Military Retirement Plan

A majority of the people I've helped with their finances have been military members within 5 years, or even days, from retiring. They're concerned about only receiving 50% of their basic pay and not receiving BAH or BAS anymore. Anytime is a good time to start getting your finances settled but the earlier you start in your military career the better.


If done correctly, military members can retire from working at 40 years old. Imagine not having to work at the end of a 22-year career and only being 40 years old. When military members retire, after 20 years in the military, we get 50% of our basic pay (only basic pay) and an additional 2.5% each year after. If you start at the beginning of your career, you can have enough to make up the remaining portion of your basic pay when you retire.


For example, an E-8 at 22 years makes $5,115.30 a month (in 2014). The E-8 is entitled to 55% of his or her basic pay in retirement. 50% for twenty years and 2.5% for both years after. This would be $2,813 every month for the rest of his or her life, or $33, 756 annually and if you start saving now, you can earn enough income to get paid like you did when you were in active duty. You can potentially make enough to earn what you were getting in Housing Allowance (BAH) and Food (BAS).


To make up the remaining pay the E-8 would have to save up $552K and earn 5% when he or she retires. This may seem like a lot of money to save up, but by starting your Thrift Savings Plan (TSP) right away, investing in an Individual Retirement Account (IRA), buying real estate, living within your means and keeping debt to a minimum you can easily save this much money (or near it). $552K earning 5% a year would earn you $27,624 a year.


This discussion is theoretical because you can't withdrawal those savings from your TSP and IRAs until you are 59 1/2. But the point is, starting early and saving as much as you can will put you in a prime retirement position.

Discussion About Depoloyment Entitlements

***Please read bottom recommendation***

Deployments can be a stressful time for many people and their families but they also come with financial compensations; although, nothing can compensate for the loss time from your family.  The best economic advice is to save ALL the "extra" money and/or use it to reduce or eliminate your debt; however, the best realistic advice is to save SOME of it and then use the rest to help you and/or family emotionally recover by making a large purchase or traveling and spending time with the family.  That being said, here are the entitlements one could expect to receive depending on location deployed to.

·         Combat Tax Zone Exclusion (CTZE) - All enlisted and warrant officer pay is tax exempt in many deployed locations. Officer's pay is tax exempt up to the cost of the Service E-9 (Sergeant Major of the Army, Chief Master Sergeant of the Air Force, etc.). This is not prorated and your whole month's pay is exempt even if you only spend one day in the deployed location.

·         Hostile Fire Pay/Imminent Danger Pay (HFP/IDP) – This is payable in an HFP/IDP authorized location and is $225 a month on a prorated basis—meaning a per day basis.

·         Hardship Duty Pay-Location (HDP-L) - This is payable for performing duties in a hardship duty location for more than 30 days and ranges from $50-$150 a month.

·         Basic Allowance for Sustenance (BAS) – For members currently receiving BAS, they will continue receiving BAS.  For members not currently receiving BAS, they will when they arrive at their deployed location. FY14 BAS rates are: for enlisted $357.55 and officers $246.24 a month.

·         Per Diem – Members receive $3.50 every day while deployed.

·         Family Separation Allowance (FSA) – Members who have approved dependants are authorized FSA and it is $250 a month on a prorated basis.

Again, these entitlements may not ease the burden of a deployment, but they do offer some financial compensation and may help improve lifestyles upon returning. So a typical Afghanistan deployment could easily yield over $1K extra a month shielded from taxes.

***NOTE*** - Please ensure you file your travel voucher within 5 days of returning from your deployment with your military finance office. Excess CTZE and BAS from not filing your travel voucher quickly gets collected back in a lump sum and is 99% of the reasons why your pay will be zeroed for one or more pay periods.  Your local military finance office can help mitigate these but your pay will not normalize for several months.  It is IMPERATIVE that you file your travel voucher and ensure it gets processed with your military finance office.