Should I Stay Past 20 Years in the Military?

The question of whether it’s worth it to stay 20 years on active duty is asked a lot. As with anything financial, it depends. But once you make it near 20, the next logical question is, should I stay past 20 years?

If you’re not careful, you can fall into what my friend Doug Nordman (from The Military Guide) calls the “Just One More Year Syndrome.” In the context of staying past 20, you’re usually trying to guess the likelihood of getting your next promotion, or you may be staring at a promotion, deciding whether you should take it or walk away.

You’re Not the First (or Last) to Make this Decision

You’re not the first person to reach the crossroads of retirement and promotion. I’m always fascinated by who stays and who leaves when faced with this decision. I’ve literally talked to senior NCOs and officers who had long stated their readiness to leave, but when faced with one “final” promotion or assignment, they still take it despite having told me for months prior that getting out was the best thing for them and their family.

I’m happy for them but also deeply saddened. In your personal relationships, you never know which straw will break the camel’s back.

Avoiding the Decision Altogether

Personally, I chose to opt out of having to make this decision. Kind of like Odysseus tying himself to the mast of his ship to keep from falling to the tempting call of the Sirens. I knew my achievement-driven personality couldn’t make the right decision when tempted. Instead, I opted out and dropped my retirement paperwork before the latest board convened.

Questions To Ask on Your Own Decision Journey

So, how do you make this decision yourself? Somehow, we end up using money as a proxy to determine whether we should stay, almost as if we need some metric outside of our own wants and desires to tell us the “right” answer. I’d like to say I’m immune to this, but I am human and, more importantly, an American, so money is a major motivating factor.

Personally, I like to reframe the money question a bit. But first, I think it’s important to ask yourself the most important, non-money questions:

If everything else was the same, would you choose to stay in versus getting out?

Which option gets you closer to the best version of yourself?

What’s the toll on relationships?

If you get out, what’s your plan? In other words, what are you retiring to versus what are you retiring from?

Will you regret leaving knowing you could have made it to E-8, E-9, etc.?

Are you getting your medical stuff handled in preparation to leave?

Bottom line, what’s the REAL motivation to stay?

If you’re just selling yourself on the idea because we’re trained to always strive to make the next rank/position, then you may need to take a tactical pause and do some deeper thinking. Then we can start talking about money.

The Questions We Need to Solve on the Money Side

Of course, there are practical considerations regarding how much money you need to live. We generally have a hard time taking a pay cut or thinking about entering a “season of deprivation” while redefining ourselves outside the military. However, I think it’s also important to ask some practical questions regarding money.

How much money do you actually need to live?

Do you know exactly what your current and anticipated expenses are in retirement?

Would you take a pay cut to be retired and start doing “that thing” you’re wanting to do outside the military?

What’s your likely VA disability compensation?

Have you been investing? Will you actually need a higher pension?

What’s your earning potential outside the military?

Mapping Out Your Streams of Income

For me, it really helped me to understand the streams of income. I wrote about this in my article on building your retirement offramp. I fully anticipate that my income in retirement will actually increase. So, delaying that possibility is a strike against staying all on its own.

However, the potential for a higher pension, which gets adjusted for inflation annually, is tempting. This is even further compounded by the prospect of getting another promotion. However, if you’re already at E-9, it’s important to note that there’s no E-10. You’re only adding to your multiplier (at least until you hit 30 years).

How to Value Your Military Pension as a Steam of Income

My friend Erik Baskin, from Baskin Financial Planning, and I actually talked about valuing military pensions on his podcast. The bottom line is that the pension is a huge benefit. But how much of a difference does an additional promotion really make?

