Hi everyone--I have a few quick questions for any of the military folks out there regarding a National Guard retirement. I'm sitting around 9.5 years in the Army National Guard with around 1900 retirement points. I have a couple months left where I have to make the decision to either resign, transfer to the IRR, or stay in the drilling reserves (which isn't really an option.)
Question #1: Is it worth it to stay in the IRR for 10-years to earn a military retirement?
I get this question a lot, and it's an intensely personal decision. I think you may also be misinformed on a couple of details, and I'll highlight those below, but it might not affect your decision.
I'm not taking a particular stand on this issue-- just reporting the news with a little analysis. One summary would be that you know you've reached your Guard work/life balance when your family, your civilian employer, and your military unit are all equally pissed off at you. (It's a lot funnier when you're not facing an IRR decision.) However that punchline also indicates that the military is just one aspect of the problem, and other resolutions would be changing your employer-- or your family. Hold on to that thought for a moment.
I get a lot of reader e-mails, and the #1 regret of my older readers is that they wish they had some sort of military pension. "If I had just stuck around a little longer to get 20 good years"... The #2 regret is that they miss the military camaraderie. It's who you are, and if you have to sacrifice that (for family or employer priorities) then you risk a lot of unhappiness or have to morph into someone else.
The family issues are usually caregiving or a special-needs child. I understand that, and the best option in those situations is going into the IRR. But if the issue is a spouse ultimatum (or, in some cases, an ex-spouse + child custody) then your sacrifice (leaving the military) might not resolve the spouse ultimatum. Ideally a more thorough discussion (or even counseling) would help bring clarity to that problem. However every personal family situation is different.
I also know veterans who go back into (or wish they could go back into) the service. I think the best person to consult on this is Ryan Guina of TheMilitaryWallet.com. He left the Air Force in 2006 (for very good reasons) but rejoined the Air National Guard a couple years ago. He missed the camaraderie and he also wanted to assure his entrepreneurial financial independence with a pension at age 60. He needed an age waiver and a significant medical exam, and it took him over a year to process the waivers. But he's much happier in the ANG, and his military career is taking off again. Please e-mail him (Ryan at TheMilitaryWallet.com) before you make your decision.
On the employer side: if your civilian employer is not accommodating your Guard career, then find a different employer. Simple as that. Your only alternative is to give up part of who you are in the hopes that the corporate machine will uphold their end of the employment bargain. I doubt that they will, and then you'd end up changing employers anyway. If you're not at a military-friendly employer then your employer is also not employee-friendly, and that relationship will turn sour even if you can get your good year through IRR points.
Let me share what I know about the IRR, and you can decide whether you're getting good info from the Guard.
Maybe the question is simpler than I'm making it, but for this to work I would need 50 retirement points a year for the next 10 years, something that could be accomplished through 150-hours of distance learning annually.
10 years * 50 points/year = 500 points
500 points * 3 hours DL/point = 1500 hours of DL in the next 10 years
Do you get 15 participation points for reaching 35 points of correspondence courses in the IRR? I'm more familiar with the Navy and the ANG, and those services will top you off with an additional 15 points when you reach your 35 points. That makes it a little easier to get a good year.
However correspondence courses are not a panacea. Eddie at Gubmints.com has pointed out several times that the Navy has greatly restricted the courses which can be used for IRR points, and (even worse) the Navy Reserve IRR members no longer have CACs. I don't know if this applies to the Guard, but read his post and consider whether you could handle this in the Guard IRR:
http://gubmints.com/2016/02/08/navy-irr-survival-guide-for-2016/#.VsjJALQrJhEHe has at least one related-post link at the bottom, and I'd search his site for keywords like "IRR" and "Individual".
The conclusion is that getting to 50 points (or 35 points) per year in the IRR may be a lot harder than it seems. If you don't have a CAC, are you able to drive to a Guard armory where you can log into a DoD system without a CAC? Will you set aside the time in your life to make that happen? Will the Guard cut back on the "authorized" courses to the point where you can no longer reach 500 points (or 350 points)?
As a CPT, I earn $0.481/month/point, so at I minimum I could collect $1154/month at age 60 assuming the rates don't change in the next 10-years. Assuming I live for 30-years into retirement, I'll collect approximately $415.5k.
That "pennies per point" pension assumption is flawed. If you're making a financial choice (instead of a family/employer decision) then do yourself a favor and use a better formula. Once you have more accurate numbers then that may help reframe the other issues in the discussion.
