[Editor's Note: Today's guest post was submitted by CPT Michael Bork, D.O., a military physician that promotes financial literacy locally and nationally from a military standpoint. The views expressed in this article are those of the author and do not reflect the official policy or position of the Army Medical Corps, Department of the Army, Defense Health Agency, or the US Government. We have no financial relationship but I applaud his efforts to educate his military colleagues.]
One of the things I notice while reading finance materials is that the intended audience is often very broad and misses the narrow field of military physicians. This is one of the points behind the White Coat Investor that is so beneficial; WCI focuses on physicians and professionals. Still, I noticed that military physicians are often relegated to a single chapter that may gloss over the TSP, hint there is a mythical “good time to get out” of service, or don’t mention anything specifically at all for physicians in uniform.
Because of the limited information for my peers, I put together this guest post based upon a presentation I put together on military finance. This is intended as an introductory view that should hopefully springboard you towards furthering your own understanding of finances for a military physician.
Military Doctor Retirement Account Basics
I will share what has been working well for me as I continue to grow my personal retirement since living on a stipend as a medical student, to being a resident, and now past that.
- Maximize TSP (Thrift Savings Plan) match (limit $19,500/year) if you are in the BRS (Blended Retirement System). Allocate at minimum 5% of your income to get the full match. More on this later.
- Maximize Roth IRA (Individual Retirement Account) contribution ($6,000/year if you are single – $12,000/year if you are married). Obtain this account with a firm like Fidelity, Vanguard, Charles Schwab, etc.
- Investments in Taxable accounts (focus on Index Funds). These are your taxable IRA accounts with a firm again like Fidelity, Vanguard, Charles Schwab, etc.
Military Doctor Retirement Savings Plan Targets
The overall goal is to save 20% of your income every year to retire comfortably. The WCI Golden Rule is to live like a resident for 3 years out of training, but that needs to be tweaked for military physicians. We have lower income, but there are other benefits of being a military doctor like lower cost of living and higher benefits. Subjectively it appears we will have to live like a resident for 4-5 years after residency. This can be offset by taking advantage of some of the military benefits. Your last step is to try and minimize your tax burden.
Financial Mistakes to Avoid as a Military Physician
Potential money pits are the same for non-military and military physicians. Essentially people expect you to live like a physician with fancy cars, big houses, expensive hobbies. I argue there is more stress for military physicians who are additionally also supposed to be living like officers. It is a little disheartening to park your 10-year-old car next to the E4’s brand new bright orange Mustang. Just remember that Mustang is likely 30% APR, and your car is paid off. Both of the cars must drive the speed limit and stop at red lights. Many of the benefits of being active duty will limit these types of pressures like BHA (Basic Housing Allowance), on-post living, excellent childcare/schooling.
Military Doctors and Loans
Loans are one thing drastically different for military physicians compared to our civilian peers. The military physician starts off without medical school loans as an HPSP or USU graduate, and is essentially $400,000 ahead of their classmates, not including interest on those loans.
However, we often still have undergrad loans, car loans, credit card loans, etc. There are two main pathways people usually talk about to repay loans. One is the Dave Ramsey Snowball approach. You pay off the largest interest loan first, then take those payments and apply them to the next largest interest, and so on. The other approach is to pay off the smallest value loan first. This decreases the number of loans you have and gives you an emotional win early that you ride to pay off the other loans.
Either way, you should view paying off a loan as a guaranteed return on investment. Paying off a $5,000 loan at 5% interest saves you $250 of interest. Investing $5,000 could possibly make you more than $250, but it could also lose money. The decision to pay off loans or invest the money is a long-debated question that has no one answer.
Refinancing student loans and loan forgiveness exist. These are more important for civilian counterparts and are not something that I have personal experience with. Defer to WCI or other posts on the matter.
Things to Invest in While in the Military
As a military doctor you should consider taking advantage of the unique opportunities of active-duty personnel, most notably the Thrift Savings Plan (TSP).
What Is the Thrift Savings Plan (TSP)?
The TSP is essentially a military 401(k) in which the government will match 5% of your contributions. Every year you should match a maximum of 5% of your paycheck. TSP contributions max out at $19,500/year but you can contribute up to $56,00/year tax-free with combat zone pay (something residents will be highly unlikely to ever take advantage of).
