I’ve been a member of the Millionaire Money Mentors forum since late 2020. It’s tremendously accelerated the financial independence of its members, including a number of military veterans (and a few servicemembers). I’ve learned a lot from the other mentors, and my spouse and I have saved tens of thousands of dollars with their advice.
On that forum, one of our Perpetual Internet Debates concerns the success (and rare failures) of the 4% Safe Withdrawal Rate.
You’d think that a bunch of millionaires (with median net worths of $5M) would feel sublimely confident that their money will last for at least 30 years, and possibly for the rest of their lives.
You would be wrong. Horribly, almost universally wrong.
“What If The Money Runs Out?!?”
Is it really this bad?
Like every other military family (and most other humans), millionaires are concerned that there’s not enough safety margin in the 4% SWR. (Spoiler: Yes, yes there is. It’s built in.) Wars could break out. Bad recessions could happen. Unexpected expenses could pop up. Inflation could run wild. The kids’ college tuitions are unpredictable. A family member could get sick or hurt.
And despite being millionaires, we might never earn another dollar ever again in our entire lives…?!?
I know— it seems silly when I write it that way. Yet the scarcity mentality is one of the strongest emotions in behavioral financial psychology, and it affects millionaires at least as badly as people who are still on the path to financial independence.
Everyone on that forum can do math, and many of them have had high-earning careers. Yet the skills which build wealth to financial independence (while also waaaaaay overshooting the 4% SWR) do not translate well into the confidence of living our best lives. If anything, the seductive temptation of Just One More Year syndrome is worse. If it “wasn’t that hard” to build the first $5M, then why not stick around for $6M? $8M? Maybe $10M tops.
Those of you who’ve read this blog for a while can predict I’m “that guy” who pounds hard on the theme of using the 4% SWR as a tripwire for starting your new life transition. After you reach FI, then keep working if you find it challenging & fulfilling— but as soon as the fun stops then it’s time to change your job, or change your career, or simply change your life.
What About A Military Pension?
In mid-2026 I’m celebrating a dubious milestone of financial independence: collecting an active-duty pension for longer than I’ve collected military paychecks.
(And yes, I’ve included 47 months of midshipman pay in that comparison.)
I’ve been writing about inflation-adjusted pensions for over 20 years, and I’m fluent in four different military pension plans going back to the 1970s. I’ve recently added Social Security to my multi-lingual annuity skills. I’ve engaged in hundreds of Perpetual Internet Debates about the Consumer Price Index and various Cost Of Living Adjustment algorithms.
Inflation-adjusted annuities are one of the world’s most powerful compounding wonders. For example, my military pension (using the same Consumer Price Index calculation as Social Security) has risen 82.4% over the last 23 years.
Looking back on this from my mid-60s, sticking around for a military pension must seem like a pretty smart decision. I can still hear my Great Depression-born father-in-law’s retention recommendation from 35 years ago: “Just keep taking their money until you can retire!!”
Of course we’ve all heard of those legendary triple-dipping unicorns with military pensions, civil-service pensions (from a bridge career), and Social Security… including the survivor benefits attached to those annuities.
Even more ironic: only 15% of military veterans end up retiring with a pension. That’s fewer than 1 out of 6. Maybe it’s higher for officers in some services, and a lot lower for enlisted infantry in the other services– that particular data doesn’t seem to be public anymore– but over the last 30 years it’s consistently 15% across the entire Dept of Defense.
You don’t need a pension to reach financial independence in the military. It sure speeds up your FI, but it’s only worth the sacrifice if you find your career challenging & fulfilling.
However there’s another side of earning a military pension: I burned a big chunk of my life energy for extra money that I’ll never need.
Today that excess is going straight to philanthropy and family gifting.
I first wrote about the issue in 2013 with this post from the Internet Archive, and that became the legendary “Don’t Gut It Out To 20” post. A decade later it’s still on the first page of most search-engine results.
With my background, it’s still frustrating to deal with these comments:
“Nords, your annual spend is covered by pensions, right? I wonder if the typical investments-only retiree (without a pension) would have cut spending or even gone back to work in 2001 and 2008-2009? Nonetheless, your experience is helpful in giving many of us more confidence!”
Grow Your Own Pension
The 4% SWR is based on [assets of 25x *net* annual spending], and that net is [gross income – all expenses]. For over two decades, my spouse and I have spent all of my inflation-adjusted pension and then spent more from our assets at the 4% SWR.
Is that different from the investments-only retiree who doesn’t have a pension? Math and logic would claim that this is only a difference in net expenses.
Feels great, right?
Once again, though, the emotions of behavioral financial psychology view pensions as big, comfy, warm, fuzzy security blankets.
There’s a very real psychological background behind a pension: paychecks.
After decades of working for financial independence, retirees get an incredible emotional boost even from building their own synthetic paycheck. These feelings will always derail the math & logic of the total return (and tax efficiency) of cashing in the growth from retirement accounts.
