A reader writes:
I’ve left active duty, but I feel compelled to get a federal civil service job so that I can apply my active duty time toward a federal pension. Would it be a wiser financial move to get a “civilian” job that pays a higher salary for investing in a taxable account that would be worth more than a future civil-service pension, especially if we’re already covered by my spouse’s military pension and medical benefits?
I think there’s only one way to determine the math answer to this financial independence question: build a spreadsheet. It’ll include your potential civil-service income, the tax-deferred contributions to your civil-service Thrift Savings Plan, the employer match to that account, and the cost of “buying active duty time” by contributing even more of your own after-tax money to that account. (Remember to include your civil-service pension if you’re planning to work long enough to qualify for one.) There may be other civil-service benefits like a cost of living allowance (for expensive parts of the country) or a subsidy for using mass transit.
After you’ve calculated your total civil-service compensation then you can figure out how much you’d earn in a civilian job. It’s not just the civilian salary (with its employer’s match for its tax-deferred account). It would also include other benefits like an annual bonus or stock options, perquisites like a company car or travel upgrades (if you feel that travel is a benefit) and other details that might only be available from their human resources website.
If you’re really digging into the details then there would be the neighborhood, the commute, and the workplace environment. Do you have to relocate for the job? How are the area’s costs of living and their school systems (both high schools and state universities)? Could you telecommute or adjust your work schedule for days off? Is there a possibility of having to move around the country (or even around the world) with the corporation for career experience? (Assuming you feel that’s a good idea.) A civil-service job would presumably avoid overtime, but what would you be expected to accept from a civilian employer? All of these aspects can be reduced to an approximate benefit (or expense).
The spreadsheet analysis is tedious, but the civil-service numbers are available from the government websites and it’s part of the estimate of when you’ll reach financial independence. The civilian job compensation is more difficult to estimate, but if you’re going to interview with a company then you’d be researching these numbers anyway. Best of all, the process of chasing down the data forces you to thoroughly analyze all aspects of both jobs– you’ll probably come up with other criteria that you hadn’t even considered before you started building the spreadsheet.
When you’re finished, you’re ready to compare the total compensation of the civilian bridge career against the civil-service career (with its additional tax-deferred benefits for buying your active-duty time). Ideally, your human capital would be more richly rewarded by a civilian career since you also have a higher probability of being laid off. Ideally, the civil-service pension would have a higher present value for its cost of living adjustment and its higher reliability of paying out for the rest of your life.
While you’re working on the numbers, take a look at this excellent Early-Retirement.org post on buying your active duty time. That poster’s Gubmints site has more tips on that process, and he’s done the same in his personal career. He’s an excellent blogger who delivers great advice, and it’s well worth your time to check your civil-service math with him.
But that’s spreadsheet math. We’re human beings, and math is only a part of our quality of life.
At some point you’re going to find yourself shaking your head and saying “It’s only money.”The challenge is figuring out where a great job crosses the line on work-life balance. Can you control your hours? Are nights/weekends part of the office culture? Does telecommuting really work? Will the employer be generous with days off, or would you be more comfortable with the civil-service leave rules? Is travel a benefit or a burden? A civil-service job may be regarded as boring, with little opportunity for advancement or bonuses. How much excitement are you seeking?
Here’s a personal issue that I grapple with at every job offer: commitment. Entrepreneurs and corporations spend a lot of effort (and money) seeking high-quality employees, so of course, they’re thrilled to discover the skills that a military veteran brings to the task. However, there’s also their unspoken expectation that they won’t have to repeat this search every six months. If you accept an employer’s offer, then I believe that you’re obligated to give it your best effort for at least a year. Unless the nature of the job is substantially and deceptively different from the offer, then stick it out.
Committing yourself to this term (even if it’s just a private personal goal) ensures that you understand the obligation you’re about to accept, and it also forces you to analyze your priorities. Do you value control over your time more than an interesting career or a paycheck? Are you really cut out for joining a team, or would you be better forming your own entrepreneurial team– or even freelance contracting?
In my case, every time I read the surf forecast I realize that I value my time more highly than having to show up for work on a regular schedule. Not many corporations will cancel the plan of the day for a longboard meeting, no matter how epically gnarly the conditions may be.
The advantage of financial independence is that it gives you the control over your time, and a choice on working. You want to answer your career “What if?” questions now and have time to change your plans once or twice. (That gets a tad more difficult as we get older.) The key is to find your financial comfort level of “enough” and not get sucked into “just one more year” syndrome.
Whether it’s civil service or a civilian career, you’ll know how much (and for how long) you feel like using your skills. It may take you a couple of years to find your financial comfort zone– and to gain confidence that you can succeed in a civilian career. Once you prove those points and answer your “What if?”, then you’re ready to stop working. Best of all, you’ll have no problem figuring out what you want to do all day.
Will you work after military retirement?
Military experience to civilian careers
Dealing with “retiree guilt”
Starting your bridge career after the military
The transition to a bridge career
Retiring on multiple streams of income
Myths of military retirement and early retirement
Observations on a military transition
During retirement: The inevitable job offers
Guest Post Wednesday: “If You Are Starting a Small Business, Do Not Expect To Get Paid”
Making the leadership transition
“Top Ten Reasons to Never Retire”
Five reasons to NOT retire early