Challenges with the Thrift Savings Plan
CPT Michael Bork, D.O.
Currently, there is an issue specifically with the Army where they are making Health Professionals Scholarship Program (HPSP) recipients wait 2 years to get their 5% match while other branches are receiving theirs. This is something that many residents have been actively fighting. You can work with your finance department and get back-pay contributions to make up for it. There are ALARACTs that helped to show the steps needed to recover the money that was missing from your TSP contributions. It is a long process, but if you are trying to make the most of your investments, it is work you need to do. I was able to get this to happen for myself and a few other residents at various military treatment facilities.
Savings Deposit Program (SDP)
There is also the Savings Deposit Program. The SDP is where you can deposit $10,000 with 10% guaranteed return while you are deployed and will continue for 3 months after returning to the states (again, unlikely to use during residency). One note on this is that you cannot deposit a $10,000 lump sum on day one of a deployment. The contribution caps at your base pay per month until you reach the $10,000 limit.
Investment Accounts
Understanding which funds are taxable and which are not is a difficulty in the military. Annually, you will receive a PSMC (Personal Statement of Military Compensation) that will explain your paycheck in full including what is taxable and what is not.
Choosing between Roth or Traditional contributions continues to be a question in the military. In short, while in the military I believe you should be doing Roth contributions 100% of the time. Roth means that you pay taxes at the tax rate you are in at the time you contribute. Traditional means you pay taxes at the tax rate when you withdraw money. A mixture of the two allows you to alter your tax bracket during retirement. However, I recommend waiting for traditional contributions until you are practicing in the private sector. The only reason to use Traditional contributions I can see is if you intend to stay in the military for your entire career and not practice when they finally kick you out.
If your income is greater than $124,000 while still serving in the military, it is time to look into performing the Backdoor Roth. Essentially you can rollover the full $6,000 from a Traditional IRA to a Roth and take advantage of the tax benefits. There are rules to follow like needing to have $0 in any other IRA by 31 Dec of that year to avoid getting taxed. This is due to the Pro-rata rule. There are good guidelines on WCI and other sources on how to go about doing these steps.
The retirement accounts you should have and focus on are your TSP, your personal Roth IRA, and any taxable accounts. If you are married, there is an added layer of which accounts you can contribute to on your spouse’s behalf, how to contribute to their potential 401(k), HSAs, or other accounts. But these are like how other physicians handle spousal or child education accounts.
Military Doctor Retirement Account Planning
Roth IRA Allocations
The first retirement account I had was a Roth IRA and I was confused why, after putting in $1000 and waiting a few months, the amount never changed. I see this skipped over too often, so I wanted to mention that you need to allocate your contributions to funds, and this is where evaluating your risk tolerance comes in.
If you are starting off your career and have time to make money for years, I suggest being more aggressive. This means investing more in stocks where you can make more money over time, but it is more volatile. You may make $10,000 in a short time then lose $6,000 in the following months. You have time to make up the difference, though. I think of it as a PGY1 that should be invested similar to 80% stocks, 20% bonds.
If you are towards the end of your career and will need to live off your retirement fund soon, you don’t want to be losing large chunks of money. Here you should be more conservative and focus on bonds. I think of this as a PGY35 that should be invested in 30% stocks and 70% bonds.
How you allocate is a personal choice. I personally agree with the suggestion that the best way for a physician to gain wealth for retirement is to put the majority of their stock contributions into index funds. That does not preclude you from following some individual stocks. I choose to have about 10% of my portfolio in individual stocks, 20% in bonds, and the remaining 70% go into index funds.
TSP Allocations
Your TSP account also needs more steps than just contributing to it. There are funds within the TSP that you can allocate a certain percentage of your contributions towards. They are listed below. There are published data for each fund with their historical returns. If you want a completely hands-free approach, you can contribute 100% to the L fund, select a targeted retirement date, and they will adjust your funds within the TSP to help you reach your goal. I explain to my peers while introducing them to personal finance they should think of each of the funds in the way they help protect their money. Take the G fund for example, it is government securities that will protect your money by competing with inflation risks. I have put the terms I use to demonstrate in brackets.