From a retiree’s perspective, inflation-adjusted military pensions look like the world’s best income stream. We’re not going to dwell on the very real survivor bias of its accompanying VA disability compensation.
What about other inflation-adjusted income streams?
If you want a reliable pension but don’t want to risk the injuries to earn it— no problem! You can still go “buy” one. For example there’s:
- Treasury Inflation-Protected Securities or I bonds (held to maturity)
- a diversified collection of investment rental properties or REITs,
- dividend equity index funds like the iShares Select Dividend ETF (DVY) held for the long term (>10 years),
- a civil-service pension from federal or state governments (although less than fully adjusted for the CPI), and
- Social Security (for those who have enough work credits).
You still have to be willing to pay for those income streams: higher income-tax rates outside of Roth retirement accounts.
Is the stock market really this dangerous?
Ironically there’s an even better inflation-beating annuity which makes most investors run away screaming: a total stock market index fund. Over the long term (>10 years) it grows faster than inflation (math & logic), but nobody *likes* (there’s an emotion word again) the short-term volatility.
By choosing a military income stream with zero volatility, we pay a tremendous opportunity cost for the emotional comfort of better sleep at night. To see the math of that difference, compare the total return of any 30-year TIPS or I bond to the same 30 years of a total stock market index fund or a S&P500 index fund.
That’s why I bang so hard on my one-key piano telling military families that they don’t need to gut it out to 20 for a pension. And now that the military has moved to the Blended Retirement System, the stock market returns of the Thrift Savings Plan are even more compelling than legacy military pension systems.
What About Those Unexpected Expenses?
In our case– after nearly 24 years of retirement– our core spending (food, shelter, transportation) is accurately and precisely dialed in. We’ve optimized for quality, efficiency, and sustainability.
Entertainment and repair/replacement budget categories are also accounted for. We know what we enjoy doing, and we’ve optimized our ways of doing that too. We’ve made reasonable projections of how long our possessions and activities will last, and how much we’ll spend to maintain or replace them.
During economic recessions, discretionary spending is even less of an issue! We’d already planned for that spending (as part of our financial independence) and we’d saved & invested the assets to pay those expenses. Recessions mean that businesses are competing even harder for our money, and they’re willing to offer more value (or charge less). When it came time to spend the money, the recession usually included a significant price reduction. The “variable” part of our spending happened without any further action from us.
Today the vast majority of our discretionary spending is legacy (family gifting) and philanthropy. That’s how we know we overshot the FI goal line (the tripwire of the 4% SWR) during our active-duty careers.
We could redirect that spending anytime we want (that’s the definition of “discretionary”) if we encounter new medical expenses (as we age) or even long-term care.
If we cut that gifting & philanthropy from our spending (out of a scarcity mentality) then it would only add even more digits to our net worth and our estate. Hopefully we’ll avoid estate taxes (especially Hawaii’s notoriously low exclusion for estate taxes) and we prefer to “give with warm hands.” We want to spend the money now, while we’re all still around to discuss it with our family and enjoy the experience together.
Your Call To Action
You’re already saving & investing for your financial independence, while still enjoying a sustainable quality of life during your working years.
You’re also going to base your FI number on a reasonable budget for both core expenses and discretionary spending. By “reasonable” you’re going to use historical long-term base rates of market returns (for your asset allocation) and for inflation (the CPI). Use the official data– don’t just make up stuff in a retirement calculator.
If you want the security blanket of a pension, then build it into your asset allocation! For those who qualify, Social Security could be all you need. If you want more pension income then pick an asset allocation to support it with the inflation-fighting bonds, or real estate, or dividend equities mentioned above.
If you’re going to be conservative in your assumptions, then don’t mess with the base rates. Instead, do it with your expenses. You’d assume that some of your spending might be higher in some years (blowout fantasy vacations), or that you’d replace some of your possessions more frequently.
Once you’ve tweaked your budget, you’re going to plug that conservative number into the 4% Safe Withdrawal Rate.
As you approach the trigger of the 4% SWR, start designing your FI life. Keep working as long as it’s challenging & fulfilling, but when the fun stops then it’s time to make a change.
Don’t gut it out for a pension— and don’t gut it out for some arbitrary margin beyond the 4% SWR.
There are no affiliate links or paid ads in this post. Try your military base library or local public library before you pay money for these books– in any format.
Military Financial Independence on Amazon:
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Raising Your Money-Savvy Family on Amazon:
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Related articles:
“Hanging On For The Military Pension”
Don’t Gut It Out To 20
The World’s Best Asset Allocation
Asset Allocation Considerations For A Military Pension (or VA Disability Compensation)
“Why Do We Start Our FI With Two Years’ Expenses In Cash?”
“What If The 4% SWR Fails?”
Our Retirement: The Spending Smile Of Financial Independence
Fear And Despair In The Time Of Bear Markets
Covering a Mortgage in Retirement
Military Financial Independence 