Computed value of military retirement and health care

[corn18]

I was always curious to know what a military COLA pension and health care are worth. I was playing around with the Flexible Retirement Planner (FRP) that I use as truth data for my own Monte Carlo sim. One feature of FRP that I use a lot is I enter all of my income and expenses and then use FRP to spit out how much is required for a particular probability of success (Ps). My current plan has a Ps of 98% in FRP, so I used that for my analysis.

Case 1: My case. Savings required = $1.9M

Case 2: Remove pension ($48k/year). Savings required = $3.3M. That would indicate that FRP values the COLA pension @ $1.4M.

Case 3: Add $16k / year of medical expenses. This represents what I think an ACA plan would cost us. I went onto healthcare.gov and got a quote for $1,000 / mo with a $16k deductible for my wife and me. This is with no subsidies. Savings required = $3.8M. So FRP values the free health care @ $0.5M.

That kindof freaked me out because it told me I would need $3.8M to retire if I didn't have the military retiree benefits. Then I was happy that I did.

Thought the other military retirees might find this interesting.

 

[pdsmith505]

I've been using the DoD supplied retirement calculator to get in the ballpark of what pension and TSP savings would be worth.

It takes into account expected annual pay/pension increases while in service and retired.

https://militarypay.defense.gov/Calculators/High-3-Calculator/

For my situation, based on exiting service at 20yrs as an O-5 (three years), using the 'old' high-three system, in 2029 and living till the ripe age of 85, the calculator spits out a total benefit of ~$5m and a "present value" of ~$2m. I figure the starting pension of ~$68k just to wake up was, at the very least, a nice cushion in life, and the ending pension of ~$186k was fantastic (even if it *should* be the same value compared to present dollars). This calculator really was the inspiration for kicking my butt into gear and contributing the maximum into TSP...

Keeping with my old contribution of 5%, assuming 10% returns prior to drawing out, and 5% once I start pulling at 65, my TSP would be worth ~$1m in "future value. Maxing out TSP makes that ~$4m in future value. Annual returns in the L2050 fund have done better than the 10% for the most part, so the difference is conservative, but definitely significant.

Access to TSP managed funds with their low rates (0.055% for the L2050 fund I'm in) and the extremely low effort to maintain them is a solid benefit of .mil retirement as well.

Retirement healthcare is definitely one of those perks that make a full career in the military though, especially if your spouse has existing conditions that you know will require quite a bit of health care.

 

[braumeister]

I was always curious to know what a military COLA pension and health care are worth. I was playing around with the Flexible Retirement Planner (FRP) that I use as truth data for my own Monte Carlo sim. One feature of FRP that I use a lot is I enter all of my income and expenses and then use FRP to spit out how much is required for a particular probability of success (Ps). My current plan has a Ps of 98% in FRP, so I used that for my analysis.

Case 1: My case. Savings required = $1.9M

Case 2: Remove pension ($48k/year). Savings required = $3.3M. That would indicate that FRP values the COLA pension @ $1.4M.

I think your method is reasonable. Using the same logic and running FIRECalc with it, my military pension's value is about 1.2M so in the same ballpark.

 

[Lawrencewendall]

FWIW, DW had kidney stones last month. Total bill for hospitalization, surgical removal and medication was >10k. My bill under Tricare was $156.

 

[corn18]

FWIW, DW had kidney stones last month. Total bill for hospitalization, surgical removal and medication was >10k. My bill under Tricare was $156.

The bills for my multiple heart attacks and then false alarm heart attacks were over $250k. I paid maybe $2,000. We are so blessed. That's why when someone thanks me for my service, I thank them for my healthcare.

 

[23isme]

The bills for my multiple heart attacks and then false alarm heart attacks were over $250k. I paid maybe $2,000. We are so blessed. That's why when someone thanks me for my service, I thank them for my healthcare.

Precisely. My inside voice is usually saying "and also thanks for the check on the 30th."

 

[ExFlyBoy5]

FWIW, DW had kidney stones last month. Total bill for hospitalization, surgical removal and medication was >10k. My bill under Tricare was $156.

