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Join the military to get rich?

I’m out of town for the week taking some kids to Young Life camp so they can have the best week of their lives. Today I have a guest post from guest post from Doug Nordman, author of “The Military Guide to Financial Independence & Retirement“.

When you’re in your 20s, just starting out and perhaps punching some debt in the face, the military might seem to be a sweet financial deal.

Or maybe not.

Here’s our credentials for this debate: my spouse and I graduated from the U.S. Naval Academy. I retired a decade ago after 20 years in the submarine force. She served in Navy meteorology & oceanography and in the Reserves before retiring. Our daughter is attending college on a Navy ROTC scholarship (she listened to our USNA stories) and she’s thinking of joining the submarine force too (so maybe she didn’t listen very well). Collectively we have five decades of experience in military personal finances.

I can understand how the military looks like the road to riches. After you’ve read about it for a while, the answer seems so simple:

  • Sign up at age 17 (or in your 20s or 30s).
  • Endure frugality for a couple decades while exploiting your awesome military benefits.
  • Retire (as early as age 37?) with an inflation-fighting pension and cheap health care.
  • You’re set for life!

Upon further reflection, the military seems to be the perfect way to gain control over your finances. Who’s better at understanding how to optimize resources, save money, develop a disciplined goal-setting approach, foster teamwork, and maximize mission accomplishment?

Yeah, I know, you military veterans are laughing your assets off right now. Straighten up for a second while we try to get the point across to the impressionable young recruits.  If you’re not getting rich, then why would you put up with the martial life?

First we should explain the “riches”.

U.S. military pay tables are at this Department of Defense link. The benefits package includes “basic pay”, a housing allowance, a food allowance, and a clothing allowance. Pay is taxed but allowances are not. More pay and bonuses are earned for longer obligations, advanced training, combat duty, or volunteering for submarines or special forces. Some before-tax pay can be sheltered in the Thrift Savings Plan (the federal version of a 401(k)) but the military does not match contributions.

Military pay varies widely: the most junior enlisted (E-1) earn only $18K/year in basic pay, along with (mostly) free food, housing, and uniforms. Depending on housing expenses (which vary by location) the total compensation package is $28K-$30K. The first few promotions and pay raises are relatively rapid compared to civilian careers. After six years that E-1 has advanced to the E-5 paygrade and is paid ~$32K/year (plus the other allowances) for total compensation of $45K-$50K.

Officers (college graduates) start at a total compensation of about $55K/year. After six years, a submarine nuclear-trained engineering officer can volunteer for an additional service obligation that will raise their total compensation to just under $130K/year.  Ship drivers, aviators, and some other military communities have similar programs (with smaller bonuses).

Next there’s the benefits. Medical & dental care on active duty is free.  Family medical & dental insurance is cheap, as is $400K of term life insurance. Disability benefits are included. Vacation is 30 days per year. You get plenty of free training (frequently during off-duty hours!).  Active-duty benefits and the GI Bill will even pay for you or your family to get a degree.

Finally, how does this compensation stack up against a civilian job? For the first 20 years, about the same. The military compares its specialties to their equivalent civilian careers, and adjusts pay & bonuses to encourage retention. For most of the last decade, Congress required the military’s annual pay raises to close the gap between total compensation and the Employment Cost Index.  Today both officers and enlisted are in the 80th-90th percentiles of their equivalent civilian careers, and that’s expected to keep pace.

Yet after 20 years there’s still that righteous retirement, right?

Yes, but the pension only vests at 20 years– if you resign before then you’re not eligible. (But you keep your TSP account.) You can leave active duty to complete 20 years in the Reserves or National Guard, but that pension is much smaller and only starts paying when you turn 60. All pensions are calculated on basic pay, not total compensation. For most servicemembers it’s barely a quarter of their former compensation– and then more is deducted for federal taxes, survivor benefits, and health insurance. Yes, the retirement does have the same inflation-fighting cost-of-living adjustment as Social Security. Yes, Tricare retiree medical insurance is incredibly cheap (~$45/month) as long as your doctor accepts the reimbursement rate.

