The military retirement system allows people to jump from the lower and middle classes to the upper class. A person with a pension at an early age has the ability to “double dip” as they work a second job.
However, a strong argument exists for using your retirement, pension, and benefits to build an empire. You can do this by retiring early and focusing on growing your pool of assets.
When looking to fully retire early, the GI Bill can provide a stable income while only taking a little time to conduct your classes. It can serve as “a rock in a hard place” as you figure out what retirement looks like for you.
Living in 1,000 Square Feet as a Family of Four
The case for early retirement. My wife and I retired early after I finished 24 years in the Marine Corps. My first thought was to double dip and get a second job; however, I decided against that plan.
Before we go further, let’s define an asset. An asset is anything that puts money into your pocket (thank Robert Kiyosaki for this definition) and you can pass on to someone else.
Considering this definition, your military retirement and a new job are not assets. Once you leave this Earth, your new job won’t magically jump to your kids.
Life is about building a base of assets to assist your kids and grandkids. When you retire early, you put your entire focus on the next generation. Conversely, when people decide to work after the military, they primarily focus on things they can acquire (pools, cars, boats, RVs, motorcycles, vacations, etc.).
Becoming an Entrepreneur #7: Generating Leads
How does early retirement look? The most important part of retiring early is budgeting long before you reach 20 years in the military. I think most retirees (retiring after 2023) will earn $7,000/month in income with disability and their pension.
Therefore, families should start living on $6,000/month of revenue around the 15-year mark. They must make tough choices along the way, including children’s sports, private school, housing locations, and vacation costs.
When the final bell sounds at 20 years, you should already have a history of living on less. Once you get your pension and disability checks, you can fully retire on that income—now it’s time to make your family rich.
Let’s look at my situation. We make $8,500/month from my pension and disability—a lot of money. If this is not enough money for you to live, you may need to address some spending habits.
If you ever want to see if your budget needs tweaking, look towards a community of current retirees. They are living on much less.
The 401K Lie: Saving 10% is a Fool’s Errand
My wife and I can live entirely on our military pension; however, this is not an asset for our kids. We need to continue to grow our wealth in retirement—here’s how we do it.
- Dividends. The most crucial part of your early retirement is building multiple dividend portfolios. Dividends help you build wealth, fund retirement, and grow your net worth. Currently, we earn about $1,500/month in dividends.
- Rental Income. Your kids need to live somewhere. We need to purchase rental homes that our kids can move into later. We own three homes and collect a total of $800/month in rent.
- Writing books. I am building a book business by releasing my books to the world. Royalties are an asset because my kids will receive them for 70 years after my death. I currently earn about $200/month in royalties.
- Options Trading. Trading options is perhaps one of the highest-paid professions that anyone can do at any time. This is the quintessential way to make money with your money, but it isn’t easy. I can pass this knowledge to my kids so they can produce huge returns early in life. I currently make about $1,500/month in options.
- GI Bill. I decided to go to the online-only version of college because I have a lot going on at home. I use my revenue from the GI Bill to invest in more dividend-paying stocks. I earn $1,000/month in GI Bill income.
As you can see, my wife and I bring in much more than our retirement income. But all of this starts by living comfortably on our $8,500/month retirement income. From there, we can use the additional $5,000 in passive income to invest in more dividends, properties, or businesses.
Think of Preferred Shares as Gift Cards
You can work a second job if you don’t want to build a passive income empire. Most retirees can earn over $80,000 annually, if not much higher. You can use the entire second income to fund your dividend portfolio. You can easily have a $1 million dividend portfolio in seven to ten years.
Using the GI Bill as an income stream. As you see from the above breakdown of my passive income, the GI Bill is part of a larger financial scheme.
If you don’t have this financial scheme yet, I recommend not using the GI Bill. Let’s say you retire with $8,000/month in retirement income, but your family spends $10,000 a month.
You could potentially retire and use the GI Bill to supplement yourself in early retirement. However, the more significant issue is your spending habits.
Renting Rooms to Family Members
To solve your spending, you would need to do something drastic. Your largest expense is probably your housing situation.
Are you willing to move your family to your parents to alleviate the financial burden? Can you move to lower a cost of living area such as Alabama or Mississippi?
Before you use your GI Bill, you want to live entirely on your retirement income. This helps you put your wants and needs into perspective.
Once you live comfortably on your pension, you can add the GI Bill as an income stream. If you live in an expensive area, the GI Bill can add a significant chunk of income (over $3,000/month) to your dividend portfolio.
How to Create, Buy, & Build Assets
Why wait until you live under your pension amount? There are substantial tax consequences to retiring early. The government does not tax your income with Social Security and Medicare. Additionally, your VA disability is a tax-free entitlement.
The GI Bill is also a tax-free entitlement that can generate income under the radar. You will have 36 months of tax-free income—you don’t want to waste these months.
If you are struggling financially, you may consume your GI Bill before understanding its power. Trust me; getting your financial house in order is a much better game plan than operating randomly.
The benefits of having time. If you retire early, you will have the most important resource on Earth—time. This gives you time to build your empire.
When you work, you use brute force (money) to make things happen while staying afloat. If you are two parents working, you lose more money on little things.
When you have time, you can save money in many ways. You can shop for better insurance, sell unwanted items, look at college costs, and have family financial meetings.
In short, you make less, but your accounts will be far happier when you stop working. We let so much money slip out of our pockets while in the workforce.
We don’t want to waste our tax-free GI Bill benefits when we have this slippage. We want to be intentional about maximizing all of our tax-free benefits at once.
Conclusion. What if your spouse or kids want to use the GI Bill? Even better. As long as they live at home, there is still more income in the household—while freeing up your time.
So the steps to retiring early are 1) start living on a tight budget at the 15-year mark, 2) retire and ensure you are living comfortably, and 3) draw the GI Bill to help purchase more assets (dividends, royalties, business, rentals).
Why Rents Will Continue to Rise
This method does sound busier than just going to work, but it has one major advantage over going to work. It gives you the mindset of an entrepreneur.
I am running my household as a business. My pension is my budget. I can generate more income than my expenses, which companies call profit.
I can use these profits to reinvest in the business (my family). So, my business keeps growing while my expenses stay the same; this is how we become rich.
The best part is that we can pass assets and mindset to our kids. Do you want your kids to work 50 to 70 hours a week as they grind to purchase their first home?
Or do you want them to work 20 hours a week while trading options, running a car rental business, and managing two properties?
We decide what we pass along to our kids. We can leverage our pension and GI Bill to make a better life for our future generations. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. 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. All Right Reserved Military Family Investing
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