is worth something very real and you're going to give that up. And I think you can beat it. Its value in the private market pretty handily over that same time period. And that's a math problem. Even if you give it a very high valuation because of the safety rating and the inflation adjustment for that pension. How do you think about this? Can you tell us the how you got here and then how you're thinking about this announcement?

[B]

Well, Scott, she said she made $30,000. That's how she got here.

[A]

That's right, yes. $35,000 taxable income, right? That's it. Boom. You save that, that's what, five years and you become worth a million bucks.

[D]

So to, to start, the very first thing that happened was I graduated college in the morning and I commissioned in the military in the afternoon. And by that point, the person on my first ship who was helping me figure out how to get to my first ship, she said, hey, the ship is going to be moving to Spain in two weeks. Are you coming with us? And I'm just like, actually, yes, I am. So by Wednesday, that week, I graduate on a Saturday. By Wednesday, I'm in my car, I'm driving from Houston, Texas to Norfolk, Virginia to get on the ship. And I got on the ship. And two weeks later, the ship actually moved from Norfolk to Spain. And then I was sent back stateside to go to a school for about six weeks. And then I went back to the ship. I met it up in Greece this time. And then for like the next 19 months, I did not have any free time. It felt like, I remember out of the 19 months I was stationed on that destroyer, 13 months were spent on the ship, which meant that I only had six months on shore. Out of those six months on shore, only four months were continuous because the ship was in a temporary shipyard and needed some repairs. So I was actually going home every night, except when I had duty once every six days, except when duty was once every three days because everyone was on holiday and they needed to let half the ship go on leave and the other half would stay on duty. So out of six weeks, I had only one weekend to myself. Every other one of those five weekends, I was spending at least one day on the ship. Six day work weeks, seven day work weeks, eight day work weeks. It felt like it seemed out of those six months that I spent on shore, four of them were continuous but without weekends. And then I only had three week pockets here and there. We would pull back into port for three weeks, and then something would happen in the Mediterranean or in the Black Sea. And this is 2014 to 2016. So we're. We had our suspicions, but nothing had actually started yet. And then we were back on the ship. I'm actually not even sure if I ever cleaned a toilet in my first house with how little time that I had.

[C]

I'm pretty sure we spent more time in your house than you did.

[D]

Yes, because I left the key in a lockbox for you so that you guys could come and use my Spanish house way more often than I did.

[C]

Thank you for your service.

[D]

I had no free time. Now, don't get me wrong, I was getting a port call every three weeks. So we were landing in places like Bulgaria, Romania, Greece, Cyprus, Portugal, Spain, Scotland, the uk, England. We did get a port call in Israel. Our port call in Ukraine was canceled, so we never got to do that one. Port call in Georgia was canceled, so we never got to do that one. Trying to think, oh, we were supposed to have a port call in Tunisia that got canceled, too. This tells you how much free time we had, right? Is that we had all these promises, and then we only got through about half of them.

[B]

So since you don't have free time, you're working all the time, you're getting time and a half. Right. You get overtime in the military.

[C]

Right, right, right, right, right.

[A]

How do you, like, how mechanically does money leave? Like, how do sailors end up broke in this circumstance? I guess I don't understand, like, is there any chance to spend money except at the bar on port on leave?

[D]

There is. And one of the sailors on the back of one of the Liberty buses said it best. He said, well, I'm still paying off the tattoo on this arm. I'm still paying off the tattoo on that arm. Had a really good time with the strip club at the last port call. And then my roommate threw up on my backpack, so I gotta go buy a new one of those. And I've heard that the best place to buy diamonds is in Israel, the best place to buy gold is in Turkey, and the best place to buy leather is in Spain. And I'm just sitting there and silent in my head saying, okay, good to know.

[B]

Well, just because those are the best places to buy doesn't mean you have any time to go to the merchants.

[A]

We got to give this guy a podcast.