- G Fund – Government Securities [inflation risk]
G Fund is managed by Federal Retirement Thrift Investment Board
- F Fund – Government bond index [low-mod risk]
- C Fund – Large stock index [mod risk]
- S Fund – Small stock index [mod-high risk]
- I Fund – International stock index [mod-high risk]
F, C, S, and I Funds are managed by BlackRock Institutional Trust Company
- L Funds – Automatically distributes among G, F, C, S, I Funds. This is managed professionally for a Lifetime goal. You set your retirement to a multiple of 5 years (2025, 2030, 2035, etc.) and it will be managed to maximize your account.
Allocation Descriptions for the New Physician Investor
Here are a few brief definitions for beginning investors to better understand financial terms such as stocks, mutual funds, index funds, and bonds.
Individual Stocks
- You buy a share of a company
- These have minute-to-minute variation in their worth
- Your investment worth is tied to the worth of the company
Mutual Funds
- A group of stocks managed by a company
- Your investment follows the mutual fund, minus the maintenance fees taken by the person who manages the account
- The benefits are that you share the risks with a group of people
Index Funds
- A large group of stocks, up to the entire stock market
- Managed by a team
- Your investment follows the index minus the small fees
Treasury Bonds
- You loan your money to the government
- The government pays you back years later with the least interest
Municipal Bonds
- You loan your money to a city
- The city pays you back years later with medium interest
Corporate Bonds
- You loan your money to a company
- The company pays you back years later with the highest interest
Should I Stay or Go?
One of the most common questions to have and the most difficult to answer is the financial ramifications of staying in the military or going out to the private sector to practice.
Staying in the military has a few points I have talked about with my peers. Staying in the military for 20 years allows you to retire, which is 24 years total since one signed their HPSP contract. For Military Academy, ROTC, USU physicians, their payback is likely long enough they will likely be required to stay in for close to 20 years. The entire time you are in the military, you are likely receiving less pay than your civilian “twin” who has the same job and life as you except is a civilian physician.
Military Pension
However, you do receive a full pension that is hard to come by nowadays. The military pension calculators online can show you exactly how much money this will be. The current rule of thumb is you receive 50% of your highest base pay, monthly, as your pension. Retirement also includes Tricare for Life, the G.I. bill which can be given to your spouse or children, and other military retiree benefits like shopping on post. You can use rough numbers to see if the finances make sense for you to stay in personally.
Getting out of the military takes as many years as you owe. For HPSP who went straight through, it is likely that you owe 4-6 years after residency. Fellowships do add time, as well. But once you come up on your chance to get out, what do you do? You will receive higher pay that can quickly offset a pension, plus you’ll receive private retirement opportunities that will likely again have favorable comparisons to the military pension. You can run the numbers and see if it makes financial sense. Some of the primary care physicians may make more in the military once they reach an O5 or higher rank, so that is something to pay attention to.
For most people I have talked with, it seems that if they reach 15-16 years active duty, that is the breakeven point to stay in to get the retirement benefits. If you can get out before then, it likely makes financial sense to get out and make the higher salary in the civilian world. The breakeven point where comparing the HPSP and a civilian “twin” swings to favor the civilian by the financial numbers is about 3 years out of residency, which is coincidentally around the time civilian physicians can stop “living like a resident” and still reach a timely retirement.
There is obviously a lot more than finances that go into staying or leaving the military. Most everyone who signs up to be a military physician did not do it for financial gain alone. They wanted to serve and enjoyed at least some of their time in uniform. But ignoring the financial ramifications of staying in the military is as silly as signing up for the financial benefits. If you have gotten to the point where you can make a choice to get out of the military or stay, you have already given back to the country, no one can fault you for leaving and taking care of yourself and your family. Ultimately, it is your choice. The only wrong way to choose is to do so without evaluating all your options.
Are you a military physician? What other financial advice have you gleaned from your active duty? Comment below!
Great advice Mike!
