The transition to a bridge career


 

The Military Guide” is full of advice and stories from dozens of servicemembers and veterans who hope that you’ll benefit from sharing their experience. I don’t tell their stories in the blog (you’ll have to read the book!) but I’ll post the stories that didn’t make the manuscript. As you read this next story, think about whether you’d like to see yours in the book’s second edition.

Here’s a comment on the “Fog of work” that grew into its own guest post from “Chief”:

That was a great read. I found myself shaking my head in agreement as I read through the article. If I could be so bold I would like to add a few of my thoughts on this topic– in particular the unique, almost surreal world in which members of the military find themselves submerged for the most part unawares.

Chief goes on to describe his retirement transition:

I joined the military in 1987 fresh out of high school with a whole lot of energy and very little direction. The Navy provided me the structure that I needed to “pull all of me in” and have a noble purpose for which I could bury my past and make a real difference. They provided me training, clothes, food, shelter, and a sense of community like I had never experienced before. I was a true believer and spent my every waking moment attempting to live up to the standards. I wanted to be the best “X” (whatever “X” happened to be) because the Navy told me that’s what leaders did: take charge and complete the mission.

At first those challenges were easy or mildly troublesome, but through the years with promotions came greater responsibilities. Real sacrifices (personal time, family) became factors. Remembering what I had been taught, I doubled down and work twice as hard, longer hours, and ultimately achieved the mission. Accommodations, medals, kudos, wall plaques.

This scene played out many times during my 20-year career. It reached a point for me personally, around year 15, where the “payoff” was not exceeding the “pain”. I found myself in a diminishing returns cycle professionally, personally, mentally and emotionally. The harder I tried to double down like before, the more unhappy and disgruntled I became.

I retired in 2007 for some of those reasons. I was burned out and tired. Unfortunately I realized that the hours upon hours of work away from family did not have a payoff, especially in the civilian sector. I was no longer “The Chief”, I was a newbie. It was boot camp all over again, only this time no one was telling what I should do or not do. I was totally unprepared for civilian life. I went through about a year of just trying to figure these strange creatures called civilians – their work ethic, social norms, ideas and attitudes about leadership. How are you supposed to land a job that doesn’t involve french fries? What about my leadership training? What about my work ethic ? My college degree? I received blank looks all around. They didn’t get me and I certainly didn’t get them. I realized the military wasn’t my job: it was my lifestyle. And I’m trying to sell ice to Eskimos.

So, I set about trying to understand my new place and work harder at developing relationships with the people I am surrounded with. Three years out and I can still only give my self a B- but I’m working on it.

I found that [the “Fog of work” post] struck a chord in me and brought me back to a time of some very scary moments. It was similar to the sensations I had during high-school graduation, my wedding, and the birth of my first child– that sense of foreboding and fear at the leap into the unknown. I discovered that all my “norms” were focused and centered around what the Navy considered normal. I found to my shock and horror that most civilians don’t share the same world view or perceptions and so I felt isolated.

Chiefs (historically and as a matter of record) are known for their over-inflated egos, sense of self-importance, and overall omnipotence. So, in keeping with long standing Naval tradition I felt obligated to document my part.

Chief went through the same transition-assistance seminars and had the use of the same self-assessment programs that we all used (or will someday use). He learned from the resources and paid attention to all the warnings but was still surprised by how much the military differs from “the civilian lifestyle”.

It might be tempting to sit around Monday-morning quarterbacking the transition, but I don’t think any of us would have done as well. (I know I wouldn’t have done that well– it’s why I never even tried in the first place.) However, keen our hindsight may be, I don’t think anyone can truly anticipate the fundamental differences between the military and civilian life– or the unpleasant surprises that come from those cultural gaps. It has to be experienced to be understood. The best that a servicemember can do is to be aware of the situation and be ready to change their transition plan on the fly.

