Last month I had a 2400-word e-mail conversation about financial independence. A reader asked:

“I’m on active duty and struggling with the idea of getting out at 27 years to start a bridge career. If I wait three more years to get my full 30, the longevity pay raise and my extra years of service mean that my pension would be 15% higher. If l get out at a full 30 years I’ll be 58 years old. I have a better opportunity now to get what seems to be a great civilian job. The money will be good and I’ll be able to contribute to another 401(k) but I’ll still be taxed heavily. I’ve saved a few hundred thousand over the years.

Is is it better just to stay the extra three years to get the full 30 or break ranks now to start the bridge career? Very interested in your thoughts.”

Every retirement plan has several moving parts. The more of them that you control, the happier you’ll be. I just turned 54 years old so I keenly appreciate this situation. I’m going to focus on the lifestyle issues before I get around to the financials, and then I’m going to conclude with more lifestyle recommendations.

Lifestyle

I frequently hear from active-duty servicemembers who’ve been given an “unrefuseable offer” from the assignment officer. Their only other option is to retire (before they’re really ready) or even resign for the Reserve/Guard. If you’re having fun and you think that you (and your family) will be treated fairly well for the next few years, then I’d keep going to 30.

Looking back, how will you feel?

If the fun is dwindling (or if your family is tired of the transfers) then it’s time to retire. For some servicemembers that epiphany is a blinding flash of the obvious, and for others, it’s decided over several months of conversations with family & friends. For a few parents, it’s their teen in high school who would mutiny and find a foster family rather than move to a new school.

In these situations, I suggest retiring now instead of 30 because of the mental, emotional, and physical stress on you and your family— in both military and civilian careers.

I hear many stories about servicemembers & civilians struggling with high blood pressure, weight, stress headaches, and more medical issues. When they retire (and remove the stress), suddenly their BP drops 40 points and they drop 20 pounds without even trying.

If you grimly clench your jaw and hang on for another three years for an extra 15% pension, you would not feel that it’s worth it. Even worse, while you’re hanging on you might have a health emergency (or a family crisis) with long-lasting repercussions.

Before retirement, everyone worries about what they’ll do all day. Six months after retirement they’re all wondering what the heck they were worried about. Ernie Zelinski’s “Get-A-Life Tree” is a great thought-provoking way to rediscover the interests that will keep you going for years.

One of my good friends used to worry about how he’d spend his time after active duty. He’s now a military retiree who’s worked a bridge career for the last three years because he was concerned about how he’d fill his days without a job. However, during those three years, he’s realized that the job is interfering with his retiree lifestyle. The months of his bridge career have given him the time (and self-confidence) to figure out what he wants to do all day.

Commitment and Service

Once you retire from active duty (at 27 years or at 30), you could consider part-time and consulting work instead of leaping right into another full-time job. When you have time & energy to pursue your interests, the money frequently follows. These part-time jobs rarely show up in the hiring manager’s databases, but you’ll develop an extensive contact network.

Some occupations (doctors, lawyers, university professors, serial entrepreneurs) have little reason to stop working– they’re doing what they love and they don’t want to stop.

However, it can also be extremely difficult to find a job in your 50s unless you have a niche skill set or a firm offer already on the table. If someone’s already trying to hire you at 27 years before you’re even on terminal leave, then you won’t have to balance the security of three more years in uniform against the uncertainty of prolonged unemployment during a job search. In that case, I’d base my decision on the merits of the jobs. As Malcolm Gladwell wrote in “Outliers”, I’d place more weight on the factors of the job’s fulfillment, complexity, and autonomy. I wouldn’t place as much weight on the salary.

Maybe you plan to work after the military regardless of your finances. In that case, it’s definitely easier to get hired now than at age 58. Job-seekers call it age discrimination, but employers only see it as the number of years that you’d be working until the traditional corporate retirement age of 65. They’d rather hire once every decade than once every seven years. Hiring managers don’t care whether you plan to stop working at age 65 or 85– they just know that they have a hard time retaining people past 65.

Some veterans still feel a strong commitment to serve and to take care of others. Some may want to see what they can do in a civilian career. A few may even worry whether they can hack it in the civilian world.

Those few might have a military inferiority complex: they don’t have any civilian workforce experience so they assume that their military skills are worthless.

Everyone in these groups could immediately go out and nail down a civilian career for a few years, but they might be able to achieve the same results by volunteering with non-profits or by serving on corporate boards. The advantage of these alternatives is that it’s much easier to find a volunteer or part-time job than it is to launch a civilian career in your 50s. It also gives you the flexibility to adjust your level of commitment instead of locking yourself into a full-time workweek.

One more point about job autonomy: when you retire then you (and your family) may want to spend more time on recreation, leisure, and travel. You may find that you want a few months off every year to travel or pursue other interests. If you feel comfortable with your finances then you may develop a strong preference for part-time or consulting instead of a full workweek.

Finances

There are several other reasons why people choose to work after retiring from the military. The financial reason is pretty straightforward if the servicemember had large student loans, or an excessively consumerist lifestyle, or a divorce, or several kids to put through college. If you’re feeling uncomfortable with your current finances, then three more years of savings (and the higher pension) will definitely cover any gaps.

But how would you feel if you worked for all those extra months and then realized (during retirement) that you’d overshot the mark? It’s probably better to analyze your finances now and see whether you can retire now instead of slaving away for three more years just to build your confidence. The real value of your pension is not the 15% difference.

