When you enlist in the military, it doesn’t take long to start utilizing the perks of allowances, tax breaks, insurance and more.
One perk that requires a lot more patience to acquire is retirement.
Currently, the 20-year stipulation for eligibility still stands, although there’s been considered debate about future changes. The decision to enlist for 20 years is a big one with a lot of contributing factors—especially with the possibility of a structural change.
Here are some things to think about when considering making the military an all-out career:
Currently, the military retirement system offers three options that are determined by your enlistment date. All three award a certain percentage of your basic pay after 20 years of service.
Forty years makes you eligible for 100 percent of your pay.
When calculating your potential retirement pay, you’ll need to take into account the basis for which Final Pay, High 36 and REDUX decide the amount. Each take a different approach to averaging your highest earnings, multiplying the years of service with a certain percentage of pay as well as adjusting the amount for any COLA and Career Status Bonus.
Knowing these factors can help you determine your future budgeting approach and whether you want to find another career post-military.
The federal government is considering changing the military’s retirement structure into more of a 401(k)-type system. The idea is to provide a source of retirement savings for military members who leave before hitting that 20-year mark.
Still, military members would have to take into consideration the fact that they won’t receive the compensation until age 57-60.
If you’re considering enlisting for the full 20 to receive regular retirement pay, be sure to leave some flexible options for your budgeting in case disbursement changes.
Take any counseling briefings or look over guides offered by your command. That way you can discuss and review your options and learn your family benefits before you make a final decision.
It’s also a good idea to calculate your potential retirement pay to get an idea of what you will need to save.
Photo thanks to Joint Base Elmendorf-Richardson under a creative commons license from Flickr.