Just remember that one doesn’t need to be “stuck” on Active Duty once they have completed their minimum time in service (HPSP recipient, for example). There are other options that may be more palatable. For instance, I served 4 years Active Duty in the Army and was ready to get out as i had “done my time”. However, a friend informed me about the National Guard. I serve one weekend a month now and 2 weeks throughout the year if i choose for additional time in service and pay (and retirement points) and don’t have the same burdens of being Active Duty. I work full time as a civilian physician and work my schedule around those weekends. I retire in 2 weeks now after getting to 20 years total service and i’ll draw my military pension at age 60 (vs immediately for one who retires from Active Duty…under current law). It’s been a great 20 years and i thought I would be done after 4!! I would recommend the Air National Guard especially to anyone looking for a way to pay for college in general or for physicians, specifically.
Col Chad Christman, D.O.
Thank you Col Christman, the Guard is definitely an option as well. We’ll see if I end up going that route myself.
Cheers to you enjoying your well deserved retirement.
Retired military surgeon here now practicing in the civilian sector. A salute to CPT Bork for his wonderful post! I encourage him to get this information to as many of his military colleagues as possible! There will be immeasurable benefit for them!
A couple quick comments:
1. Roth TSP contributions- I highly recommend military docs consider this. Your salary will double (or far more) after you get out (as will your taxes) so you will definitely want to do traditional contributions then. You will not regret having a larger Roth component in your retirement accounts. You very well may find your future taxes in retirement (this stimulus money will have to be paid back eventually!) will be higher than they were on active duty. Unfortunately, Roth TSP was not available when I was in. I am thankful for my TSP account that was built up during my military career, but every time I look at the statement I cannot help but think that the government actually owns a good chunk of it.
2. Staying in for the pension versus getting out- this is an endless debate amongst active duty military docs. I equate this to the endless debate of “should I pay off the mortgage or invest”? You can run the numbers over and over, but the psychological benefits of having the guaranteed pension with COLA and survivor benefit plan and the cheap healthcare cannot be overstated. I have not met a military physician yet who has regretted staying in to get the pension. It gives you tremendous flexibility in your post military medical career to FIRE, work part-time, pursue passion projects, etc.
Again congrats to CPT(Dr) Bork for a great post! Please spread this wisdom to your colleagues! I wish I knew what you know when I was in your shoes….
Thank you Introvert Investor MD!
I agree with both points.
It’s unfortunate you didn’t have the Roth option back in the day. I’ll try to make things better for those that follow in our footsteps.
2. That’s because those (at least most of those) who would have regretted it (like me) DIDN’T stay in! The numbers can be run. When I have done so (and it’s been a while) the break even did come pretty early (about 8 years in) but it’s highly dependent on assumptions, especially income and savings rate on the outside. An orthopod who can make $750K as a civilian doc IS NOT going to come out ahead staying in rather than getting out after 4 years.
I’m struggling with the decision to stay vs get out. I’ll have 12 years of service (O5) when I can separate and have civilian offers that would triple my military salary. Would separating for a +$600K salary make financial sense with this many years served?
AFSurgeon: Financially in your specialty the switch to private practice is probably better. Do the math: can you buy with that higher salary (and don’t forget your increasing military bonuses for such a high demand specialty)
1- an annuity that will give you 50 (or 40)% of your base pay as a retiring COL 8 years after you leave with 12 years? (But it probably won’t have COLA!)
2- Health insurance as cheap and at least as good as Tricare and Tricare for Life (after age 65- BTW you DO have to pay for Medicare if I have it right but TfL is a free Medicare supplement plan covering that 20% copay etc.)
3- Will you live near a military base for free pharmacy benefits and with commissary/ PX benefits (and is that a better deal than your local shopping)? (bar time and convenience hassles, and subject to the whims of Congress re retiree benefits)
4- Do you want a high chance to be the youngest Dept Chief and Branch Head in your specialty since so few other O-5s and O-6s of that type doc remain in the military?
5- Will you actually use the higher pay to make up for those benefits or just live larger and never get to retire? Will it overall leave you better off money and otherwise? What’s your spouse if any think?
For us as two doc FP/RAM it made sense especially since the RAM got to fly Navy planes and Army helicopters (US AND British) without paying for the privilege. I also noted, not the retiree but never a private practice owner, that salary GS or AD at O-6 was pretty good for as curtailed a workweek (barring deployments!!) as that entailed vs the generally much longer hours civilian FP docs would put in for usually not always somewhat higher pay. Not the case for you! Also, how much do you like working? Without that COLA pension and nearly free (we pay under $1000/year for Tricare coverage with frequent medical even hospital care) health care prior to age 65, you will not likely be able to retire fully, if you want to, 20 years after getting your MD.