Running the Numbers

I’ll attempt to make a rough comparison of what it would look like for me if I knew I was going to get promoted this year and stay an additional three years. I made the following assumptions:

Retired Pay – $36,000/year

VA Disability Rating – 50% ($15,000/year (2024 rates)

Inflation for Pension and VA Disability Compensation – 3% annually

Next Higher Rank Retired Pay in 3 Years – $48,000

Life Expectancy After Retirement – 40 years (roughly based on Social Security life expectancy tables)

My Estimated Employment Income After Military – $75,000 annually

Spouse Estimated Income – $40,000 annually

Investment Growth Rate – 7.1%

***Note: These are estimated (and pretty conservative) numbers but may differ slightly. I used the 2024 pay charts. I also rounded everything to the nearest thousand dollars to make things easier to follow. Regardless, this is for rough approximation and illustration purposes.

How Much Retired Pay I’ll Receive

If I retire at 20 at my current rate and live another 40 years, I’ll receive an estimated total of $38,000 of military retired pay per year. If I got promoted immediately and stayed an additional 3 years, then my estimated military retired pay would start at roughly $54,000.

Using an annual inflation rate of 3% per year, my retired pay starting at 20 years for another 40 years would yield a total of $3,005,000. If I wait three years to get the promotion, I’d start my retired pay at 23 years and continue for another 37 years for a total of $3,545,000.

So, the total amount of lost pension would be roughly $540,000 over the course of my lifetime. At first glance, this seems like a huge potential sacrifice. However, what happens in the three years directly after I leave after 20 can make a significant difference.

The Power of Starting Retirement Three Years Sooner

The critical deciding factor from the number’s perspective is the three-year delay in starting my post-military career. This is even further compounded by our limitations on my wife working due to childcare costs. In theory, we may have three additional streams of income when I retire compared to now.

After I retire, we’ll have my military pension, my income from my encore career, my wife’s income when she’s able to work again, and a potential for VA disability compensation (if I receive a rating over 50%). I estimate the following annual income in retirement: $75,000 for my earnings, $40,000 in spousal income, $38,000 in retired pay, and a possible 50% VA disability at $15,000 for a total of $168,000. Which, if I’m honest, seems like a lot of money to me when I lay it all out like that, but it seems totally reasonable.

If that’s true, then we’ll be far exceeding my current take-home pay. This means we could put more away for retirement, pay down a mortgage if/when we buy another house, etc. If I can manage to replace my current compensation with my retired pay and my encore career, then the “extra” money would be from my wife’s income and potential VA disability, so I’ll focus on that.

Take a Quick Step Back and Work Back from the Difference

Let’s go back to that $540,000 estimated loss in total retired pay. It seems like a big number, but when you spread that out over 40 years, we’re talking roughly $13,500 per year. It’s not nothing, but if you can make up that difference somewhere else, it becomes a moot point. So, what would you need to do to make that happen? I can think of three things:

1. Adjust your spending and enjoy your life.
2. Beef up your investments in the three years after you retire.
3. Work like a crazy person to make up the difference.

Personally, I like a combination of the first two. For giggles and grins, let’s assume that we don’t need any of my wife’s potential income those first three years and that I don’t receive any VA disability. If we both max out our Roth IRAs and put away a good chunk in employer plans (TSP, 401(k), Solo 401(k), or SEP IRA), we can probably put all $40,000 into retirement accounts for those first three years, totaling $120,000 in extra savings.

Let that grow for another 20 years (because we don’t want to wait until we’re dead to use it), and it will grow to be a hypothetical $473,000. If we stretch that out the full 40 years, it dwarfs the difference in pension payouts to end with an extra $1,865,000 in 40 years!

Working Backwards to Get a Better Savings Goal

To keep it simple, I used my handy financial calculator to calculate that you need to put away an extra $137,000 (and nothing else) for the first three years of retirement to make up the difference. You can also put away an extra $3,300 per year for 20 years instead (I’d say this is a little more manageable). The bottom line is that even without a VA disability in the equation, simply saving extra in the first three years after retirement can make up the difference.

If you spread that across 40 years, you’d only need to save a total of $43,000 extra in the first three years. If you’re deliberate about saving, you can use the power of compound interest to your advantage.