[C]

We talk about how when you get underway, you have no free time, but then when you get into a port, you spend all your money because you feel like you have built up the need to do that, that you've earned it, you've had a tough deployment, so you really do deserve that pickup truck when you get back home after six months of tax exempt combat zone pay and you end up getting a very consumeristic style lifestyle because you just have no incentive to save. You have no incentive to put money away for a pension, especially if you grew up in scarcity or chaos, especially if you don't have the financial literacy that goes with that. And especially if you join the military in the first place. Place to get out of a bad situation like excessive debt. If you don't get off to a start, if you don't have that financial literacy to make sure you understand where to put the money. Well, the reason that your foundation for financial independence started so, so early was because not necessarily that you had a high savings rate. It's got you at an extremely low spending rate. It was piling up in your retirement accounts because you had nowhere else to spend it, right? No other opportunities.

[D]

I couldn't figure out how to order Amazon on the ship. There are a lot of people on the ship that would have Amazon coming in once a month. And I'm just like, how do you get your computer to work? Because every time I actually find a computer, it times out after 15 minutes. Because you don't get bandwidth at sea. So I couldn't even like stress order stuff.

[C]

We had that same Amazon problem in a submarine force.

[D]

And so I'm not spending my money, I'm not given the time to spend my money. I'm not getting paid time and a half. I appreciate you making that comment because I actually did not get enough sleep for about 13 months. I was running on somewhere between, if I was lucky, three and six hours of sleep every night. And I say every night like it actually happened at night. The best time for me to sleep on the ship was between 4pm and 11pm because my watch started at midnight. And after I finished my watch at 3 in the morning, that was the best time to work out in the day. And the workday started at 6am underway. And it goes from 6am until 10pm and so my best opportunity to sleep was after the 4pm early meal until 11pm if I was able to sleep, if there wasn't a drill happening, if there wasn't a long announcement about kinder hippos on the PA system, which has happened before. I'm still pissed at my captain about that. That was a decade ago, you know. And so what I did was I started automating it. You know, I got back from the first underway, you know, the two and two and a half months that I've been on that underway, and I looked at my checking account and it had five figures in it because I had no time to spend money. And I'm just like, okay, I gotta do something about this. So I immediately lump sum, dumped a bunch into my Roth IRA for the year. And I've been a lump sum fan ever since. And then I increased my TSP contributions. And so that meant that my TSP was set to something like 25% for most of my military career. And as I got further along and started making more money, I'd back it off 24%, 23%, 22%, but it was only ever a little bit. And so I had that automated payment going to my tsp. I would do the lump sum Roth IRA whenever I could. And then every time I got back into port, if I had extra money, that was an automatic dump into my taxable account as a result of all of that, my TSP, my IRA. So I rolled my TSP into my Roth IRA. And so that between my TSP and my Roth IRA makes up $600,000, give or take nowadays because of all the money that I was saving on active duty and then all the compounding that has happened since then. But I also have money in my taxable account from that extra little bit that I was squirreling away every time that I was in port. And I'd already had TSP taken care of and I already had Roth IRA taken care of and I really just needed to go get some more sleep. Like let me just throw this money in a taxable account and come back to this later.

[C]

I will point out that dual military, dual military couples, when they both have an income, you can right away start with a 40 or 50% savings rate. Now, you guys weren't married at the time, but that dual military two earners in any family reaches financial independence much faster, right?

[D]

Two bahs, two bass, two paychecks. Our Norfolk apartment was equal to one bah and our living expenses were only about $30,000 a year. So one paycheck covered all of our living expenses and the other paycheck went right to our TSPS, our Roth IRAs, our taxable brokerage accounts.

[A]

So it seems like you need a very specific strategy to not accumulate wealth wealth in this particular setting that you had here, which was the tattoo on the right arm, the tattoo on the left arm, the strip club at that port, this one in there. But then for your approach, it's. There's the basics, the basics of many in the financial independence community know, but the. That you have to go and discover and learn here of investing in the tax advantaged accounts and actually put it into work in the right. You know, I'm assuming broad based market cap weighted index funds or the closest available option inside of that, that.