Are there any particular techniques to help ease the transition? Well, sure– we’ve all been exposed to the hundreds of books and websites that help translate the military lifestyle to its civilian advantages. (Impact Publications produces some of the best and has one of the most comprehensive catalogs in the business.) Here are a few additional suggestions that are discussed more thoroughly in “The Military Guide” and the pocket guide:

1. Strive to be financially independent before you leave the military. For some of us that means a 20-year career and an aggressive savings program. (Of course persevering for 20 years may be worth the effort (or not) and it depends on a number of more important quality-of-life factors.) For many servicemembers, financial independence means completing a career with the Reserve/National Guard through a combination of drills and mobilizations. For a very few highly motivated and disciplined individuals it means saving an extreme amount of money while living a very frugal lifestyle, and then deciding whether or not to stay with military past the first obligation. (Yes, it can be done in five years but it’s not easy– see EarlyRetirementExtreme.com for the details.) However, you achieve that financial independence, and however long it takes, it gives you choices. You have fantastic flexibility in deciding how you want to handle your transition. There’s a huge pressure difference between “I have six months to live on before I need my next paycheck” and “I think I’ll just take a few years to explore my options”.

2. Keep doing your research and don’t leap on the first “opportunity”. Even a few months of savings can give you the flexibility to make sure you do it right the first time. One negative aspect of the military culture is its tendency to make you feel “worthless and weak” while barely capable of carrying out your duties at your current rank– let alone promotion. Don’t carry an inferiority complex into the civilian world. The reality is that every veteran has tremendous skills sought by every worthwhile employer, and that “first offer” is really just the first of several. Be courteous to prospective employers and treat each offer with the professionalism that it deserves, but don’t feel obligated to terminate the career search at the first “Yes!” Of course the more financial independence you have, the more choices you’ll be able to consider.

3. Include your “military lifestyle” standards in your job search. Maybe they’re a higher priority than a career that exactly matches your technical skills. Maybe they’re more important than your location or your salary or other opportunities. Your career-search criteria could include a military headhunter or military-friendly companies or businesses that have won Reserve/National Guard awards for supporting their employee’s military responsibilities.

4. Network, network, network. You already know this from all the transition programs, but treat it just like a new duty assignment. When you were offered a set of active-duty orders, you did a lot of shipmate research to find out if it was a good fit for you and your career. The same principals apply to a civilian career: find a culture that matches your lifestyle. Maybe you’ll even limit your search to the defense industry or electrical utilities or other employers who are known for their “wardrooms” and “Chief’s Quarters”. Seek out old wingmen and battle buddies who have been through the transition and ask them where the military culture fits into the business.

5. Pick a different type of career where you can still seek out mentors, gain knowledge, and help other people instead of just earning more money. Even if you’re not financially independent yet, you can leverage your military benefits to pick a field with other advantages. Work part-time while using your GI Bill (and its housing stipend) to improve your skills in a new interest. Ask your college if they need contract instructors for topics where you’re already an expert, or employees to help maintain their services & infrastructure. Look for temporary jobs or contracting opportunities at military bases near your chosen location. Consider working for a school, a volunteer organization, a non-profit, or federal/state civil service. (One retiree even joined the Peace Corps.) You won’t earn $175K/year with stock options or a company jet, but your stress level will be a lot lower. Veterans excel at training, counseling, and motivating– these sectors offer outstanding opportunities to do more of it and it may be the most satisfying work you’ve ever tackled.

6. Above all, treat the transition like a transfer to a command at a foreign culture. Overseas duty exposed you to experiences that most civilians will never see. Even if you just crossed a few state lines, you had to learn how to live with a totally different society and possibly even a new version of the English language. The military gives you lots of practice at handling big changes and teaches you how to handle all sorts of surprises. The “civilian culture” is just one more foreign experience where you’ll learn to acclimate. You’ll still have your same standards and lifestyle, but little by little you’ll learn the language, the rituals, and the subtle signals that are part of every culture. You don’t have to compromise or “give in”– just learn, appreciate, and enjoy the differences.

How did you handle your transition? What did you learn that wasn’t in the seminars, and what unpleasant surprises did you face?

The first edition of “The Military Guide” is being typeset this month, so now I’m collecting contributions for the second edition. Please post a comment or contact me if you have a story to share!

Related articles:
The “fog of work”
How many years does it take to become financially independent?
Frugal living is not deprivation
Retiring without a military pension
Retiring from the Reserves and National Guard

Does this post help? Sign up for more free military retirement tips via e-mail, Facebook, or Twitter!

