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NetworthIQ and the Military

I’ll be honest, I was shocked when I loaded my financial balances on NetworthIQ and was ranked at the top of the list for all military members. I really expected to be in the middle. Instead I was about $30,000 above the next highest amount.

Of course, I was also the oldest registered military member to load a profile. If you look at the statistics, just 12% of the public profiles belong to members between 40-44, and there are just 85 military profiles.

So, instead of patting myself on the back for being ahead of everyone else, I think all those other members will be way ahead of me when they get to be 42 years old. They have the focus and the tools to become financially independent when I am out looking for another job.

Good luck to all those other 84 families!

Discussion

2 thoughts on “NetworthIQ and the Military

  1. My top spot was recently taken by another military member–with a great understanding of all this financial stuff. Just take a look as his blog! I’ve added it to my blog list.I was glad to see that someone was doing better than me. It’s also a great incentive to continue to save, reduce debt, and do the best I can for me and my family.

    Posted by Lee | April 27, 2008, 4:47 am
  2. I wrote this based on your comment and am placing it on my blog as well. I hope it makes you feel a bit better and helps you think about apples to apples.Pension, Pension, Who’s got the Pension? I came across one of NetworthIQ’s military employed individuals lamenting about how they were the top of all the military personnel utilizing the site but far below many of the private sector posters. He noted how far behind he felt on the whole net worth game than us other side of the fence working stiffs. This got me thinking about net worth and the value of guaranteed cash flow in retirement. First a few points to make:1). Any individual who chooses a career in the military is most likely, and at the end of it all sacrificing a part of their ability to really have a huge net worth and live an over the top jet set life. People in the military do truly sacrifice for our nation.2). I believe being in the military is an honorable profession, regardless of who the commander in chief is or our issue of the day.3). Base pay is simply low for almost all levels in the military and the environment is not conducive to long term savings. In some locations, entry level ranks with children are actually below the poverty level of the bases host state. This may all sound a bit depressing to a newly enlisted member of our military but fear not, all is not lost for you and the game of winning in retirement. Here are some of the points that make a career in the service a potential huge life long win. This same logic applies to many government jobs from teaching to State to Federal careers.Why are we monitoring net worth anyway? For most, including myself, I think it’s to assure that we will not run out of money in retirement before we die. Will we have enough to drink Coronas in Mexico, spoil the bejesus out of our grandkids? Visit Europe for six months or simply stay in our homes and pay for health care until our last day? To this end, net worth calculating doesn’t really address the ultimate need which is creating an income stream that will last up till that final breath of life. Some people may wish to leave a legacy as well but for most it’s all about making it to the end game, if not in style, at least with dignity.Here we go, enter the military. If (and this is a big if), you don’t get killed in the line of duty, don’t die of cancer, don’t burn out, don’t F*$%& up and get booted out, and don’t mouth off and tell everyone who is even remotely near you how screwed up the service is, you get a big – massive – amazing carrot at the end of it all. You get a real pension at 60 (for those who are in 20 years inclusive of reserve and guard service and damn well close to free medical for life. If you get 20 years in full time, you get the pension starting when you leave service. That means if you are young, dumb, and well you know; and start your career from some small and what I call “teeth optional” community at the age of 18 and you apply yourself, you could have a pension starting at 38 years of age and as a bonus be of a pretty poor location to start off in. . All I can say is, OH!!! MY!!! GOD!!!! No one gets that on the private side. But that’s not all folks. The military also provides fairly good to great retiree medical. That’s right, full medical insurance until you die. They also get VA nursing care if required, a killer prescription plan, and a host of other small retirement medical perks. It can be argued that care is not always consistent but remember it’s pretty consistent when compared with the private sector; consistently bupkiss. Other benefits for retirees or active include on based purchasing programs, no state tax on base purchases, good to great lodging available from Hawaii to Italy and perhaps some day beautiful downtown Baghdad  Base housing can be pretty amazing and a screaming deal. Think a clean Embassy Suites just a little more basic and a lot