[C]

Well that's, that's. The thrift savings plan is broad based index funds with low expense ratios. SB500 fund, a small cap fund, international fund and a bond fund and the G Fund. That's, that's the whole thing right there. Pick one or two or three.

[D]

Or the Life cycle fund, which is basically all six in different denominations.

[C]

All of them. Yeah. Yeah.

[A]

It doesn't sound like this was part of your journey, but if you go back in time, was there an opportunity where in hindsight it would have been obvious to house hack, which is my. The bias I bring to these, these journeys here. I don't know if that's the answer. I would just be curious in your view if that's how you feel.

[D]

I watched it backfire on a couple of people in not spectacular fashions, but in ways that you knew could be happening and you weren't quite ready to. One of the predominant thoughts that I had while I was on active duty, was I spend time with you people all day. I do not want to spend time with you people at home. And so that was pretty much what shut me down from house hacking.

[C]

Scott I was doing this house hacking 1980 style. When I knew that I would be underway on a submarine away from home for two or three months. I would rent my condominium, a two bedroom apartment. It would be a, essentially a short term rental arrangement, have somebody come and stay there for two or three months and pay me a couple thousand bucks. In the 1980s and then our first house here on Oahu, we bought a house that was in a great location that had been terribly cared for over the previous 10 years. And then we basically did the Mindy Jensen model of a live in flip. I say Flip because we still own that place 36 years later. But the whole point was you buy a place that's in terrible condition and if you have the skills, you, if you have the time, you can do a considerate rehab on it and build your own equity out of sweat.

[B]

The military has slightly different rules for the primary residence sale. I just Learned this. It's two out of the last 15, not two out of the last five.

[D]

Yes.

[B]

Which is quite nice because you guys get moved around all over the place. You don't have the opportunity to necessarily stay there for two out of the last five years. So they give you a little bit more time, which is nice. I mean, I have taken advantage of the live in flip rules 10 times.

[C]

We have a friend who did 34 years on active duty. She had a wonderful career. And back then in the 1970s, 1980s, the conventional wisdom was that you would buy a house with your VA loan at every duty station because real estate always went up. She followed that rule and had a very successful career. But when she retired, she had had five rental properties and a personal residence. And she spent the next decade after she sold that personal resident moving into each one of those properties to get that minimum two year stay to be able to get the deduction on her capital gains and her, you know, she still had to pay depreciation recapture. But to us it seemed like a miserable life. At the back end of her career, when she retired in her late 40s, to have to go back to each one of those properties to do that 2 out of 15. But it worked for her. It worked out very well.

[B]

I was going to say she chose to, she didn't have to.

[C]

Yes. The good news is that she bought a recreational vehicle so that when they drive to that house. They could do anything they wanted and sleep in the driveway in the rv. And that was the, the business plan that worked out very well for her. Very successful. Again, once you know what you're doing, work for it, plan out in advance. That all works very well. I'm sure some of the places she bought in, they did not always go up over the 20 or 30, 30 years that she owned them.

[B]

And you just have to have that as your primary residence. In my primary residence, I could travel, I could go do whatever. I just have a primary residence. So she didn't have to stay there for two years. She could, like you said, hop in

[A]

her RV and travel around one of these Navy officers. They dive deep into this world.

[D]

So sorry. There is an entire Facebook group called Military Landlords. It is a fantastic Facebook group and it's exactly what it sounds like. It's all the folks that have become landlords, accidental or on purpose while they're in the military and they're handling things like help. I'm stationed in Florida and my offut Air Force base house is having these issues. Anybody know a good lawyer like that? That's exactly what the group is for.

[A]

I just think real estate is such a good option to be open to for military folks because you have the income you can borrow against. Unlike an entrepreneurial pursuit or a real side hustle. Like the project at the house can wait until the next break you have there. And you don't really lose a ton if you delay it by a week where, you know, you lose a ton if you, if you have it vacant for two months. But you know, it's just like very conducive to the ebbs and flows. I think of the military work life for some people who are interested in that and the borrowing is very beneficial. But I want to go back to two parts. So we've learned here that we, we saved our $30,000 salary. That's how we became a millionaire here. And I, I, I assume that these numbers just begin, just stacked over the five years and, and you invested them aggressively and, and you had some extra etc whenever you got extra cash from hazard pay or you know, seed duty or whatever they call it, the terminology here, you stacked all that up and that added up really nicely and compounded over the last couple years. Is that generally the story of how we got to this multimillionaire status?