My RAM spouse loved parts of his 20+ year career (flying more so than medicine), but didn’t like medicine enough to keep working after he could retire with the pension and Tricare and VA disability in his late 40s. (BTW we live off MUCH less than $600K/year.) Had it been me, I’d’ve relished promotion to administration and maybe tried to make General but the money wouldn’t be much better.
However for you to be sure of $600K/year (for at least 8 more years? Probably so no matter the healthcare situation in the US) vs ? $200K total with bonuses and supposed benefits is no doubt a no brainer; you’d have to really want to be Air Force and serve your country to make that financial sacrifice.
If you’re a really good saver, probably. You’d have to run the numbers.
As an ex-Army physician I enjoyed reading this… I didn’t even know about the TSP until I was a third year resident! I feel like there should’ve been finance lectures incorporated in Morning Report. Now as a VA physician, I would love to see a blog post or article on the specifics of working for the VA. I’ve been there almost three years now and still don’t have a completely firm grasp on the retirement system. 🤦🏼♀️
Have you bought back your active duty time? Could be an exceptional ROI, especially for former military docs who don’t stay in until active duty retirement.
Likewise, part time Guard or reserve can pair quite nicely with a career at the VA.
No, I haven’t yet bought back my time. I asked for the calculation from HR shortly after starting…I think I have a few more months to buy it back before they would start charging interest on the buy-back amount. I am part-time which complicates things just a tiny bit…and my orientation to the VA was very brief. What takes most people a full work week, I had combined in two days, so I know a lot of information was left out. I’m under the very strong impression that our local HR is lacking… but I’ve had good luck with HR at the VA in Boise. I need to stop making excuses and educate myself 😬
Ashley please ask/ demand a meeting with HR, perhaps virtual, and all the virtual classes they can give you on pensions and benefits. I absorbed most of this at inprocessing briefings but I was already a WCI reader when I joined the VA.
Ashley Shaw, sorry I don’t know much about the VA side of things myself. When you find your answers, please put them out there for everyone else to find!
Thanks for the support for the legwork I’ve done. I teach peers, medical students, officers, enlisted, and pretty much anyone who will listen. Taking an extra hour of morning report to discuss financial literacy is well worth it, can literally change people’s lives!
Great idea for a future guest post. Maybe even from you after you do some more research and want to share what you’ve learned.
Do TSP contributions count towards the yearly 401k max contribution of $19,500? I’m an EM physician with no previous military experience and I’m planning on joining the reserves. My civilian job has awesome benefits and does a super match for our 401k (I put in $19,500 and they match $38,500 for the $58,000 limit). Would I then be “forced” to take any military pay that I receive since I can’t use TSP? Any other military retirement plans I could utilize?
TIA!
Answer to 1st question is “yes” for the $19,500 (max for employee contribution across all plans); sounds like your civilian plan is better. If you deploy, they raise limit to $58,000 total, so that additional $38,500 could be contributed to TSP as additional contribution.
Steven Propst, that’s not something I’ve run into personally so I’d have to look into it. I see Dr. A replied that the match counts across all 401(k) plans. My assumption (without have researched this as of yet) is that this must be for tax purposes. In that assumption, I would agree and say the match is much better in your civilian job.
Yes.
Yes.
Roth IRAs (probably via the backdoor), HSAs, a solo 401k for any moonlighting, a taxable account etc.
Great post, agree w/ many comments above regarding nuanced decision of stay in/get out and the many flavors of Guard/Reserves/IMA in between. As a Guard member, who rejoined after a break in service after separating Active Duty, I can attest to a few additional benefits:
1. The ability to transfer post-9/11 GIB that I wasn’t going to use to kids.
2. Little known clause that allows you to be “credited” an HPSP year of Med school as a “good year” towards retirement with each year served. In my situation, separated after 8 yrs Active; after serving 4 hrs in Guard will have 16 towards retirement (4 HPSP yrs credited), 4 more for 20 total.
3. While serving and after retiring @ 20yrs, access to Tricare which currently runs <$300/mo for family plan. This is cheap access to health insurance during potential early retirement years prior to Medicare age.
