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Can You Really Retire from the Military at 38 Years-Old?


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Most people know that members of the military can retire with a fifty percent pension after serving twenty years of active military service. Since many young men and women in America join the military directly after high school, most enter at the age of 18. So, most members of the military will become eligible to retire at the ripe old age of 38.

However, while a member of the military can retire at 38 years-old, most will find it difficult to accumulate enough investments during their working years to generate enough retirement income to live off of for the remainder of their life.

Investments Must Produce 30 Percent of Income

Most financial planners recommend that retirees plan on spending 70 percent of their pre-retirement income after he or she stops working. A retiree needs to have enough money saved in investments that generate the extra 30 percent needed to live in retirement.

There are a lot of assumptions built into this rule of thumb, but it is derived from the idea that a person”s cost of living will be less in retirement. In theory, a retiree will need less income during retirement because hopefully a retiree would be close to paying off his or her home mortgage, has fewer or no children living at home and other living expenses will be smaller than during his or her working years.

How Big of a Nest Egg Do You Need at Age 38?

How much money do you need saved for it to produce an income stream that equates to 30 percent of your pre-retirement income? Take the following example:

A Sergeant First Class (E-7) needs to replace $14,871 per year in pre-retirement income (30 percent). A soldier will need a nest egg of approximately $180,000 invested in an annuity in order to produce about $1,240 per month assuming an annual return of 8 percent for 40 years of retirement.

In order to save $180,000 over the course of a twenty-year working career, the casino online soldier will have to invest approximately $300 per month to reach that goal by the time he or she retires at age 38. While this may seem like a lot of money, especially for a young private starting out, it would be possible to accomplish as the military member progresses through his or her career and up the rank ladder.

Why There May Be Holes In This Early Retirement Idea

Despite the fact that military retirees and their family’s health care costs are taken care of by the federal government during retirement, there is still a considerably high need for income from a retiree who is 38 years-old. Someone that young may not have a paid for house, will probably have children about to enter college and significant bills still left to pay, unlike a traditional retiree.

Another factor not added into this equation is that members of the military also receive an allowance for housing called basic allowance for housing (BAH), which is not taxed and is not factored into the calculation of retired pay. In an effort to save money, the federal government calculates a service member’s retired pay off of his or her base salary only. Allowances for food and housing are not included which makes the retirement pension smaller than 50 percent of the member’s total compensation. So, there is a need to increase savings for retirement to compensate.

If a member of the military plans early and saves wisely, he or she could in fact retire after a 20-year career at the age of 38. It would take a lot of planning and sacrificing early in the military member’s career, but it is entirely possible to retire at 38 years-old and never work another day. These are things to carefully consider early in order to be set up for success when retirement looms near.

Hank Coleman is a Captain in the U.S. Army, freelance writer, and the founder of personal finance sites such as Military Money Might. His writing has been featured on The Motley Fool,, and many others. You can follow him on Twitter at @HankColeman.