[D]

Yes. I was active duty, so I had base pay. I had an overseas housing allowance. I had a cost of living allowance for Spain, which was probably four or five hundred dollars. And then when I was stateside Norfolk, that went away. So that was BHBAs base pay. Already mentioned that I had deductions for SGLI, the service group members life insurance. Service members Group life insurance. So that was maybe somewhere between 25 and $30 a month. That number has gone up and down over the years. Deductions for my tsp. And I'm trying to think of what else I had. I did have CPay when I was, as they say in the Navy Hayes grant underway. And when I started, that was about $100 a month. By the time I finished in five years, that was maybe 220amonth. It wasn't really high. But you'll run into some people on sea duty that, that have been at sea for 16, 18, 20 years. And you're looking at numbers that are like 1000amonth, 1200amonth. It all depends on how many years of sea duty you've racked up. And especially in the Navy, everybody is really adamant about paying attention to their sea duty counter. It's a number that's actually includes on every single one of your paychecks. Every single one of your leses. And that number translates from your les onto your DD214. The final paperwork actually tells you how many days you spent at sea while you're in the military.

[A]

I noticed with play around the calculator, you'll also see the pay jumps very nicely from 01 to 02 and O2 to O3. And it increases with your years of service. Right, so those all stack up to compound.

[E]

Right?

[D]

Yes, but no one talks about the tax brackets. When you put on O3, you jump a tax bracket. Most people forget about that now.

[A]

You join the real world.

[D]

You join the real world, you go from that 10 or 12% and you go at the time it was either 10 or 12%. And then it jumped into 22%. And so that first paycheck, my withholding increase, I was like, like, wait a minute, I'm getting less money than I got last month, even though I was getting paid more this month. What just happened? And I actually went online and found that, yeah, when you put on O3 because it's such a high pay jump, it also jumps you up a tax bracket.

[C]

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[B]

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[A]

I want to go back to the second part of our question. So we had how we got there and now we have. This is, I think this is a problem facing million hundreds thousands of active duty service members here, which is do I gut it out to get my pension or not? There's the how I feel about it, how, you know, that's different. Let's do the math. This pension for your husband is going to be what when he in eight years. And he's considering giving that up. And I think you can beat it. I think you can beat it in the private market. It even after tax in there. But I want to actually hear how you think about it from a mathematical standpoint because that's the other part of it.

[D]

Yes. My husband is an 04 right now, which is the same rank as Grand Doug. Grand Doug, can I talk about your pension numbers for a minute?

[C]

Sure.

[D]

So Grand Doug gets about $3,400. I think it's still $3,400 a month in his pension. And there's different ways that the pension changes its taxability depending on your VA disability compensation. I am not going to go into that today. That is super complicated. But basically, if your rating is less than 50%, they'll actually make your taxable pension lower. And if your rating is more than 50%, then you get both your VA disability compensation and your pension side by side. And so this is one of the reasons why they tell you apply for your VA disability claim because you actually could get the pension and VA disability compensation side by side. But granddad gets about $3,400 a month. Oh wait, he has the numbers right

[C]

there on his eras grand total of $4,828. Some of that is tax exempt due to VA disability compensation.

[B]

Yes.

[D]

So the pension number does not always equal the taxable number. And so that's one of the big things about the pension to begin with. And then the other calculation is granddaughter does not pay for health care. Well, I guess you pay about $13.20 a month, or was it $20.13 a month for your TRICARE.

[C]

Used to pay about 15 $20 a month, but now that I'm on Medicare. Oh man, 200. No, no, no complaints. This is, this is awesome. Health insurance. And you're Right. The health insurance is very, very cheap. It's really around error in your compensation if you're a military retiree.