Posted in Career | Leave a comment

Retirement: don’t recreate your old environment


Retirement is a great opportunity to make new lifestyle choices, but proceed with caution. Most people are comfortable with the habits they’ve developed over the years, and upheaval for its own sake can be more disruptive than beneficial. Family and friends may also be slow to embrace major changes, especially if those changes will challenge their relationships or impact their own routines.  There’s no need to rush into change or to set an arbitrary deadline.  You have the rest of your life.

Another danger of this “opportunity for change” is the risk of recreating your old environment. If your old workplace personality thrived on crisis, controversy, and confrontation then your family may not enjoy that lifestyle at home. If your career was a perpetual search for the optimal processes then your spouse or neighbors may not appreciate your benevolent attention to their efficiency. And if you spent any time at military training commands, especially recruit training, the kids may not enjoy your new focus on their appearance and deportment. You don’t want everyone to feel that you’re competing with them or scrutinizing their behavior.

An especially treacherous aspect of retirement is replacing your old responsibilities with new ones. The first few years of retirement are a wonderful time for thoughtful contemplation of how you want to live the rest of your life. You may have been responsible for taking care of people and valuables for decades, but don’t thoughtlessly fill your new life with more long-term obligations. You may eventually decide that you prefer to continue your old habits with new responsibilities, but give yourself the time to experiment with other activities that bring you value and pleasure.  Believe it or not, retirement is a time for personal growth– not repetition or replication.

There’s nothing wrong with taking care of family, friends, and neighbors instead of a platoon or a department. It’s very fulfilling to lead a local charity instead of a military command. Serving others is a wonderful way to discover new interests and activities for your own benefit.  Enjoy the experiences, but be careful not to drop into the old familiar habits of working long hours, pushing to accomplish the mission, making personal sacrifices for higher priorities, scrambling from one activity to the next, or even running your own domestic personnel and logistics command. Leave plenty of unstructured time in each day for reflecting on your activities and for discovering unexpected opportunities– even if it’s just walking the neighborhood or watching the backyard wildlife.

In a few weeks you’ll find plenty of ways to fill your time and your “To Do” list. If you’re seeking inspiration then jumpstart your thinking with Ernie Zelinski’s “Get-a-Life Tree”.

In the next few posts we’ll show the common yet subtle traps of sabotaging your retirement by recreating your old environmentOr we might take a break or two for news or other brief topics.

Related articles:
The “fog of work”

Posted in What Do You DO All Day?!? | Leave a comment

Retirement: Relax, Reconnect and Re-engage


So, what happens after you declare yourself retired? Maybe you finished 20 years of active duty in a blaze of glory with a farewell dinner, a retirement ceremony with full honors, and dozens of family and relatives. Perhaps you did the same in the Reserves/National Guard along with friends from the civilian office. Or you could have left the military long ago and your retirement is the capstone of a successful bridge career.

However, you got here, everyone is starting over. You may be permanently finished with the workplace or you could just be taking a breather. Maybe you’ll be reconnecting with other work or volunteering. While you’re considering your options, this is a time to restart your life and re-examine all your habits.

What Happens After You Retire?

Relax

One of the first things you can change during retirement is your sense of time. You’re accustomed to seeing the future as the next mission, tomorrow’s sortie, the next deployment, 30 days of leave, or the next tour. You could still do that, but now you don’t have to! This is your chance to develop a new perspective: “the rest of your life”. It’s a gradual shift that may take a few months to develop.

One of early retirement’s pioneers, Paul Terhorst, advises taking “the two-year test“.  When he was first considering ER, he thought about what he would do if he only had two years left to live. What would he change? What would he do differently? But once he was retired, he realized that he and his wife were doing exactly what they wanted to do– they wouldn’t change a thing. Now they take the two-year test every six months or so and gradually approach new things.

At first, two years may seem like an eternity! But he and his wife have been perpetual travelers for over 25 years and they’ve learned not to rush into creating new habits. The first couple years of retirement are one of life’s few opportunities to contemplate how you want to spend your time.