The real value comes from the pension’s cost of living adjustment and the cheap health insurance. Unless you’re planning to buy an airplane or join Pebble Beach Country Club, you’ll probably be fine with your current finances– and perhaps some part-time work during retirement.

Do you feel financially compelled to work after the military? You’ve mentioned your retirement income and your assets, but another critical variable in retirement math is your spending. If your retirement expenses (including taxes) are less than your military pension then you have no financial reason to stay on active duty. If your retirement expenses are a little higher than your pension then you still have enough savings to retire now. You have to be very familiar with your current spending and then figure out what expenses you’d change in retirement.

Anecdotally, most senior officers and enlisted who’ve retired with more than 26 years of service are now happily living within their pensions. Admittedly my data is coming from people who were burned out and who would rather trade a little money for a lot more control over their time.

However, when you’re retired you’ll have the time (and the energy) to figure out precisely which spending brings you value. You’ll live where you want to, not where you’re stationed. You’ll shop for bargains and buy at a discount. You’ll review all of your insurance policies and your utility bills and get only what you really want. You’ll decide what parts of home maintenance & yardwork you care to do on your own, and what parts you want to outsource. You’ll travel more cheaply because you’ll be flexible on airfare (or Space-A) and you’ll stay longer– living local in apartments for weeks instead of a few days at high-priced resorts. You’ll have the free time to do more of your own cooking (if you want to) and spend less on convenience foods.

Lifestyle again

Here’s a final thought: I’ve been retired for over 12 years. I do a lot of volunteer work. I’m not even seeking paid employment, yet I still get an offer or two every year. If I decided to put some real effort into my writing then I’d be earning $25K/year with only 10 hours/week. Yet I have enough money, and I value my time more highly than wealth. I don’t mind work but I insist on the flexibility to travel without deadlines and to surf whenever the waves are passing through.

He responded:

“I met with my financial advisor. Even with the bridge career’s higher salary and maximizing its 401(k) and matching contributions, he demonstrated that going to 30 is more beneficial to my very long-term finances. I have no family or health issues with the extra three years but I am feeling a little burned out. We enjoy the outdoor recreation at this duty station. We bought a home that is not extravagant and I could simply move back here after the three more years and pick up on the activities that we’ve enjoyed. However, we are leaving a lot of family and friends and I’d lose some of my network upon returning in three years.

The bridge career is good, but I feel that it is a very long-term commitment. If I retire at 27 years instead of 30, the financial model suggested that I should work all the way out to 62 years old… This could be a little bit of a grind even in the most ideal circumstance since it’s corporate America style work and all the trimmings that come with it.

It’s funny how I can go years without a thought about such things and then all of a sudden it’s crunch time in dealing with a difficult decision. I think the best answer is to stay the 30 and then get out with a renewed sense of controlling lifestyle spending. Easier for me maybe a little bit more difficult for my spouse. If I took the job and decided after two years it wasn’t for me (or got laid off) I would definitely look back and say I should’ve stayed in uniform until 30.

So I’ve made a decision to re-up with the military for three more years. I think I’ll fulfill this obligation pretty easily. Your perspective helped sway me. Even though my retirement cash flow may not be optimal, if I take your suggestions on spending I should do quite well.”

I think you have the right idea on looking back later and deciding that you’d rather have 30 years.

Everyone worries about losing their network if they’re away for three years, but that might also show you who your real friends are. You’ll keep in touch with your friends (especially through social media) and then you’ll pick back up when you return.

If you have the chance before you transfer, try to attend your service’s senior transition class or a Ruehlin seminar. It’s even better if your spouse is able to sit through it with you to hear the same concerns and questions. When you get to your new duty station, try to make the time to do it again (and with her if possible). You guys both want to know all about your finances (and be comfortable with your choices). Then you can make the decisions on whether she wants the Survivor Benefit Plan and when you’ll start Social Security.

There are two schools of thought about controlling the lifestyle spending in retirement. One is that you’ll have three years of paychecks to build up a bigger retirement entertainment fund, and you could fence some of that off for “his” and “hers” portions. That way each of you spends their fund without having to feel the obligation to justify it to the other. When your fund is gone then you’d have to either raise more money (part-time work?) or make up the expenses somewhere else.

The other school of thought is “spend it while you can”. Financial planners have claimed for decades that retirement spending follows a predictable three-phase curve of “go-go”, “slow-go”, and “no-go”. In your situation, I’d feel comfortable spending every penny of your pension for the first few years of retirement and 4%/year of your savings too. Your spouse’s Social Security survivor benefits will be much higher if you can hold off SS until you’re 70 years old, and if you have that higher income (pension + SS) in your 70s then you could spend a little more of your savings during your 60s.

In my 12 years of retirement, our spending has been relatively flat. Part of that was launching our college daughter from the nest, so we’re spending a lot less on groceries and a lot more on travel. But the most important part of retirement spending is finding what activities really bring you value and budgeting around that.

Let us know how it goes over the next three years!

Related articles:
One More Year Syndrome
Eight Reasons Not To Worry About Military Retirement
“I’m Setting A Good Example By Working At A Job”
Will You Work After Military Retirement?
What, Me Worry?
Reader Advice: Bridge Career: “Ha!”
Reader Advice: Update on Ben’s Bridge Career
Reader Update: From The Military To A Bridge Career To Retirement
Should You Start A Civil Service Bridge Career After The Military?
Starting Your Bridge Career After The Military
The Transition To A Bridge Career
Military Experience To Civilian Careers
Book Review: Your Retirement Quest
Retirement: Don’t Recreate Your Old Environment
The “Fog Of Work”
But… But… But What Will I DO All Day?!?