At 20 years an enlisted servicemember can reasonably expect to be an E-7 earning $85K/year in basic pay & allowances, which would equate to a gross retirement income of about $24K/year. The submarine officer will get at least one more promotion (and several pay raises) to retire at $40K-$45K/year.

For a frugal lifestyle, especially with inflation protection, that’s more than enough.  Even if you’re not financially independent, you can choose a family-friendly bridge career or go part-time.

Yet consider these statistics: During most of America’s history, only 1% of the population has been on military duty. Today’s total active-duty force is only 1.4 million, and the services are starting another round of cuts which may drop that as low as 1.2 million. Only about 17% of the force stays for at least 20 years.

If the retirement system is so good, then why do five out of six servicemembers quit before 20?

Let’s look at the first glaring issue: workplace mortality. That pension looks pretty good because a few of your battle buddies aren’t going to be alive to collect it.

Next is “wear & tear”:  it’s a high-stress and physically-active lifestyle. Chronic fatigue is the norm, as are 60-hour workweeks. (No overtime pay, either.) Combat mortality may be at an all-time low, and servicemembers spend most of their time outside of a combat zone.  However they still risk their lives every day by training with high-power equipment, explosives, hazardous substances, and hostile environments. It’s not as bruising as construction or firefighting, but 20 years of daily abuse takes a toll. One moment of inattention can wipe out years of safety.

Although death and serious injury are relatively rare, there’s still the workplace environment. For example, submariners and aviators have less personal space than convicts in the federal prison system. Soldiers and Marines routinely live in harsh environments. There is very little work/life balance, let alone for a day off to take care of a sick kid. If you and your spouse are both military parents, you’re required to have someone else care for your kids when (not “if”!) you’re both deployed at the same time.  No waivers or unpaid leave.

If you’re not sure about joining your local police force, let alone cleaning toilets or doing other humbling jobs, then you probably don’t want to risk your health in the military either.

The military imposes strict rules of conduct that would be illegal in any Fortune 500 corporation. Servicemembers are required to maintain ridiculously high standards of appearance and fitness, including hair and body fat. They’re actively discouraged from smoking or chewing tobacco, tattoos or piercings, riding motorcycles, or drinking alcohol. Hair coloring, nail polish, and makeup are heavily regulated. Drug use is out of the question, even on leave or liberty. Military records are far less private than for civilians. Even families are subject to constant scrutiny by the chain of command– especially in base housing.

Maybe those five out of six servicemembers quit because they’d seen enough. Maybe the question should be: Why would you join the military in the first place?

For a few it’s the only way out of a bad life. Others didn’t know what they wanted to do, as long as it wasn’t school or shifts at Taco Bell. In my case it was the irresistible challenge: I could prove myself and be a part of an incredible team. Other veterans joined for the crash course in motivation, commitment, and self-discipline. You’ll have far more responsibility in your 20s (especially in the Marines) than most civilians will get in their 30s. Even better, you’ll have the training & experience to handle it. Recent college graduates manage million-dollar budgets and make life-or-death decisions before they get their graduate degrees.

Above all, the initiative and perseverance have to come from within. “Getting rich” will not fuel those drives through the first service obligation, let alone for two decades. You keep going because you’re “making something better of yourself“, and your military skills will also keep you on the track to early retirement.

The best reason to join the military is for yourself.

The worst reason to join is for the money.

Doug Nordman blogs at and also posts to a number of personal-finance forums as “Nords”.

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  1. Someone in my program in law school joined the military knowing that he eventually wanted to be a lawyer. He is saving about $125,000 in law school tuition. Plus he receives other money from the military that allows his wife to stay home with his children.

    • I couldn’t help but reply with a bit more information concerning the JAG officers (lawyers). JAG stands for Judge Advocate General. ‘Judge Advocate’ refers to your job as a lawyer. The ‘General’ part of the title indicates that you are part of the general corps. General corps members (doctors, lawyers, and dentists) don’t command troops in combat and don’t get the degree of combat training that a regular officer would get.

