Q.
Would you consider a follow up to the outstanding post you wrote about separating from the military, but focusing on separating after hitting 20 years? I'm an emergency physician (Navy) with 1 more year to go until 20 and weighing the pros and cons, financial and others…of staying in after the 20 year mark.
A.
[Editor's Note: I don't really consider myself sufficiently expert to answer this question, given that my military experience is now getting further and further away, not to mention the fact that I didn't get anywhere close to retirement. However, I do know someone who has wrestled with this very question, so I recruited him for a guest post on the topic. Gregory Morgan, CPA, Col USAF, Ret, left the military at 26 years. He isn't a physician, but was an accountant who worked in military finance throughout his career and has worked in adminstrative positions with Bank of America and two colleges since then. I'll add a few comments at the end.]
The Military Pension
The military retirement system is a “cliff vesting” model where no benefits are earned until the individual has twenty years. If you are close to that number staying until twenty is a no-brainer. Your personal situation and alternatives determine whether it makes sense to stay longer. The benefit of staying is very predictable as you will receive 2 ½ % additional retirement for each year beyond 20 pro-rated to the month. Twenty year military retirement at 50% of base pay and access to medical benefits is very generous by modern pension standards and is that way because most military specialties don’t translate directly to the private sector and the retiree must start over in a new line of work. Also in theory, military retirement is not a pension but rather a retainer as you are subject to recall in a national emergency although as a practical matter that has rarely been done.
Consider Your Military Rank
For those fortunate enough to work in a specialty such as medicine it probably doesn’t make financial sense to continue past twenty years. There are some exceptions. Are you looking at a near term promotion? Most line officers are O-5’s at twenty years and are eligible to compete for promotion within two years. I had planned to retire at twenty but had a great job offered to me at that point and was fortunate enough to be promoted to O-6 during that time. My retirement pay as an 0-6 at 26 years when I did retire was double what I would have received as an 0-5 at twenty. However, most medical corps officers will probably have already reached their highest likely rank by the time they have twenty creditable years for retirement due to credit given for time in training that doesn’t accrue for retirement.
Physician Civilian Opportunities
What are the salary and benefits of your civilian opportunity? While you get 50% of your base pay at 20 years, that is a much smaller percentage of total compensation, particularly for medical personnel with a large portion of their salary in specialty pay and bonuses that aren’t included in your retirement. If you can replace your military compensation in your chosen civilian alternative then the retirement can result in a big pay raise. That was my experience as I fortunately was able to move to a comparable civilian position and salary with retirement benefits that more than offset 2 ½% a year for additional military time. So the financial question is whether you can equal or exceed the difference between your current compensation and the retirement payment in your new job. For most medical personnel that is probably easy to do.
Non-Financial Considerations of Being in the Military
Most of these are true whenever you transition to civilian life but are worth considering as you select your new job. Are you prepared for the change in status? Going from a senior officer position to being the “new kid” is a shock. Get used to the idea that you are “starting over”. Also, working for the bottom line and not the public good can be a difficult transition for military retirees. Be prepared to be stereotyped. Assuming that your new co-workers are not veterans there will likely be preconceived ideas that you should expect both positive and negative. Leverage the positive such as discipline and fitness to your advantage and work to erase the negative such as inflexibility and authoritarian by being aware of them until your new co-workers realize your really aren’t like that (unless of course you are.) The biggest change at least at first will be cultural rather than financial. Depending on your personality and preferences that may be a plus or a minus.
White Coat Investor Commentary
There are a few factors unique to physicians that should be considered by anyone weighing this decision. The first is skill atrophy. Physicians who stay to 20 years have often been placed into administrative positions and their clinical skills tend to atrophy as the years go by. The old adage that “There are 3 kinds of physicians in the military: In-Training, In-Payback, and In-Competent” holds some truth. If your clinical time has been severely limited for years, you may no longer feel comfortable going out and restarting a clinical practice. Non-clinical civilian opportunities may be more limited and pay much less than the typical clinical opportunities for your specialty. On the other hand, at 20 years you may feel that you need to get back in to clinical practice as soon as possible or forever abandon it.
Second, partnership opportunities may not be as valuable. Many civilian groups have a partnership buy-in with either time or money. If you are leaving the military at age 55 and plan to work 5 more years, buying in to a partnership may not make much sense, leaving you to choose from less-lucrative employee and partnership positions.
Third, although it varies by specialty, many practices have a ramping up effect. In the military, you get paid more each and every year you stay in. There is a lot more variability in the civilian world. In my specialty of EM, you ramp up rapidly once you make partner, then your salary is basically flat for the rest of your life. If your position/specialty has a long ramping-up phase while the practice fills, you may find that you never reach the really great years prior to retirement. When you compare military and civilian pay, you want to make sure you're not comparing military pay to the average civilian salary in your specialty, but to what you are actually likely to make.
