April 2

How to Calculate the Present Value of Military Pension Benefits

Why Calculate Present Value of Military Pension?

Being able to calculate the present value of military pension is extremely important when planning for post-military life.  Especially if you are concerned with protecting the full value of your pension.  Most don't consider this until they discover the high costs of the Survivor Benefit Plan (SBP).  

On the DFAS website you can find many version of a retirement calculator with military pension value results.  

However the much more useful and slightly complicated calculators were developed by the DOD department of the actuary.  Why is that important?

Because they track all the number about when people die! So they do the predictive models trying to determine the life expectancy of individuals.  Kinda of freaky, right? We have other videos looking at the probability of receiving the Survivor Benefit Plan using these calculators.

What is 20 year of service worth?

In this video we discuss why it's important to calculate the present value of military pension. Have you ever thought about it that way?  

Let's put it this way.  You've served twenty or more years for your country. The tax-payer's are generous enough to pay you a monthly pension. Starting on the day you leave the military!  That could be years of tax-payer funded benefits!

That, is a tremendous amount of value.  And why it's important that you understand how to do a present value analysis of your pension.  

For example:

  • Army LTC (O5) retiring at age 43 after 21 years in service.  
  • Annual military retirement pension will be $60,000
  • His life expectancy is until age 83.  
  • That's 40 years of payments totaling more than $3 Million!

If he was using his own money to receive that level of income for 40 years, he would have need to save $1.6 Million by the time he left the Army.  That... is the present value of military pension. 

Do most Career Military realize that? Do the military spouses?

You should, and the retirement calculator with military pension can show you how. 

Because we all know the Government doesn't properly show they how to protect that asset and instead convinces you to buy into the costs of the Survivor Benefit Plan (SBP) and VGLI.  

value of military pension

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