Two years gives you a chance to appreciate the annual routine and to see how things work out. Don’t buzz back and forth with a new “To-Do” list and try to change everything around you. You have the rest of your life to figure out how you want to do this so relax, slow down, and contemplate the opportunities.

Reconnect

Your top priority is re-engaging with family, relatives, and friends. You might not just have to figure out the new family routine– you might have to get to know each other again!

If you’ve had a career of long deployments and extra hours on the mission, then your spouse is probably accustomed to being in charge of domestic decisions. That is not going to change just because you can make it your new mission. Your kids may also be a bit suspicious of your new schedule. They may be horrified to learn that you’re going to spend all your time with them (while secretly enjoying the attention) but they’ll also be a bit skeptical of your commitment.

Even if you’re living alone, the first months of retirement are a great chance to reconnect with relatives and close friends. You have the time to spend a few hours with an elderly aunt or to go out for a meal with your wingmen whose schedules never synched up. There’s even time for a trip around the country to give people a chance to congratulate you on your retirement all over again.

As you visit with these relatives and friends, pay particular attention to the retirees. How did they make their own retirement transition? What perspective have they developed on the future and their own activities? What surprises or challenges did they face? What would they do differently? What advice would they give you? These could be the mentors you’d never find around the military or the office.

Re-engage

The first months of retirement are also the time to confront the perpetual question of all retirees: “What will you do all day?” The cliché response, of course, is “Whatever you want to.” The difference is that you can spend the time to do it without being rushed by weekend deadlines or fighting the crowds.

As you contemplate your morning routine, you’ll notice that the neighborhood seems to be evacuating around you. Front doors and garages are ejecting their occupants, families are bustling to load up, car doors are slamming, and the streets are full of urgent rush-hour commuters.

Meanwhile you can plan your day at your own pace. Maybe you’re continuing a morning workout habit or you’re starting a new exercise commitment. Perhaps you’d rather help the rest of the family get out of the house, do your chores before it’s hot, or have your own quiet time enjoying the sunrise– if you’re even planning to be up this early. Once the rush hour crowds have reached their destinations, you’ll be able to enjoy the neighborhood without rushing.

Remember the hassles and crowds of shopping and errands on a Saturday morning? You don’t have to do that anymore. The entire world is open during the workweek but it’s a lot less crowded at 10 AM on Tuesday. You can also break up your business with leisure activities– an hour at the library or a quiet coffee house, a workout at the gym, or just exploring the neighborhood.

In the shops and stores, you’ll notice that the workers have time to answer your questions or to help you plan a project. (No more competing with six other crazed weekend shoppers before you rush back home to prepare for next week’s work!) If you adopt a weekly routine then you may get to know the staff and their work schedules– and they’ll get to know you. You might even reacquaint yourself with the people around your neighborhood

Back home it’s time to think about lunch or projects or even a short nap. After years of long hours and irregular routines, you may be chronically fatigued. The first couple weeks of your new life may even require an extra hour or two of “catch up” naps before your circadian rhythm resets. Even if your eyelids aren’t drooping, there’s a blissful pleasure in 20-30 minutes of quiet contemplation of your surroundings. Practice “being” instead of “doing”.

The afternoon can be devoted to more chores or you can give yourself a reward for completing them. If you spent the morning surfing then maybe you’re ready to start errands. Or if you spent the morning on yard work then you might be ready to escape the heat with a visit to a local museum, an uncrowded movie theater, or lunch with friends.

Take your time and enjoy being able to focus on an activity. You don’t have to rush back to work and you don’t have to burn through the chores so that you can enjoy what’s left of your weekend. Once again, perhaps for the first time in decades, it’s your choice.

If you’ve been perfecting the art of dodging the commuters then you’ll get to your evening’s destination before rush hour starts anew. The kids will be out of school, ready to spend quality time with you as they discharge their pent-up energy before homework.

The neighborhood will start to fill up with cars again as the morning’s evacuation reverts to an evening invasion. It’s time to start thinking about dinner and spending the rest of the day with family. The retirement difference is that you have time to plan ahead and really enjoy a creative meal, whether it’s fixed in your own kitchen or enjoyed at a local restaurant among a few weeknight diners. From now on, you only have to compete with the weekend crowds if you want to.