Dr. A
Thank you for the support!
All three of those points are great to know, I didn’t know any of them. “Credited” HPSP years is likely a game changer for some people who did HPSP, military residency, and a fellowship who their payback would put them right around the 15 year mark.
The credited HPSP years do NOT so far as I know decrease the 20 year service needed to retire, just ADD 4 years to that for the size of the pension.
Such a great post. Everyone needs to know about the TSP.
Eric I agree!
Reserve/ National Guard after active duty: Sometimes that one weekend a month can stretch to a 12 month deployment so when you make that decision to go civilian or stay military, if not deploying is important (eg solo practice or family concerns) then reserve/ national guard would not work. And (25 years ago) I was told when I left the military that I needed 10 years total service, ie 3 more years (inactive) reserves after my 7 of active duty, but as I had already served 4 years reserves in medical school I was fully separated as our family desired. (Wanted to avoid both parents of the infant deploying same time.) Don’t know the current rules but keep that in mind.
Hear Hear! I didn’t even have TSP as an option when I was active duty; now (after 5 years civil service, VA and Army civilian) to get a little compensation for my active service in my pension is worth the cost. Please all veteran docs expecting 5 or more years civil service do the military buy back. Foolish not to unless you are drawing a 20+ year military pension.
The Military Buy Back and financial side of going Guard/VA after active duty sound like they may need to be featured as a future guest post.
I would also mention the post 9/11 GI bill. You can transfer to one of your kids and this will pay for 36 months tuition with E5 BAH . But you better get a page 13 to make it official.
BTW don’t be confused as I was- 36 months = 4 years of 9 months per year. Still unclear if we will have 45 days left towards grad school if her 4 years are under 36 months. This is BAQ for an E5 in the area of the school, instate (public school max) tuition, and $1000/ year book allowance. Many colleges will offer instate rates to out of state GI bill recipients or other ‘yellow ribbon’ grants to keep tuition free. At present we are making a little extra on the BAQ over her expenses since our kid is frugal. Paid out of pocket for other kid who had partial scholarships to save this for her not knowing how expensive her school would be. Had first kid been expensive might’ve done 2 years each, had second kid been cheaper might’ve encouraged her to do law or med school to use it up (can be applied for grad school, so you military docs who want to get a JD or MBA could use the GI bill).
Great blog! I was Navy HPSP back in the 70’s. I wish that I had had a resource like this back then.
I’d like to make sure that military physicians and veterans know about USAA and Navy Mutual Aid Association for their insurance needs. USAA is for motorcycle, automobile, home, umbrella, etc….
Navy Mutual Aid Association (NMAA) has a variety of life insurance products. Eligibility: “All active duty, reserve, and retired United States military service members are eligible to apply for coverage. Recent legislation has also opened eligibility to honorably discharged veterans residing in; Arizona, Connecticut, Florida, Hawaii, Maryland, North Carolina, Oregon, Rhode Island, South Carolina, Texas, and Virginia.” If you are getting ready to leave active duty, consider looking into membership while you are still active duty if you are not going to live in one of the states mentioned. For their life insurance products, there are no military service restrictions – There are no war, aviation, terrorism, or travel clauses (for those on active duty). Navy Mutual is a quality organization. Here’s a link to a review: https://www.goodfinancialcents.com/insurance-quotes/life/companies/navy-mutual/
Finally, and I would assume that active duty folks already know this, but many credit cards (including Chase Sapphire Reserve) with an annual fee will waive them for active duty personnel. Check it out. Here’s a link: https://militarybenefits.info/credit-card-benefits-military/
Old Doc Donna,
I’m glad that we can pass on our lessons to those coming up behind us.
Usually, after I get asked to give this brief the “sexy credit card” question comes up. Yet another thing that is rarely shared except by word of mouth. I’m glad there are people like you out here taking care of us all!
USAA is also a great bank for those who move a lot and are out of country- better ATM and foregin exchange etc fees than many other banks. And that is not limited to service members etc- my mom, not our dependent, got an account there. And dunno NMAA, but USAA membership continues for kids/ ex-spouses- my adult daughter choosing it over other options for her family, and my brother’s partner keeps her membership from a former marriage.