2020 was the first year we *almost* hit the catastrophic cap of $3,000. It took my wife having a very complex spinal tumor removed by a physician that is not a network provider at a hospital that also isn't a network provider as well as 3 months of physical therapy, 36 sessions of proton radiation therapy, two myelograms and 6 MRIs. I couldn't imagine how much this would have cost on a "Cadillac" ACA plan. Never in a million years would I think that Tricare would be such a GREAT deal for hanging around the military for 20+ years.

We are so blessed. That's why when someone thanks me for my service, I thank them for my healthcare.

My last assignment was in the metro ATL area that didn't have many active duty folks and even fewer "zipper suited sun gods" (aka flyers) and I couldn't go anywhere in public without being thanked for my service. I always felt a little tinge about it, because it was a fantastic 22 years and the Uncle Sugar has spent A LOT of money on me with some great benefits...it was truly a privilege and I am so very thankful I was able to do it.

 

[Huston55]

Great thread topic! I'm a retired Reservist (6yrs Active + 17yrs Reserves) >60yo. Actually, I'm now 65yo so, TriCare is my secondary carrier, except for prescriptions, for which they are the primary insurer.

Using Corn's math, my retirement pay and Tricare have a NPV of ~$1.6M. I'm proud to have served and very grateful for the well deserved benefits.

 

[razztazz]

2020 was the first year we *almost* hit the catastrophic cap of $3,000. It took my wife having a very complex spinal tumor removed by a physician that is not a network provider at a hospital that also isn't a network provider as well as 3 months of physical therapy, 36 sessions of proton radiation therapy, two myelograms and 6 MRIs. I couldn't imagine how much this would have cost on a "Cadillac" ACA plan. Never in a million years would I think that Tricare would be such a GREAT deal for hanging around the military for 20+ years..

What a coincidence. I just about hit the out-of-pocket max but it took a serious heart attack, kidney stone removal surgery, and installation of a pacemaker & defibrillator. And that was just in a 5 month span.

 

[deserat]

I've been using the DoD supplied retirement calculator to get in the ballpark of what pension and TSP savings would be worth.

It takes into account expected annual pay/pension increases while in service and retired.

https://militarypay.defense.gov/Calculators/High-3-Calculator/

.....

Thank you for that link - I have an excel spreadsheet with the Reserve points to pension calculation which I update yearly with the latest base pay. I am a retired O6 30 year Reservist in the gray area with approximately 4600 points - the linked calculator says PV of my pension is ~$1.5M - and yes, as for many here, the TRICARE for retired personnel will probably be one of the best parts of that retirement benefit. This linked calculator aligns with my excel sheet.

I have maxed out TSP since I could contribute in 2001, so there's a nice cushion there. I also had a civilian 403B and now SEP IRA. As REWahoo has told me "just retire already!" Nevertheless, I went Reserve 4 years after college and *never * thought I would make O6, last 30 years and end up with a pretty decent pension for being part-time. As as ExFlyBoy has said, the experiences while on duty, while at times frustrating, have also been exciting, novel and fulfilling. Laslyt, I have not had to pay much for all of my education as the military picked up most of it (ROTC, GI Bill - my masters was a civilian scholarship).

 

[OAG]

Born 1940, Enlisted 1958 @ E1, Retired 1979 @ W4 21 yrs AD. I could never answer these two questions so I just kept tract of the Retirement number. It will reach $1 Million in a couple of months. Medical is a bit tricker and have never been able to estimate the dollar amount (just know it was large) and so glad we had it as 4 kids were growing up.

 

[ncbill]

This thread is why I'm trying to convince my kids to go career.

Even the one kid who plans to go Guard after undergrad will be able to buy Tricare Reserve Select health insurance which I'm sure will be cheaper than any employer-provided plan.

 

[corn18]

Just did the math for the COLA I have received since retiring in 2008. Average COLA was 1.78%. Average inflation was 1.8%. Life is good. We are so fortunate.