Speaking of weekends, they can become a retiree’s nightmare. There’s nothing worse than leaving the house for a few quick errands– only to realize that it’s Saturday when you’ll be stuck in traffic, crowded parking lots, and long lines. You may no longer need to keep track of every minute but you may find it helpful to keep track of what day it is. This is simpler if you have school-age children or a working spouse, but you may still need to have a calendar in every room of the house or a “day clock” that displays the day of the week instead of the time.

No, this is not a joke. There really is a day clock, and it really helps you keep track of the day!

Relax, and don’t worry about the next few months. One of the top three concerns of all new retirees is “But what will I do all day?” By the second week, though, they’re all wondering what the heck they were worried about.

The next couple weeks of posts will talk about more ways to develop (and enjoy!) your retirement without inadvertently re-creating your working life.

Related articles:
“But… but… but what will I DO all day?!?”
Myths of military retirement and early retirement
Lifestyles in military retirement: surfing

Does this post help? Sign up for more free military retirement tips via e-mail, Facebook, or Twitter!

Posted in Military Retirement | Leave a comment

“So, Nords, how did you start blogging?”


A friend’s e-mail inspired this post. They asked:

“How did you get started?”
“What software/host do you use?”
“Is there an understandable how-to out there for the non-technical?”

I’ve only been blogging for 18 weeks and the blog is slowly gaining traction.  You readers are contributing 50-60 views per day, and the recent “Fog of Work” post hit 94. (Thanks!) Unsurprisingly, many readers come to the blog from Early-Retirement.org. However, the site must be climbing the Google ranks because a growing minority of you are finding it from searching military-retirement keywords.  If you want to share how you found the blog then please leave a comment at the “comment” link or the “Leave a Reply”box at the bottom of this post.

Of course I’m blogging to market “The Military Guide”, but it’s turned out to be a multi-use tool. It’s a great way to collaborate with multiple authors or to test an idea in a different market without annoying the regular customers. The “privacy” feature of a blog also happens to be a wonderful way to vent or to archive documents or to just keep a journal.

When I started this blog I was paralyzed with the fear of making irrevocable design decisions. I was sure I’d do something that would lead up a blind alley months later, and then I’d have to scrap everything and start over.  A smart IT friend (thanks, BMJ!) helped me get over that fear with this link to Brent Ozar’s “Why blog?” post.  Yet even Ozar would probably agree that if his advice doesn’t resonate with you then it’s also very easy to just sign up at a blogging site, click a few buttons, and muck around. The blogging sites seem to pitch their products & support at the average high-school junior [insert joke here about junior officers or junior enlisted], and from there it’s easy to add more features as you need them.

As you’ve probably noticed by now, I started with WordPress— open-source if I need that feature later, lots of users, and well documented with huge help files and supported forums. (I’ve asked several extremely obscure and technical questions on the forums and gotten the perfect answer every time within 24 hours.) WordPress is free if you don’t mind their URL being assigned to your blog, or for $25/year (cheap!) you can register your own personal URL for them to host. Blogger (Google) and TypePad are top competitors. I don’t know much about those latter two, and so far WordPress is keeping me too happy to care about them. However, a blog’s content can be easily ported from one host/system to another– they’re all based on common codes like CSS, HTML, and PHP so that we don’t have to be experts on the technical details. Sure, it’s impressive and interesting, but I’d rather write.

Almost everything on this blog can be changed without losing the things I want to keep. These days I fearlessly tweak the settings, and if I’m not sure then I can use the “preview”, “draft”, or “privacy” settings while I’m doing it. Every week I seem to add another feature, and so far I’ve only had to throttle back on one of them. WordPress has never blown up on me and it’s been pretty easy to backtrack out of dead ends.

Another concern was the overwhelming variety of buttons, bells, & whistles. My advice is to ignore them until you want to go beyond the basics. Start simple: decide what you want to call your blog, go through WordPress’ signup menus, don’t get sucked into the upsells (unless you want to register a custom URL), pick a theme, and start writing. I’d recommend WP’s “Twenty Ten” theme— it’s their most popular theme, I’m happy with it, and it’s easy to switch to something else anytime. The text editor is visual and more powerful than discussion-board software, and there’s an HTML mode for even more formatting controls. When you want to do something more advanced like a “custom menu” or a different “column format” or a blogroll, the settings are intuitive and the help files are easily searched.

