Then how does that affect the rest of the math?
Hubby receives VA disability, as well as retirement pension from the USMC.
Right now he works for the Dept of Defense and is 12 years from retirement (he would be 57) we are trying to figure out if that third income stream is worth the next 12 years of his life.
We are about 3 1/2 years to debt free.
Thoughts?
As another poster mentioned, the pension reduces the amount of income that you'll need from savings. Not only that, but the military pension's CPI COLA will generally keep up with your spending inflation, so you'll be hedged against inflation for the rest of his life (and yours, too, if you took SBP).
But wait, there's more. A U.S. military pension is probably pretty likely to keep paying out, and it's the world's most reliable inflation-adjusted annuity. That means you can afford to invest more of your savings in equities or rental real estate or more volatile asset classes.
Still more! Many VA disability recipients find that the degree of their disability rises with age. As your spouse ages, more of his pension may be tax-free, saving you more on taxes. I hesitate to call this a "benefit" because it's surely been paid for.
Having said that, I'm not sure what you mean by "worth it". If your spouse enjoys work then he might as well keep doing it. When you reach financial independence then he has a choice to stop working-- have you figured out when that happens? At that point he can decide whether to stick around for more money than you need, or whether to enjoy life with "enough".
In our case, my military pension handles most of our spending. We're drawing down our investments at less than a 4% rate, so our investment portfolio is over 90% in equities. We keep two years' expenses in cash to ride out bear markets (since 2002, so far so good). We also have a mortgage on our primary residence because it costs less than the equities are earning, but that's a highly individual decision that requires being able to sleep comfortably at night.
This is my situation. I'm eligible to receive a fairly generous retirement from the Navy which makes the math for FI interesting. I'm planning to retire from the Navy and live on less than my pension with the goal of not touching my investments.
Again, if you enjoy what you're doing then I'd keep doing it. But once you're over 20, even the Navy has a nasty reputation of pushing your tolerance limits. You're the one who can decide whether the extra stress is worth the price, but I think when you're 5-10 years away from a projected retirement date then it's awfully difficult to expect that you'll still feel as motivated four years later. If you're already eligible for a pension then I'd have a hard time planning to stick around longer than the end of the next service obligation.
More food for thought:
http://the-military-guide.com/2010/10/11/when-should-you-stop-working/http://the-military-guide.com/2010/10/06/the-biggest-benefits-of-a-military-retirement/http://the-military-guide.com/2010/12/30/tailor-your-investments-to-your-military-pay-and-your-pension/http://the-military-guide.com/2011/03/17/present-value-estimate-of-a-military-pension/http://the-military-guide.com/2011/03/21/asset-allocation-considerations-for-a-military-pension/http://the-military-guide.com/2011/03/23/asset-allocation-considerations-for-a-military-pension-part-2/http://the-military-guide.com/2011/03/24/asset-allocation-considerations-for-a-military-pension-part-3-of-3/