[A]

But we've already got the health insurance and we've already got the disability. That's not going to change.

[D]

Hopefully it's going to increase.

[C]

It rises with inflation.

[A]

I'm sorry. The decision about whether to leave the military now or in eight years does not presumably affect the disability pay your husband would receive. Is that, is that a correct statement?

[C]

It's all an inflation adjusted dollars. So it's pretty much a constant amount. When you look at the forecast, you don't have to worry about inflation.

[A]

So on your check, Doug, that 4800. Let's strip out all the other stuff here.

[E]

What's the pension amount?

[A]

That's the math problem that Carol's husband's

[C]

got and he's looking at the same problem. And so hypothetically he'd be looking at about $3,800 a month of taxable pension income after VA disability compensation.

[A]

Okay, so that's 45 grand a year. I'm not going to use the 4% rule. That's better than a 4% rule. Right. Like I think that a lot of the rest of society is going to collapse long before you guys lose your military pensions in there. And I think that that's got to be one of the safest income streams in the, on the planet that you're ever going to see adjusted for inflation. If we were to say that this, this income stream divided by the 4% rule, that's about 1.1 million, 1.14 million dollar income stream. But I'm gonna, I'm gonna give it a better reading than that. I'm give it a 3% guy there. So I think it's worth 1.5 million easily, this income stream. Do you guys agree with that? Very, very loose back of the napkin map.

[C]

I've been doing this analysis for 24 years off and on. And yeah, I concur with all those numbers. And that's a synthetic net worth number. You add that to your net worth. That's, you know, that's the value of that. Keep in mind, longevity might be an issue. Also keep in mind that there is some tinkering of the system from time to time, but those are good numbers to start with. The big obstacle is not the money. The big obstacles, quality of life, family, work, life, balance. Again, take it one obligation at a time. If you're challenged and fulfilled, stay on active duty, there will be sacrifices, but eventually you have to Make a priority over do I want to continue this job and promote or do I want to spend more time with my family and watch my kids grow up?

[A]

I think that that's exactly right. The question then is how can I make this opportunity cost as low as possible? So maybe you can beat that number, which I think you can over eight years depending on what you do in business or real estate, other stuff that's possible or even likely for someone with a master's degree degree and an undergrad from the Naval Academy who's 04, this is not someone who's going to go get a $70,000 a year job at entry level in marketing. This is somebody who's going to get a probably a job that starts with two, I would imagine external to that, maybe more in the private sector. The second part I think of this is if I can't get beat it, how close can I get so that that cost is low over those eight years? Right? Is that how you are frame the problem here?

[C]

It's a mystery to me why he's still showing up for work.

[A]

Oh, so I'm accidentally helping you guys?

[D]

I think not exactly, but the, the downshifting aspect is another thing. You know, my husband for example, had to leave for work at about 7 this morning. He hopes he'll be home at 3pm Something always happens at 3pm so really he's home at like 6pm so from the time he left the house at 7 in the morning to the time he makes it home at 6pm, you're still talking an 11 hour day. And that includes traffic. We're fortunate to have electric vehicles. We are all part of the EV club now. And so our burn rate while sitting in the middle of traffic is really, really low. But most duty stations aren't EV friendly. So imagine burning gas while you're sitting in traffic with all the people you were just sitting on base with on your way home. Are you paying for after school care or before, before school care or summer care for your kids because you're at work? Are you paying for nannies? Are you paying for extra care when you can't take a day off work when your child is sick at home? Are you paying for extra meals out? Are you paying for different kinds of drop off and pickup services for your kids to go to their different sports? And so one of the big things that we've been seeing, and it's mainly because I'm in my early 30s, is that a lot of our peers are having the same consideration of leaving active duty because they have a family now and their minds are elsewhere. Their minds are not in the ship, they're not on the mission all the time. They're really more concerned about their toddler at home that has the ear infection or their kid that just picked up Covid and has to be home from school for 10 days. Which was a real reality a few years ago was the fact that you're going to have to figure out how to find some leave or find someone to watch your kid. Was something as at the time dangerous as Covid. How are we going to handle that? And those were some of the real situations that we had covered because I was the stay at home parent, I was the on call parent, I was the part time parent. So you talk about the possibility of entry level marketing versus $200,000, you know, computer science background. But the reality is that my husband also does not have to work full time anymore. I've not worked full time since I left the military. My work at RWS has all been part time, usually somewhere between 10 and 15 hours. Hours a week. There was one tax season, it was 25 hours. But we're not going to talk about that one. Most of the time it's been enough for me to work for an hour or two or three in the morning and to be there to drop off my daughter at school, to pick her up as soon as the school day ends, to not have to sign up or the after school programs or have the nanny or have the pickup service.