What About Staying for an Extra 3 Years and Not Getting Promoted

Because I needed to know the answer, I also ran the numbers to see what simply staying an extra three years just to get the higher multiplier would do. Staying an extra three years without a promotion only yields an extra $71,000 over the rest of my lifetime. It’s not worth it at all. We’ll probably make that up in the first year or two.

The Mystery of Veterans Affairs (VA) Disability Compensation

One major variable that we can only guess, at least until our claim is settled, is VA disability. With 20+ years of slamming your mind, body, and spirit against “the mission” every day, you’re probably at least a little banged up. However, there are a myriad of variables to this, and your claim is only as good as the documentation backing it up.

I highly recommend that you use a reputable VSO to help prepare your claim. This is not a time to “wing it” and go. Take your time and make sure it’s correct and comprehensive.

I’m making my plans assuming I’ll get nothing for VA disability, but also planning on how I would utilize a separate check. I don’t want to get that extra money without a plan for it. I also wouldn’t want to plan for it and not get it.

The Military Spouse Income Variable

Another key component in our decision is the ability for my wife to have stable employment. My wife has been a stay-at-home mom off and on due to difficulties finding work to pay for childcare. Even with benefits like the DCFSA, the math doesn’t really make sense for my wife to have a full-time job right now.

However, once I retire, I’ll be the stay-at-home/work-from-home dad. This will free my wife up to work a job she enjoys. Beyond just the benefit of letting her live her purpose, an additional income is very helpful. Even at $15/hour, that’s an additional $30k/year extra per year. The Dunkin down the street starts at $17/hour, so I think with her certifications, she can swing that.

I think she’ll be able to find something at $20/hour or more pretty easily.

Bringing Multiple Income Streams Together

Once we add up my pension, VA disability, encore career, my wife’s reentry into the workforce, and living in a lower-cost-of-living area in retirement, the deck starts to stack in favor of leaving at 20. It’s actually hard for me to imagine a situation (barring death or disability) where we’re not in a much better place financially and emotionally.

The Non-Money Aspects of Leaving at 20 Years

There’s so much more I want to do in life that I can’t accomplish inside the military. I’ve spent my whole career always being a workhorse to bring other peoples’ [mostly shitty] ideas to fruition while my ideas sat on a shelf. My earning potential is permanently capped within the military. I have little control over my time, where I live, who I work with, and what I do on a day-to-day basis. In the Army, my life is not my own. Not being able to be who I really am is the most painful part of staying in for me.

Furthermore, I anticipate that I won’t really need the additional income from one more promotion. I feel like having a floor of income through my pension and potential VA disability will allow me to take some time to build my business(es) outside the Army, publish my book, and have more family time. No amount of money could keep me from getting the chance to try my hand at creating life on my own terms.

We’re Never Guaranteed Tomorrow

Also, other things that have happened in my life have influenced me to prioritize life outside the military instead of staying longer to make a little more per month. My mom passed away when she was 55. I didn’t get to spend much time with my dad when I was younger either.

My son is still young, so I want to prioritize more time with him while he’s still living with us. My goal is to be that annoyingly supportive dad who follows him around to see his life events and support him in any way I can. I want him to look back and say, “Dad was always there.”

I really don’t want to waste any more time. We’re all ready to start living life on our own terms.

Bigger Impact on the Outside

Lastly, I truly believe that the things I’m doing outside the military may have a much greater impact on other service members than what I can accomplish within. I can focus my efforts on one thing, not force myself to be an “expert” in all things. I want to be an expert in helping others get their finances under control and live the life they were meant to live.

The Bottom Line on Staying Longer for a Promotion

My advice to anyone thinking about staying after 20, promotion or not, is to ignore the money until you decide what you want to do. Then figure out how to make the money work. Undoubtedly, the benefits of staying in for one final promotion can be great.

However, nothing is worth being miserable or feeling stuck because you can’t pass up some extra money. Only stay if you truly enjoy what you’re doing. Don’t stay for one more year, promotion, or assignment just because you fear missing out on a little bit bigger pension check.