Congrats on a great article, many great lessons and thanks for spreading the word.
One correction, retirement is no longer calculated as highest pay. It is the average of you best 3 years (typically your last 3 years) base pay multiplied by your years of service percentage. For non-BRS it is 50% at 20 years of active duty service going up to 75% for 30 years. For BRS, it is 40% – 60% (but they did pay a match to your TSP and continuation pay mid-career).
As for getting out vs military retirement, the break even years very much depend on your specialty but from a strictly financial standpoint, agree somewhere between 10-15 years in will be most people’s break-even point. But you also need to consider low cost healthcare (compared to civilians) for life, the stability a pension brings (it can allow more aggressive investing in retirement for one thing since you now have a guaranteed income) and the increased likelihood of getting a higher VA disability rating (just because you are older and more things start happening in your late 40’s and 50’s). The VA currently pays up to over $40,000 tax free dollars per year (also indexed to inflation) to a married veteran.
Scott C you are correct with the retirement calculator, thanks for pointing that out. I’m glad there are calculators out there since these rules seem to change every 3-5 years.
Great post!
Two Thoughts:
1. I would also mention that once on Medicare, “Tricare for Life” provides free Medicare wraparound coverage for military retiree and spouse. It is a great deal.
2. As a military retiree, it is important to mention and understand the Survivor Benefit Plan options available for a disabled dependent.
Be sure to obtain quotes from all the other insurance carriers as well for premium comparison purposes. USAA/NMAA seem to imply that they are the only carriers without war exclusions. That is not true.
Be sure to obtain quotes from all the other life insurance carriers as well. USAA/NMAA seem to imply that they are the only life insurance carriers without war exclusions. That is not true.
Make sure to spread your tsp contributions about over all 12 months. If you contribute as fast as possible to get to the 19,500 max, the military won’t match 4% on the months after you’ve maxed out and can’t contribute more.
If you do your time as a GMO, you can use your VA benefit housing stipend as a civilian during residency.
Important point re spreading the TSP contributions! Don’t miss out on free money.
Re GI bill during residency: if you are getting paid for being a resident, it would waste tuition money to use GI bill just for the living allowance. I advise not using it if there is any chance you will have kids or a spouse or yourself who might want to use the GI bill for college or grad school in the future. Now if there arise residencies where you have to PAY for that ordeal, I could see using the GI bill for a GMO post military service to get his or her O/O/O/D residency despite not having been selected competitively for such a slot. (OF course the VA would have to start recognizing these as accredited educational programs.)
ANd sure E5 MHA if you live in NYC or SF during residency is nothing to sneeze at, but if your kid ends up going to Columbia with no financial aid you’ll wish you had the GI bill for E5 MHA in NYC PLUS possibly free tuition at Columbia (they do yellow ribbon)
Hi Brittney Dudley thanks for the two good points.
Could you elaborate more on the VA benefit housing stipend for GMO? That particular niche has one of the most unique financial ramifications due to likely completing their residency in the civilian sector after 4-5 years of practice within the military system.
Thanks for putting this together and thanks to WCI for publishing. Great information.
For those who choose to join the military system there are unique offerings listed above that should be utilized immediately. I think even most unique for the USU student. Having the ability to max out TSP day #1 of medical school is a huge springboard for early financial independence that many miss out on just because they don’t know. Combining that with passing on GI bill benefits to child and VA loan eligibility really accelerates our financial futures and helps bridge the pay gap once training is over. Military specific financial education should be standard for all incoming MilMed students, especially those at USU.
Good point on TSP contributions as a USUHS student. That sort of thing goes a long way toward making up for the civilian/military pay gap.
Hello Capt Bork,
I was lucky enough to be present for this talk at the SAMOPS conference and I was wondering if I could get access to your slide deck to go over with some of my fellow Interns?
Hello
I am curious so for 2022. You can get up to 20500 in employee contributions
The remainder would be some sort of match for income that the government puts in up to 61K per year correct not including catch up, in other words as a federal employee say at the VA I cannot put in more than 20500 from my salary in the TSP, is this correct?
Thank you
Yes. And the government probably won’t make the difference up enough to get you to $61K. Many employers don’t. Be glad you get any TSP match; I didn’t when I was active duty.
Mike Bork!