The biggest advantage of being hosted by a site like WordPress (instead of some other webhost service) is the back-office support. WordPress.COM handles all the backups, security, spam filters, and plug-in utilities. I can only use their plug-ins; I can’t add my own. Their benevolent sandbox limits have kept me out of trouble (and hacker-free). Happily their new features are coded, tested, and added far faster than I’ve been interested in using them. They show a few ads (I can’t control that but most readers use AdBlock) and I can’t earn revenue with my own ads, but when I decide to donate blog revenues to military charities then I can easily move it all to my own host and continue to use WordPress.ORG as open-source software with thousands of other plug-ins. Unfortunately earning revenue also means handling my own backups, security, spam filters, and plug-in issues. It’s not impossible but a good host is critical and it’s just one more distraction from what I really enjoy– writing.

It’s easy to get discouraged by the discipline of writing. When I look back on the last four months, I’m surprised by the number of one-time setup decisions I made on layout, links, and organization. (All those decisions can be changed but none of them have anything to do with actually writing and getting things done.) I’m surprised by how much my technique has evolved, and luckily most of it came from picking a few settings and using some boilerplate text. I’m also grateful for all the effort WP puts into entertaining its customers with tips and encouragement. For example, Scott Berkun is running a “Post a Week” challenge this year with lots of ideas to jump-start bloggers– topic suggestions, rough-draft techniques, tricks to get around writer’s block.  (Scott is a prolific author & speaker with a few of his own ideas about overcoming writer’s block.)  Every stray thought I have goes onto a topic list and eventually gets turned into a post.  If I’m burning out then I can always tell a sea story.

I read a lot of other blogs and frequently ask “How did they do that?” If you can figure out the name of the feature then you can find it in WordPress’ help files and decide if it’s worth the effort. If you can’t figure out the feature then you can post its link in the WP forum and ask the dumb questions– there are lots of experienced moderators to guide you to the right info. I also read business blogs on the business of blogging (especially for revenue) but most of their advice is common sense… or they’re trying to sell you something.

Search-engine optimization is getting easier. Its Wild-West days are over and it’s largely been dumbed down by Google, Yahoo!, and Bing. There aren’t really any tricks or pitfalls and WordPress also does most of the SEO heavy lifting for its bloggers. I think a lot about it and about readability/marketing techniques but WordPress also has lots of staff bloggers to consult for those questions. Of course they have products that they’d love to sell you but you can do 90% of it for free.

If you’re blogging to reach a wide market of readers, then Facebook and Twitter will inevitably rear their ugly heads. Let’s just say that WordPress has integrated those websites with their blogs, and it was a lot easier than I expected. After a couple false starts I realized that I needed to install a “Twitter” application into my Facebook page (which doesn’t make a lot of semantic sense, but those are the words). Now when I put up a post the blog automatically repeats it to Facebook and tweets. That gives me more time to go surfing write.

The best blogging advice is the simplest yet also the hardest– write at least weekly about things that interest you and provide helpful links to relevant material. Then, if you’re trying to attract an audience, it’s just a matter of pushing through the months until you’re “discovered” and hundreds of subscribers look forward to your next thoughtful post. I’m finding that I write just about as much every day as I did before the blog, but now I’m more focused on using my musings as blog fodder.

So if you want a better quality of fodder, feel free to let me know what you’d like to read.

Next up I’m drafting a post on SECDEF Gates’ recent Tricare proposals. After that I’ll go back to chapter eight of “The Military Guide”!

Related articles:
Writing and publishing

Does this post help? Sign up for more free military retirement tips via e-mail, Facebook, or Twitter!

Posted in Entrepreneurship | 2 Comments

Tailor Your Investments to Your Military Pay and Your Pension


Moshe Milevsky’s book “Are You a Stock or a Bond?” suggests that military on active duty can invest much more aggressively than many civilians. Milevsky’s concept of “human capital” grew out of his studies of investment and retirement plans.