cheaper. If you’re game to adventure sometimes you can even hop a flight some place for next to nothing or nothing at all. Active duty members also get other things that take from our monthly budgets. These include free gym and club memberships, subsidized housing (on and off base- Except for Gates, I guess. He pays some $6500 a month), cheaper fuel, tons of support systems, and perhaps even use to a vehicle or two. I could go on forever but there are real tangible benefits to being in the service.One other point, many of the best members of the military move up in rank, pay and responsibility until that final retirement date. The next day, what do they do? Show up the next day in a contracted civilian job at the same desk, in the same office, with a bump in pay but now they are no longer in the service but have gone “government civilian”. Now they pack on another bunch of years and guess what? They get another pension.So, let’s compare with NetworthIQ people and do some funny but real math. Let’s level the field and goose those military guys to a level of assets that can spin off an inflation adjusted pension, inflation adjusted retiree medical, and throw in a few perks per year. I would like to note that to get some of these retirement benefits you have to know how to play the game. Here we go. If you had a Fixed Annuity that began paying out at age 60 and then adjusted its payment up each year with a COLA, you’d have to have an annuity geared to only pay out about 4.0% per year. This would allow your principal to grow enough that the insurance company providing the pension could offer you an increasing payment and allow for them to also turn a profit (damn capitalists). So if you are a mid level officer who spent most of his/her career in the reserves you would probably be looking at a first year payout of around $20,000. If we then divide this by 0.04 (See above 4.0%) number. That would mean your present value of this annuity would come in at a cool half a million. Now let’s look at if you did your whole gig at full time service. This person gets to start receiving a pension immediately. They get more money. Let’s say $60,000 per year adjusted by COLA for life!!! Such an annuity would start out requiring far more money or to look at it another way; its disbursement rate would be lower at closer to 2.75% for a mid 40ish retiree. So $60,000 would require an immediate pay annuity north of $2 million dollars. You could argue for stock market returns for a variable annuity would decrease the required funding but that’s not fair. A military retiree pension is backed by the full force or the U.S. government. A variable annuity is not. If we look at medical retirement benefits, while the number is not as staggering, it’s fair to assume the funds needed in today’s dollars for full medical retirement benefits is substantially more than $250,000. Long term care cost about $100,000 for a couple in retirement. Let’s add this up for a full time serviceman who retires an upper middle level officer. Pension Value (Present Value) $2,000,000 Medical Benefits Value (Present) $100,000 VA Care $100,000Wow, congratulations all you military people. Your true Net Worth just went up a cool couple of million plus. Of course, you could always say, “Hey wait minute, private firms provide pensions too” I answer, “Yah, sure, you just keep thinking that”. Practically no private employer offers a COLA adjusted pensions and every day a new employer nixes or does radical surgery on its pension plan. I’d call it more a lobotomy than surgery.I could go on forever on this subject and please don’t go over analyzing the numbers. I didn’t go on a provided chart but just my dealings with military retirees both full time careerists and weekend warriors. The end result is the same though. Your non pay military benefits must be taken seriously. They hold most of the financial value of being in the service and most programs are designed to benefit long term personnel. I pity the fool who goes in to the service and then voluntarily bails in year 17. That is moronic. The one thing that exists, whether you are private or military is we should all be in the game to win it. In the military, this quote gets bantered around a lot. “It’s up or out”. If you are in the military that means you have to keep going to school, look for mentors, take career risk, suck it up to an idiot next in command, and just out work your competition. This sounds a lot like a civilian job doesn’t it?Finally, my family has a small military pension coming when the Mrs. Hits 60. Yep, I’m the civilian and she’s the officer. My understanding here is greatly courtesy of her 20 years of service and we will be lucky that our medical costs will be paid by Uncle Sam. She had another much more lucrative career in tandem with her military years. We respect her experience and the service as well as her fathers 37 years of dedication; 20 of which were at the rank of Chief Master Sergeant. (A pretty amazing statistic to banter around). He passed away recently and no less than 3 Generals and 5 Colonels attended.

    Posted by StealthBucks | May 4, 2008, 10:42 pm

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