The military retirement system is one of the best retirement pension plans available in the United States. In a nutshell, if complete 20 years you will receive 50% of your salary in retirement, for the rest of your life. Two things even make this better, annual cost of living increases and you begin to draw the pension the day you retire. So if you retire at 38 years old, you will start drawing your pension then. If you complete 30 years, you will receive 75% of your salary in retirement. There is also a possibility you can get disability rating and payout, depending on how much psychological and physical damage your mind and body took over the years. The military is rough on the mind and body.
I wanted to examine how much I would need in a dividend portfolio in order to match a military retirement. Let’s take my friend T. He just retired as an E-8 after 20 years. Between his military retirement and disability rating, he is sitting at $6000 a month before taxes. At a 3% dividend payout ratio, he would $2.4 million invested into a dividend portfolio. Could he have invested $2.4 million over the course of 20 years?
My situation will be similar, however I plan on staying in the military longer, hopefully making it to 30 years. My military pension and disability should be close to $10,000. At a 3% dividend payout ratio, I would need $4 million invested into a dividend portfolio. I guess it could of been possible had I known what I know now.
The main disadvantage of military retirement is that it is not passed on to your heirs. So the wealth-building tool stops with my death and my wife’s’ death. My plan is to retire at 48, make $10,000 a month in retirement, and then get another $100,000 paying job. Therefore I am going to build my children’s dividend investment portfolio, so when they are 40 they have a $4-5 dividend portfolio. That is the power of generational thinking.
Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Leave a Reply