[A]

Let me ask another question here. So we have this $1.5 million asset that we're working towards over eight years. You said 15% of people make it, Doug. How about from here? This is not, this is not a 15% situation. This is farther beyond that. So the odds are certainly higher than 15% that Carol's husband will get there. I'm sure he's exceptional, but let's assume he's average for this particular thing as in term and relative to his cohort in the officer set. Right now. What percentage of people make it from here to there? An average if they're trying for it without getting like a hey, we're moving you to not Bermuda, but like some remote island that's not fun.

[D]

Diego Garcia.

[A]

Yeah, there you go. What percentage of people make it from here to there without one of those things coming up along the way?

[C]

We have the studies. Rand Corporation does this work for the Department of Defense. And what happens at about the 10 years of active duty? Between 10 and 20 years, the retention rises every year and it's a fairly constant slope from 15% up to about 40 to 50%. In other words, if you've been on active duty for 10 years, you're probably going to have a one out of three, a 30% chance of going to retirement. If you've been on active duty for 15 years, well, maybe it's a 40 or 45% chance that you're going to continue serving until retirement.

[A]

That's it, 45 to 50% at 15 to make it the last five.

[C]

And two things, well, okay, medical is a, definitely a medical issue or some physical disability or medical illness that keeps you from serving on active duty. And you've seen a lot more of that. The other issue is that at that point you have an impending sense that this is the time to get out out or to go to the pension. You've got an angel on one shoulder saying, oh, stick it out for the pension. You've got the devil on the other shoulder saying, oh, you so are much more worth your, your human capital in a civilian career. And so it doesn't rise as you would expect to. You know, 16 years, only got four more years to go. Maybe my chances are 80%. It doesn't rise like that because again, the, the penalties you pay, the prices you pay in quality of life and lack of family time time become ever more severe the more senior you are. Another issue is that when you start out in the military at a low rank, there's plenty of places to go because there's plenty of jobs like that that are open as you climb the billet structures, you climb in rank. Now you get to the point where there's a pyramid effect and the billet choices you have are more restricted. And we all know that if we're at 14, 16 years of service, that not only are our choices more limited, but the assignment officer is making a calculated bet that you're going to stick around no matter how mean they are to you and they're going to solve their own problems by saying, yes, you do have to go to that one year unaccompanied tour in Diego Garcia. After you do that, we'll give you your choice of your next duty station and maybe even your next home port. And you know, never know you might meet your next spouse at that next home board after you lose your first family during the year in Diego Garcia. So those are the choices. That's the calculus you go through to decide, hey, I'm going to get that million and a half dollar payoff. I think your point the Point you made earlier on, Scott, is the biggest factor is that many people in the military look at where they are on active duty, and they can't imagine that anyone would pay them that much money in the civilian world. And then they work around with their peers. They network, they talk to their friends from high school, college, wherever they've got peers who are now succeeding in the civilian world, and they realize what their human capital is really worth. And so at that 12 to 14 to 16 year point, just as the assignment process, just as the detailing is getting a little coercive on your career, and just as you're running out of choices, you also become aware of all those soft skills that are so valuable in the outside world. And your friends who left active duty earlier, 8, 10, 12 years are telling you, hey, come on over to Amazon. I'll teach you everything you need to know. But really, I need somebody who can get stuff done, and I know you can do that. Could you, please? You know, and that's how it works. So I would say that the chances rise linearly, and by the time you get to 16, 18 years, there's probably a greater than 50% chance that you're going to stick it out to 20. If you're at 18 years, you are federally protected to be allowed to stick it out to 20. But again, lots of other things can pop up. One example is my spouse. She left at what turned out to be 17 years and 11 months of active duty into the reserves strictly because of one of those unrefusable offers from the assignment officer. We can do all the math, and, you know, I am focused on the math, and. And I can do it, but we also have to look at quality of life and sacrifices.