      The Marines are a bit different in that they send their lawyers to OCS and to boot camp. So they are merely labelled as Judge Advocates. I’m not sure about the other branches of service, but the Marines no longer provide a hefty bonus for passing the bar exam as a way to pay for school. You do, however, get a TON of experience as a military lawyer. A top graduate from a Tier 1 law school might end up at a big law firm where they do nothing but research for other lawyers in the firm for a few years. In comparison, the military will often have you prosecuting cases in court within a month or two after you finish your USMJ training. You cannot get the same degree of experience and responsibility anywhere else that I know.

      You have a much lower risk of combat mortality as a lawyer. I’m not sure about the other branches of service, but the Marine’s Judge Advocates are always stationed on a base for their first tour of duty – almost always stateside.

      Overall, it’s a great way to pay for an advanced, professional degree if you can qualify for the program. The application process is competitive, and it’s only becoming more so given the currently depressed legal market.

      • Filling in some gaps: Navy JAGs go to ODS before Justice School. No guarantee you’ll be stateside for first tour, and most Navy JAGs work to deploy on land or at sea in their first tour as well. Enter the mortality risk factor.

        Navy JAG stats – <8% acceptance rate to the JAG Corps out of law school, they don't pay for any part of law school (huge bummer), and as Michelle said – compensation + benefits is much less than any entry level legal job in the private sector. Navy JAGs also make less than any other military branch lawyer position. Only upside here for those who took on student loans for law school, as active duty military you can request lower rates and can defer payments if you want. You are eligible to have the Navy pay for law school if you apply to the "Lep" program – you're already in the Navy, and you are one of the 4-8 people the Navy selects to go to law school based on the very competitive application process. Incredibly rare.

        I do agree joining the military is absolutely not to be done for the money, even as a staff officer the compensation simply doesn't offset the cost of a demanding military lifestyle – you have to want it for other reasons.

  2. The military really freaks me out. I’d never consider joining and I don’t have any friends that have (though the entire image and participation in the national forces is much different in Canada than the United States. Because our army is so small it’s generally unusual to meet anyone that’s a part of it… or maybe I just don’t run in those circles). I find it a huge turn-off if a guy is in the military. I don’t think the lifestyle and risk is worth it at all.

  3. I grew up in a military area. The base I lived by (ten minutes away) is one of the most populated and active bases. Most of my friends were military brats. For many of my classmates, due to financial circumstances or family heritage, military was their choice. The sons/daughters of officers of course went to college first, the others started as privates.
    I am not cut out for the military. My husband was on the path of Navy OCS until we got married. It’s not something we have abandoned completely, but due to my career path, I’m not sure how much of a possibility it will be?
    You have to be committed to be in the military. If you have a family, your family has to be committed, as well. It’s the only way it works.

  4. Mahalo nui loa to Ninja for giving me the guest post! I get this question a lot on personal-finance blogs & forums, so I’m happy to have a spotlight on it.
    @Paige, the military is very generous about covering the educational expenses (and insurance) of its lawyers & doctors. Good help is worth paying for. I can practically guarantee that they’ll end up on the leading edges of their fields in military law and battlefield medicine. (Think back on the headlines you’ve seen in these areas over the last decade.) Hopefully the lawyers & doctors see that as a good thing.
    @Bridget, I’ve spent some time with Canada’s submariners. They are at least as skilled as their U.S. counterparts, and their subs are a force to be reckoned with. (I’m also jealous that they’re allowed to have beer onboard.) If you get to know a sailor, it may change your life… and they don’t stay in the military forever.
    @SavvyFinancialLatina, you and your spouse might want to take a look at the Reserves. It’s better to learn about the choice now rather than to hear about it later and wonder “What if…?” It offers a lot more flexibility to your career, and it’s much more family-friendly than active duty. But it’s still not easy.
    Our daughter joined Navy ROTC to make an opportunity for herself and answer her own “What if?”, just as she saw her parents do for ourselves. Her cousin is an Army veteran, and she knows lots of military kids. I’ve been retired for half of her life, and that must look pretty good to her so far. She is tremendously reassured to know that she has a “job” waiting for her after graduation. However I work very hard to make sure she learns everything she can about the service, so that when she reports to her first submarine and if she realizes that she’s made a horrible mistake… she knew what she was getting into. When she graduates in 2014, she’s obligated to stay on active duty until 2019.
    I recognize a lot of bloggers here. Hope to see you guys next month at FINCON12!

