Topics: HBR IdeaCast - Harvard Business Publishing
A few weeks ago I was reading an article in Money magazine about a couple who retired at 40. While they do live frugally in relatively low-cost St. Louis, the primary reason they were able to retire is that they each served for 20 years in the military and now receive a pension of $58,500 per year. They will receive this amount, adjusted for inflation, for the rest of their lives ! On top of that, they get health coverage forever as well.
Obviously there are some important issues involved in working in the military. A sense of national duty, risk of injury and even death, possibly lower pay, and constant relocation, just to name a few. But let’s just focus on the financial aspects here. I knew military pensions were good, but I didn’t know they started as soon as you retired. I figured they’d kick in at 60 or 65, not right away. How much is that pension really worth? How much would a civilian job-jumper have to put away to replicate it?
In addition, I can’t properly estimate how much the lifetime of health insurance is worth, but it has to be worth at least another $100,000-$200,000. The article lists their net worth at about $500,000, but really it is the equivalent of around $1.75 million for someone with no pension. At 40 years old, that is quite impressive.