Retirement is Great! You Can Do Better.

Making it to retirement is a great achievement for many veterans. Most retirees at 20 years will receive 50% of their base pay. I know that number is less if you joined the military recently, but it still isn’t bad. What makes this an incredible achievement is that each veteran reaching this threshold is essentially a millionaire–even if the sum is paid out incrementally over many years.

An E-7 retiring today can expect to receive $1,997.20 per month and $23,972.40 annually leading to $958,896.00 over the next 40 years. Retiring O-5s will receive $3,848.70 per month and $46,184.40 annually for a total of $1,847,376.00 over 40 years.

Even without adjusting for inflation, veterans can reach substantial amounts. Veterans can also add 2.5% of their base pay to their retirement for every year they stay in the service past year 20. Achieving higher pay grades can also add hundreds, if not thousands, of dollars per year.

Despite the terrific benefits, retirement salaries alone do not allow veterans to maintain the standard of living they enjoyed prior to leaving service. Partly, this is because retirees only receive a percentage of their base pay. They lose their other benefits, like a basic allowance for housing (BAH), cost of living adjustments (COLA), flight pay, and other sources of income to which they were accustomed.

Moreover, a recent change to military retirement for those who join after January 1, 2018, reduces 20-year retirement from 50% to 40%. As a result, retirement planning is even more important. That’s not to say this new program is a bad thing. As it stands, only 17% of veterans actually make it to 20 years of service. So, a majority of service members never see any retirement benefit from military service.

Before January 2018, these veterans left the service with nothing. Now, they leave with some investment towards retirement.

So, how can service members get ahead of their post-military service and secure their financial futures? You probably already know the answer–invest. If you are in the military now, learn to pay yourself first. This means before you do anything with your paycheck, invest a portion of it to savings, Thrift Savings Plan (TSP), or another retirement account. You might even consider real estate investing. While I encourage you to max your TSP and other options, you can also do great things with real estate.

This article is not nearly long enough to cover all the intricacies of real estate investing. So, I will end this article with some book recommendations. These books will help you better understand what real estate investing is, how it works, and how to use it to secure your financial future. For the time being, however, know that each time you PCS (permanent change of station), you have an opportunity to grow wealth. The idea is simply to buy the property and obtain equity each time you PCS and hold the property.

When you PCS, turn your property over to a property manager and let them handle the rental and maintenance of the property. With them handling all the leg work, you’re free to find the next property and repeat the process. At the end of your military career, you could have a great cash flow that compliments your retirement. For instance, some military members have managed to obtain multiple rental units (over 20) while navigating their military careers. Doing so, allowed them to achieve substantial cash flows in their post-military careers.

Of course, I could have done better. That is where reading books on property investing and visiting websites such as BiggerPockets.com can help. Honestly, had I read Brandon Turner’s book, “The Book on Rental Property Investing,” before I bought my last townhome, I could have saved a lot in sweat equity. The good news is I’ve read it now, and I’m much better prepared. In fact, I just pulled off my first BRRRR. If you’re wondering what that means, then pick up one of these books below and find out. Better yet, get them all, and keep going!

I’d love to hear from you in the comments. What is your experience with real estate investing while in the military? Do you have any lessons learned?

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