[A]

I love how there was just this actual island in the middle of nowhere that they do send you to, which I invented fictionally for this example.

[D]

It's real. It exists. It's not fun. Yeah. And on top of that, I happen to be a millennial. And one of the medical anomalies that's been happening with my generation is there's been a lot more cancer cases in my generation. And if you see it in America, you see it in the military. I've actually relieved a couple of folks on active duty because they had cancer. Then they needed to be reassigned to the local military hospital for their treatments. And so I was taking over their job. Actually had. He was not my captain. He was the captain of the command that was in charge of my command. And he died on active duty from his cancer. And so you Talk about making it the 20. One of the real issues is medical issues. There is a point where you've had either enough industrial exposure or you've had oil fields or some Mount Pinatubo in the case of my dad, you know, if you've had some kind of industrial exposure that actually depending on your genetics, depending on your where you were raised and what you were exposed to in the past could actually mean that you don't make it to 20 years, we

[C]

call that occupational hazards.

[A]

I have to discount the pension, right. I said it was worth 1.5 million back of the napkin, you know, 3%, you know, if, if you consider it equivalent to a portfolio that could withdraw 3%, you know, from, from that asset, you got to withding it by these probabilities, right. Based on your 10, 10 year out. So if there's only a 30% chance, you're going to able to stick around to get it because you know that at that 17, 18 year mark, it's not more likely, it's more likely because you're closer. But you have every reason to believe you're going to get stationed to godforsaken island in the middle of nowhere at great personal cost at that point by somebody whose job it is to make that happen for you before you get through that hurdle. And taxpayer pays this pension for life. Right. Or whatever it is. Right. Or that's just how the cards get dealt to you. So that, that means if there's a 30% chance that your husband and we'll make it there, just a cold calculus of what that looks like, then this pension is now worth 500 grand, which definitely changes. That's a very different number when you contextualize it that way. That's a number you can achieve with saving 50 grand a year for the next eight years and investing that at a very average non interesting return on there in the private sector, which is probably very achievable. Is that the right way to think about valuing this asset? Which I think is very challenging. I imagine for a lot of military officers.

[C]

We do this math all the time for our peers. Carol used to do it at work for her clients. And I do this all the time with military families. And the very first thing I say when I'm giving one of these financial seminars is I am not a member of the command retention team. I am here to help you plot your exit ramp out of the military. And it's for those issues. So yeah, you can do the math. And math works. And that $50,000 a year number looks an awful lot like what a lieutenant commander who is on active duty now knows that they could earn at a drill weekend and some active duty for training that they would do in reserves anyway.

[A]

I think you should gut it out in that journey. If you're like my calling is to command a billion dollar aircraft carrier and like I'll be out at sea for most of my life but that's what I'm good at and I'm going to defend this country for the rest of my, you know, because I'm better. I'm just good at it and I'm going to be better than the next guy. That's what I'm going to do. That's a great reason to go and stay in the military. It sounds like like not the I'm going to gut it out to get this pension if I if because if the opportunity cost is just really not that large. When you weigh these probabilities it seems

[C]

but challenging and fulfilling if you enjoy what you're doing and then someday you think you might become CEO of that project, well, okay, that eventually happened. So to you it was worth whatever sacrifices had to be made along the way. Sometimes you might feel like you end up getting promoted just by the vacuum of attrition sucking you higher in the ranks. But again, it's a personal choice. Highly really personal choice and your family does have a vote.

