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 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.

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

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!