Fourth, consider the costs of staying in. There are many downsides to being in the military, including deployments, living in an undesirable location, being at the whim of a large impersonal institution, substandard physical plants and equipment, inexperienced staffing with high turnover, and dealing with non-clinical military-specific duties. Given the cliff-vesting nature of the military pension, it's worth putting up with a lot of that to get to 20 years. The additional compensation of staying longer may not be worth that.
Last, remember that one of the best parts of a military pension (with Tricare) is that you can get it at such an early age. Those who enlist straight out of high school can begin getting it as early as age 37. Most physicians can get it by age 50 or so. If you decide to stay 5 more years, then your pension will increase each year, but you also don't get the pension for those 5 years. If you get out, you are essentially “double-dipping”, collecting a pension and Tricare from the military while receiving a full salary as a physician.
In summary, the default position for most military physicians who stay to 20 years should be to get out if they are making the decision based on financial merits. However, you shouldn't have joined the military primarily for financial reasons and you shouldn't have stayed to 20 years primarily for financial reasons. Compared to the vast majority of Americans, military physicians are still very well-paid even if they decide they wish to serve our country for more than 20 years. Thank you for your service.
Agree? Disagree? Did you stay to 20? Longer? Comment below!
Hi WCI, Great post.
“The old adage that “There are 3 kinds of physicians in the military: In-Training, In-Payback, and In-Competent” holds some truth.”
– I would add to this “In-a-low-paying-specialty” and “In-the-special-operations-community”. Back when I was at Madigan Army Med Center, there were always more O-6 pediatricians than you could shake a stick at. There must have been 10+ of them, and there were only rare emergency physicians who were O-5’s, much less O-6’s (in similarly-sized/staffed departments). The pediatricians always seemed to be the most military/gung-ho soldiers there, and it’s no mystery why. To a lesser extent, this was true of FP as well. The military pays them almost as much as they could make in the civilian world, with less work/better schedule, and much less risk. It was always ironic to me to see how military the pediatricians were, despite a specialty being in a specialty which doesn’t seem to be the most operationally-relevant.
On the other hand, I knew of individuals across specialties who were the special-operations types, who would often disappear for months at a time in an unannounced manner, presumably to go looking for Osama or the like. These folk just lived for the military life, and probably could not imagine doing anything else.
Yes, the adage clearly isn’t universal. I had similar experiences to what you cite.
…but from a purely financial perspective, I can’t imagine any physician staying past 20 years, and turning down the 50% of base pay NOT to work, unless he/she truly is unable/unwilling to work elsewhere.
Decent on most accounts except the following: “and much less risk”
Family medicine is the most deployed specialty. Pediatrics I believe is the third or fourth most deployed. The drop in pediatrics as they get older has to do with specialization. All those 0-6 peds guys are specialists and they control the deployment assignments some what.
Over the last 15 years an FP doc could expect deploy 3 times in his first six years post residency. FP docs are usually deployed much farther forward than most other specialists that are often but not always deployed to major bases.
When I said risk, I meant in the malpractice/financial loss sense, not deployment. Obviously, deployments are one reason that most docs don’t stay in any longer than they have to.
Its pretty hard to make a case for going beyond 20 just on money alone. The additional factors one should consider are likely the following:
1. Will staying in allow me to make or retire as an 06 and is that status valuable to me personally besides just the money. Keep in mind that if staying as an 06, you may be required to take more of a command type job although not necessarily. If you want to avoid such jobs, sometimes its good to see how many other higher ranking people are at the post you are considering especially if those other folks are looking for promotion or to follow more of a command track (ie they actually want that job).
2. Do i prefer working my current type of job to working outside the military realizing i could work VA (some similarities), academic, Kaiser or the equivalent or private practice. There is more than one choice with different strengths/weaknesses.
3. Are there any factors that i cant really get outside the military. In particular ones being an assignment in hawaii, germany, or alaska.
4. Do i want to pursue a 2nd residency late in my career or additional fellowship experience. The option is even more palatable in the military if you are making the decision to stay 20 years and are at 14-15 since you get paid your normal pay while doing this training.
You cant make a good case for staying beyond 20 based on math likely even in the fields where military pay is closer to civilian pay.
agree
I agree with many of the points of the article and comments so far, especially for those on the typical path. However there are those of us with prior officer time where you’ll probably reach 20 before you make O-6. For example, I will have 20 years active duty by the time my USUHS commitment is up giving me a 60% retirement. Based on standard promotion timelines I will most likely be an O-5 and will only just be up for O-6. 60% of an O-5 retirement at 20 years is about $61,000 per year. In my case I would be 50 years old. Pick up O-6 and stick around for another six years and you get 75% at 26 years for about $95,000.