  5. As the wife of an E-4 and the daughter of a of a retired E-7 I laughed when I saw the title. And continued laughing as you laid out how lovely it all seems, because you’re right, it DOES seem like an obvious choice! Why doesn’t everyone do this?! Because everything you said in this was true 100%. It kills your body, it’s not 9-5, deployments are constant, there is no overtime pay, and most importantly it is not just a commitment for my husband, it is a commitment for my whole family. It’s a way of life whether we want it to be or not. Thank you for this post.

  6. You’re welcome, Lindsey!

    We’re working on the 2nd edition of “The Military Guide”. Please take a look at the blog and let us know if you’d like to contribute your story/advice for the book…

  7. This was a very interesting post. I was very close to joining the Commissioned Corps right out of my residency, but chose not to. After twelve years in private practice, I am trying to cut back at the end of the year, but if it doesn’t work out, I have an application in right now with the Corps. It takes forever to get boarded. Not exactly on the front lines, but the same as far as pay and benefits.

  8. My uncle worked in the military and was even assigned in Iraq during the Desert Storm. I was still very young then so I do not have any idea as far as the financial aspect is concerned. But I know that it was not easy for him and his family to be away from each other — physically, emotionally, and psychologically.

  9. Great post, Doug. It made me think of a story I read back in the early 90s but I can’t find it on the web. There was a soldier who was getting discharged after completing his first enlistment, and they realized he had never been paid. There was some pay screwup after boot camp, and I guess he didn’t realize soldiering was salaried position. Talk about the volunteer force! He had free food in the chow hall, lived in the barracks, and didn’t own a car. His mother would send him money for him to go home for holidays and stuff, and I guess that was all he needed.
    I’d love to find this story again to make sure it’s not an urban legend.

  10. @Kim, @Cherleen, there are many non-financial factors about the military quality of life that just can’t be compensated for by the pay system.

    @Rob, I think I served with hundreds of those guys in the submarine force– they couldn’t believe they could get all of that and a paycheck too…

  11. Thanks for reaffirming my decision to join the military. I have a couple of friends in the Army and reserves. One has had enough and the other is just about to retire. His plan is to get another government job and earn a second retirement benefit.

    When you hear him talk it also sounds good buy after a couple of tours in Afghanistan and some other assignments he has had it doesn’t seem worth the risk. He is one of the seven that made it through and I’m happy for his survival. What you get for 20 years of risking your life though seem small in comparison.

  12. Great article, Doug. I thought your article was very a honest look at the military. One angle you didn’t cover was that joining the military isn’t an all or nothing endeavor (well, it is while you are in the service, but it isn’t a lifetime commitment). It’s important that anyone who is considering joining the military understands they can join for one tour, then go back into the civilian world.

    There are a lot of benefits veterans take with them when they leave the service, some of which veterans will have access to for a set time period (education benefits are usually good for 15 years after separating from the service), and some for a lifetime (like the VA Loan).

    Then there are the like skills and adventures you can earn while you are in. I served 6 years on active duty, and had an amazing tour. I lived in Europe, traveled to over 30 countries, earned my degree while I was in the service (on the government’s dime), and have hundreds of stories.

    There are definite pros and cons, and the military isn’t for everyone. But there are a lot of benefits (financial, medical, educational, and other), and they are worth investigating if you are interested.

    • Very good points, Ryan!

      We could write entire books about the re-enlistment/transition decision– oh wait, there are hundreds of books about that already…

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