[A]

Doug Carroll, thank you for sharing this wonderful detail about about building wealth in the military and then making the irreversible decision of whether to slog it out to the pension or to give up early and go in the private sector. I'm surprised at how more compelling the math of not slogging it out is that I would have biased to towards coming into the conversation. So thank you for sharing that. That was really illuminating. Where can people find out more about

[D]

you you so I need to get back into social media, but you can find me under my name on Facebook and we also have a Facebook page for the book that my dad and I co authored, Raising your money savvy family for next generation Financial Independence. The reason I need to get back into writing is because my daughter has an allowance now and I have so many stories so I will get around to that eventually.

[C]

And Doug, I'm@military financial independence.com and my email address is all over the Internet already. Nordsnords gmail.com come please reach out. I I get these emails every day

[B]

and he loves answering these questions. So please reach out to Doug or Carol. They're a wealth of information and they are generous with their time. So Doug and Carol, thank you so much for talking to us today and we will talk to you soon.

[C]

Thanks, everybody.

[B]

All right, Scott, that was Doug Nordman and Carol Pitner and that was a master class in benefits of the military and how to grow wealth as a military member. What did you think of this episode?

[A]

I thought it was great. The intergenerational wealth building, you know, psychology that's been transferred here is awesome. Here Carol has a wonderful life and situation. I love the challenge that her husband is facing in a really high stakes financial decision about how to value this asset. And I think it's not as simple as here's what's worth. Let's go slog it out towards it. There's probabilities that weight towards achieving that too. So I thought it was a fantastic discussion and I think the numbers light you up. Up from a military perspective into life is very hard. The benefits that you receive for military service are well earned.

[B]

Absolutely. Anybody who has a problem with the military members getting the benefits that they get can send me an email and I will, I will be happy to chat with you. And I will not be nice. Hey Scott, has anybody ever taken a shot at you, at your job?

[A]

Well, I also say this. The fact that folks like Carol and Doug serve in the military and some of our like finest people serve in the military and defend the country are the reasons we get to debate things like what health care policy ought to be like or what the tax code ought to be like. So these guys really make a big difference. And we record this two days before the 4th of July here on America's 250th birthday. So shout out to all the military service members. Hopefully this episode was helpful for you. We love the folks in the military, would love to help you with any problems. There's lots of great groups out there as well that are specific to the military members trying to build wealth. So we love it and thank you for your service. We appreciate it and hope you continue. You can use those benefits. It's a real educational process, I think to be able to access them. But I hope you use those benefits to live a life of well earned financial freedom.

[C]

Yep.

[B]

Check out Doug's website, militaryfinancialindependence.com he has a ton of articles and a ton of information about the benefits so you don't have to just figure it out yourself. All right, Scott, should we get out of here?

[A]

Let's do it.

[B]

That wraps up this episode of the bigger Pockets Money podcast. But just because the show is done, it doesn't mean you have to stop learning. Hop on over to our website biggerpocketsmoney.com where you can sign up for our newsletter. Check out our new forums. You can find resources like calculators and templates to help you on your Phi journey. Scott is busily typing away with our tech team creating all new resources all the time. So go over there and check it out. That wraps up this episode of the Bigger Pockets Money podcast. He is Scott Trench I am Indi Jensen saying convert it to a rock Roth Sloth when you're ready to start your business, Northwest Registered Agent helps you do more than just file paperwork. You get all the tools to build a real business identity from day one. A business address, website, phone number, operating agreement, free guides and more at no extra cost. Northwest Registered Agent has been helping small business owners and entrepreneurs launch and grow businesses for nearly 30 years. They are the largest registered agent and LLC service in the US with over 1500 corporate guides. These are real people who know your local laws and can help you in your business every step of the way. With Northwest, your business is set up to stand on its own from day one. That means your home address, personal email and phone number. Stay private. Don't pay hundreds or thousands of dollars for what you can get from Northwest.

[D]

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