He noted that every worker has the lifetime potential to earn different amounts of money, with varying degrees of reliability and predictability, depending on their potential occupations. Some careers had a high degree of continuous employment and steady income. Civil servants and university professors could all be expected to have relatively steady jobs which, while not paying large salaries, would earn a decent income with good retirement benefits. The modest yet predictable nature of their income was like a bond.

Other occupations, like Wall Street financier or professional sports, could generate huge payoffs in bonuses or options– but their likelihood of employment and the reliability of their income could be volatile. They could be laid off during any recession or a single injury could end their career.

Although they would probably earn a much bigger total than more steadily-employed professions, their income was not predictable and they might even have to arrange for their own retirements with tax-deferred savings and annuities. The wild swings of their employment and their income resembled a penny stock.

A military member’s “human capital” has the potential to earn millions of dollars over the years between school and retirement. With every paycheck, their years of training, skills, and experience are converted to investment dollars plus retirement and healthcare benefits. Even in a combat zone their pay, benefits, and insurance rise to cover the higher possibility of injury or death.  The military’s reliable predictability of employment is the equivalent of a steady stream of high-quality income. It’s as good as a portfolio of government bonds.

When you’re on active duty you’ll enjoy a steady stream of largely predictable income. According to Milevsky, the asset allocation of your investment portfolio can shift to stocks because your human capital already resembles bonds. You’ll still need an emergency fund and you’ll still want to save for specific goals like buying a home, but you don’t need to allocate much money to low-volatility assets like bonds or Treasuries or CDs. As long as you’re on active duty or drilling for Reserves/National Guard pay then you can take extra risks with your investments for an extra 1% of returns.

If you’re saving military paychecks for retirement, or if you’re retired on a military pension, then you can take extra investing risks! The income stream of your pension is based on one of the world’s highest-quality annuities resembling a portfolio of inflation-adjusted bonds or Treasuries.

If you had to buy these bonds to produce the income stream of your pension, it’s possible that their value would be greater the rest of your savings. In that case, the majority of your overall investment portfolio, including both your pension and your other assets, would be its bond component. Offset that bond allocation by investing the rest of your portfolio in larger portions of equities and real estate. The compounded extra return over 20 years will greatly increase your portfolio and speed your retirement.

The challenge of this financial analysis is its emotional turbulence. While your high-equity portfolio will earn a greater long-term return, it has much higher short-term volatility. If you can sleep at night despite a -25% year once a decade, and if you don’t need to convert the assets to cash within five years, then you could invest more aggressively. You could rely on the bond-like income stream of your paycheck or retirement benefits while raising your asset allocation in stocks, including small-cap and international equities, to enjoy greater returns.

If you find that an occasional 25% loss causes you enough emotional stress to consider abandoning your strategy at the worst possible time (despite its long-term rewards) then reduce your asset allocation of equities until the volatility is low enough to live with. Everyone swears that they’re able to tolerate a high degree of investment volatility, but that’s generally only true during a bull market. No one enjoys downward volatility, and selling equities at the bottom of a bear market will quickly wipe out those earlier years of extra gains.

If you’ve used your Reserve/National Guard career to reach retirement with a smaller pension, or if you retired with no pension at all, then consider using a portion of your savings to buy a no-frills annuity that provides a small percentage of your retirement income. (Milevsky’s book has more details on the types of annuities and their expenses.)

Annuities earned a (deservedly) bad reputation in the 1990s for their high sales commissions and expenses, but even Milevsky has been impressed by their recent improvements. Insurers have learned a lot about estimating their annuity risk, too, and their products are more likely to be backed by a strong company with adequate assets.

An annuity isn’t as highly guaranteed as a military pension, but your retirement annuity can support a “basic necessity” lifestyle. Keeping a few years’ expenses in money markets and CDs will allow you to ride out the worst of a bear market’s volatility while remaining confident that your overall portfolio has the resiliency (and the time) to recover from the inevitable financial roller-coaster.

Related articles:

Retiring on multiple streams of income
Retiring from the Reserves and National Guard
Retiring without a military pension

Does this post help? Sign up for more free military retirement tips via e-mail, Facebook, or Twitter!

Posted in Investing & TSP | Leave a comment