That $34,000 difference in retirement is worth about $850,000 as a purchased annuity based on the 4% “rule.” From a financial standpoint I would need my civilian salary to be equal to my military salary plus and extra $150,000 or so to make up for the lost retirement income during that six year period. This is highly unlikely in a primary care setting since the military pay for primary care is not far off from civilian pay. Retiring at 50 from the military I may still need to work to meet my income goals, however sticking around longer may yield a retirement that meets my income goals and I could retire completely once I leave the military at 56.
But as Rex said, picking up O-6 may require taking positions that I’m not interested in doing. And if you make O-6 the operational medicine gigs are less available to you. So if you are the type of doc that Dr. L describes there isn’t much benefit to making O-6 if your goal is stay in operational medicine. My case isn’t unique, but it isn’t the norm either.
As some of you know I am a family physician. Former Army. When I joined I was single, wanted to see the world, and was at least considering making it a career. As a family doctor we are paid close to equal in the military (I’ll say 80-95% depending on the situation).
My last duty station was Germany. I loved it there. But I couldn’t stay there or in the military for many reasons but the largest of which was skill erosion and lack of career choice. Let me tell you about my and my new partner’s choices.
Myself: I was stationed a larger base that only gets a new provider every two years or so. There were two 0-5’s looking to say around while their kids went through school so I had no option to become medical director (my goal) in the next 3-5 years. Not that it would matter because even if you wanted to do Admin full time you aren’t going to be selected for those spots unless you went to the military medical school or spent most of your career doing “unit medicine”. I was also the 2nd lowest ranked despite being a Major. I could expect that if I stayed there I would deploy within 4 months of resigning and again likely 2 years later. So my three year extension in Europe would result in 60% of that being spent in Afghanistan. If I left Europe we wanted to try to get to Colorado or San Antonio. In both locations I would have been facing the same career choices.
My Business Partner: Super smart guy. Great physician. Was assigned to Fort Drum (horrid) after residency. Deployed within 6 months for a year. Returned and after two months of doing clinic was assigned to doing medical discharge evaluations. Something he fought but was never reassigned from. In his four years since finishing residency he has maybe done a combined full year of actual patient care. Thankfully he can start slow in our practice to rebuild his skills. The Army wastes physicians careers doing admin.
If you want little choice in where you live, almost no choice in your career goals and duties, and to spend 30-50% of your family time away from your family than being a Family Doc in the military is right for you. I suspect that fits less than 5% though.
To add to my last post. Almost all of the military physicians I know that have stuck it out to 20 years have one of two things in common:
1). They were prior military service, military medical school, or West Point thus their commitment was 12-16 years anyways
2). They do very very little patient care and are okay with that. Meaning they want or chose a military career over a medical career.
i disagree about the need to go to the military med school if you want the admin track. After residency, I spent 8 years on active and didn’t even go to the adv school (received constr credit) and yet I had many opportunities to pursue an admin/command if I wanted to. Now I would have needed to start going to the additional schools for sure if I wanted any of that but there really aren’t that many people bucking for these spots as long as your not at a choice location. I could see how Germany might be a problem though since it is a choice location and some of these folks will try to take on that job in order to get or stay there. I don’t have the stats in front of me but its like over 90% leave after their commitment is up so most aren’t looking to fight you for the job.
Drum isn’t the worst spot. Im not saying its a great place but its no Polk.
Unfortunately the Army has really abused the primary care folks. They used to do it the PAs (likely still do) but since they want a physician’s name on so many things to avoid a stigma from the past, many FPs get stuck in jobs that aren’t so exciting. I imagine that at some level they feel they can get away with it since the pay is similar and I think the retention rate isn’t much different then it was before.
I agree that getting admin positions as a doc isn’t that tough. They were being thrown at me as an O-4 headed out the door. It might be different in lower paying specialties.