I'd suggest using your current rank in the current year's pay tables. (If you go to the IRR then you're probably at your terminal rank.) The federal law of the military Reserve/Guard pension system says that if you "retire awaiting pay" (gray area) then your longevity accrues until age 60 just as though you were still on active duty. In other words you'll be at the maximum O-3 column of the pay tables that are in effect when you turn age 60.
First, that means you can hope today's military pay keeps up with inflation and the Employer Cost Index. It's a gross approximation, but it lets you use today's pay tables to estimate your pension amount at age 60.
Second, you'll use the maximum pay of your terminal rank in your pension calculation. Today's maximum O-3 pay of $6448.20/month is over 10% higher than your current $5818.80/month base pay. Does that help with the IRR choice?
If you retired at 2400 points then your pension (at age 60, in today's dollars) would be roughly:
2400 / 360 * 2.5% x $6448.20 = $1074/month. If you wanted to factor in the High-Three average of the highest 36 months of the pay table (when you're ages 57-59) then take ~96% of that amount or lowball it at $1030/month.
Would you take $1030/month at age 60 as the payoff for earning 20 good years? What if you kept drilling instead, and achieved up to 75 points per year? That'd be 750 points instead of 500, and 2650 instead of 2400, and $1139/month instead of $1030/month.
If you wanted an inflation-adjusted annuity today that generated $1030/month ($12K/year) at age 60 then you could buy I bonds yielding 1.64%. That portfolio would cost over $750K. That's the present value of the deferred compensation you're giving up by leaving the Guard without reaching 20 good years. If you stayed drilling (and reached 2650 points) then your $1139/month would cost $830K.
I'd prioritize family over money, but I'd certainly bring up the $$ during the spouse discussion. And unless you have a great guarantee of employment continuity, I'd put a higher priority on the chance to earn a present value of $750K in the military than from a civilian employer.
Then, there is always the possibly of a mobilization. If they were to call me up right now I would just walk away (as I have no commitment). I'm not sure how I'd feel about it five-years from now. In any case, If I make the choice not to mobilize when called, I'll be discharged and lose and prospect of retirement. If we (the US) stays relative war-free for the next 10-years, I have nothing to worry about and can complete the IRR requirement without issue.
That's a definite risk, and during the last decade a lot of soldiers were mobilized from the IRR. Your risk would hopefully be relatively remote, but that depends on your skills.
The only way to drive that risk to zero is to resign from the Guard. Not IRR, and not retired awaiting pay, but resign and be discharged.
Question #2: Is it ever a bad idea to just walk away?
Everyone that I work with in the Army thinks it's crazy to stop at the 10-year mark and they would all stay until retirement, no questions asked. I'm pretty fed up with everything about and definitely need a break. Figuring out whether that break is a complete disconnect from the service (resigning my commission) or just a stint in the IRR.
After this post, I hope everyone else appreciates the analysis that goes into the decision. Walking away may still be the right decision, especially for caregivers and special-needs kids.
In general the better choice has been to keep drilling and only go to the IRR for a few years, if at all.
I'd lose my 1900 retirement points and my only retirement benefit would be the $20,000 or so I have in the TSP.
If you go into federal civil service (and some states) then you can use your years of military service to buy extra pension credits and also accrue vacation time at a higher rate. See Gubmints.com again for the details:
http://gubmints.com/2013/03/26/gubmints-comprehensive-military-service-credit-deposit-guide/#.VsjRx7QrJhEAgain, if you end up in civil service as a bridge career, contact Eddie to walk you through the details. He's happy to help and he gets the question every week.
By the way, I'd leave your money in the TSP. Try not to touch it until age 59.5, or leave it in the TSP until the last minute before you convert a traditional TSP account into a Roth IRA.
PS--My plan 3 was to transfer to the Air National Guard and finish up there, but the prospect of AF flight school at age 30 wasn't exactly appealing.
Does this line of thought seem a little... limiting? Especially compared to 10 years of IRR hell or just walking away from the military altogether?
You may have already verified that the ANG wants you to go through flight school. But even if that's the case, you're an O-3 with far more skills than just maintaining continuity of flight. Your first choice might be to find a similar O-3 billet in a different Guard armory, even if you have to commute for drills. Without more details on your situation, I can't tell whether that's a good idea.
But going into the nearest ANG unit with your O-3 skills might qualify you for quite a few billets that do not involve flight school. And if Ryan Guina can do switch military specialties at age 35 with a waiver, I'm pretty sure you can hack it at age 30.
Switching military careers certainly beats ultimatums from employers & families... or even worse, switching them.