I’ll ask around, but it may have been specialty driven and location as well. I wanted to see patients but also wanted some degree of decision making. I don’t “like” admin, but I happen to be very good at it for some reason. There wasn’t anything being offered to me that wasn’t in some really poor locations or that offered almost no patient care. Alas I am happy with my decision but I think that with better management the Army could have probably kept both myself and my business partner…
i hear you about that but the truth is the military needs or at least thinks it needs people doing that less satisfying work you and your partner experienced. And they really arent losing out in the big picture of things for them. They seem to have enough of those types that will go with no patient care or will go to polk in order to advance up that side of the ladder. It definitely is much harder to find a great combination in Germany as an 04. From the military perspective, you already have a great location so they dont need to offer you any more and they are expecting you to leave regardless of what you might say you would do. Additionally in my view the military isnt strong on mentoring people into these positions. They sort of let happen what happens bc it hasnt broken the system. As a FP, you have a FP consultant who is trying to look out for you and your specialty. Unfortunately that person is so over worked just trying to fill slots for all the required deployed positions that he/she doesnt really have time to work with you. If you are in a smaller field, sometimes a different story.
Our choices are made- Husband stayed 20+ for Tricare which we considered more valuable than the pension (ACA may obviate that though) and then to 21 to make O-6 with higher ret pay- but when I did the math I hadn’t considered that that extra year cost him $40K or so in pension he could’ve gotten for sitting at home playing video games. But for an extra few K a year onward guess it was still worth it.
I am glad the TSP ends the absolute cliff- I got bupkis for my 7.3 years which would at least vest you in most companies’ pensons even back when I was military.
A pre 20 year (or 20 vs more) thought is that if you go civil service- VA etc- your military years can be used to buy into the FERS pension plan. So if VA is better than military for you, 5+ years there gets you a pension while you draw your military pension. Probably not as big an increase as 5 years more military, but it’d suck to work 22 years mil then only 4 years VA instead of 20 and 6 etc.
I am struggling with the question of whether or not to STAY till 20 — I will have 13 years creditable when I can choose to leave, and am an anesthesiologist (o-5) – so my total increase in pay in the part of the country in which I will live will be about 150k. Is is financially worth it to stay till 20 to get the pension?
No way I would get out at 13 years, even if I faced another deployment or two.
So is there a point at which PURELY FINANCIALLY it makes sense to stay till 20 years? I know this is hard to apply generally as physican salaries vary widely on the civilian side. In addition, the amount each person saves varies widely. But is there some general advice on this question?
Yes, but it is specialty dependent. The lower the salary, the sooner it makes sense to stay. The last time I ran the numbers the break even was after something like 6-8 years toward retirement. I’d be surprised if it ever made sense (from a purely financial perspective) to leave after 12 years.
What would your yearly pension amount be at 20 years? Take that number and see how much it would cost to buy a SPIA which pays the same amount. Or better yet, see how much principal you would need for a high-quality municipal bond portfolio with moderate duration that approximates the same after taxes. See how long it would take you to accumulate that amount, and that should help answer the question.
For me, the family strain of repeated, long deployments would have required an enormous financial incentive to make it worth considering staying. My understanding is also that the pension rate (as percentage of base pay) isn’t what it used to be, either. I probably would have gotten out at 13 but stayed at 15 or 16. (Emergency Medicine)
Thanks! It would be about 5700/mth
Thing left out of this calculation is reserve retirement. You have to wait until 60 to collect but not a bad option. In addition to reserve points you can get 35 pt/year just for doing CME and reserve also offers bonuses and promotion.
How do you get 35 pts per year for CME? I transferred from AD to National Guard and haven’t received such information. If getting 35 pts for CME is possible then essentially you don’t have to drill to get a good retirement year (added to 15 membership pts). Any info would be much appreciated.
I am eligible to retire from the USPHS Commissioned Corps next year at 20 years, as a general adult psychiatrist, with a rank of O4. In terms of staying past 20 years, I’ve been running the numbers, and simulations from the High 36 calculator, with an assumed life expectancy of 85 years, for each year I work past 20 years, I would get about $85K from my pension. And this is over and above my base pay, specialty bonuses, and other special pays. And I’m also contributing about 50% of my base pay to TSP, so each year it grows as well.
From the financial standpoint, I think it’s worth it to stay past 20 years. What do you think?
1 year left? Heck yea it’s worth it.
This is definitely a personal decision. I’m at 20yrs active service right now (O-3E, prior enlisted, Nurse Corps). I’m finishing up a military-funded Doctoral program with 5 yrs payback after I graduate as a Psych NP. My wife and I still see staying past 26 as a decent option. She’s Japanese, and our kids are bilingual. Rotating duty stations between CONUS and Japan lets our family make the best of both worlds (kids get to spend time with aunts/uncles/grandparents beyond a short visit). I do not want to retire in Japan, nor do I want a GS position there. 3 yrs is perfect before we look forward to spending some time CONUS again. Now, if my specialty were high-risk for deployments…that would be another story, and I’d be throwing up the peace sign ASAP.
Great discussions; thank you all for sharing.
Thanks for your service. O-3E with 20 at age 38 after the military pays for college is an awfully good option.