TurtleDO2012, I agree almost exactly with this line of thought, and indeed it's how I calculated the financial difference between staying in and getting out when my educational obligation was up. However, I have two large quibbles with your assumptions and math.

First, it assumes retirement as an O6. The days when nearly everyone could count on pinning on a silver eagle if they stayed for 20 are absolutely, completely, categorically, totally OVER. Only around 50% make O5 their first time in zone these days. That's not to say you can't or won't make O6; just that most medical corps officers who retire at 20 or 21 probably won't. I think this kind of math should be done conservatively, assuming an O5 retirement grade.

Second, I think you significantly overvalue the cash value of the pension -

I don't think this is the correct way to estimate the value of a military pension, though I'd be interested in how you arrived at that number and if you're doing any kind of inflation adjustment (which I think would be wrong for this specific purpose).

I also am not prepared to buy off on the notion that the lifetime healthcare benefit is worth $500K to $1 million ... for the simple reason that I think it'll actually be worth nothing, because I believe by the time I get there, the USA will have some form of nationalized healthcare for all and EVERYONE will have Tricare- or Medicare-caliber health insurance. IOW, I don't believe I'll gain anything, health-insurance-wise, over any random hobo on the street who didn't do 20 in the military.

But to get to the math ... most simply, if you just do the math for the 30-year payout in retirement, an O6/21y pension would be high-36 base pay ($9272 + 9272 + 9721 / 3) x .525 (21y high-36 retirement multiplier) x 12 months x 30 years = $1,780,695. But that's not quite right, too simplistic.
You could estimate a cash value, including inflation adjustments, by buying the right number of TIPS to match the pension payout, then using your psychic powers to time your death perfectly and die broke. Or you could use the CDC's life expectancy tables and buy enough TIPS to take you until the day you're scheduled to die, Logan's Run style. This is a stupid way to plan for retirement

but as an estimate of a pension's cash value it has a lot of merit.

But I think the most correct way to estimate the cash value of a pension on the date of retirement from the military (which is the figure you want, when making get-out vs stay-in calculations) is the lump sum CASH cost of an inflation indexed single premium immediate annuity (SPIA), because that's what military retirement pay is: an annuity, with some kind of inflation or cost of living adjustment, that pays for the rest of your life, and then has zero value when you die.

When I did the math, a bit over a year ago using the 2013 pay tables and a 2013 online SPIA quote, these are the numbers I came up with for my projected situation. I anticipate retiring as an O5, with high-36 pay (and note that's the >16, >18, >18 lines ... remember high-36 is NOT just three times >20 pay!), and a 25-year retirement multiplier (my USUHS kicker).

**$1,641,147** best estimate: A CPI-indexed SPIA for a 55-yo male paying $60,322/y (

$3676/y per $100,000 premium).

**$1,169,031** lower bound: A non-indexed SPIA for a 47-yo male paying $60,322/y (

$516/y per $10,000 premium).

**$2,050,948** upper bound: Buy TIPS, time my death perfectly, die broke. Provides an inflation-adjusted $60,322/y for 34 years.

In my case, I was eligible to get out at 12 years, so I divided the above $1.6 million by the 8 additional years needed to "vest" in the military pension, or $200,000 per year.

An O5 >12 to >18 under 4-year MSP in my specialty earns roughly $250-275K/year. Adding in a couple of tax benefits to being in the military (BAH, and not having to pay a 5-10% state income tax) brings that to $290-315K or so, plus the $200K of value each year "vests" in the pension, I estimated the value of my Navy pay during those final eight years at roughly $490-515K per year.

Plus some nebulous, very hard to estimate 'value' to the lifetime healthcare benefit for me and my wife. Which, as I noted above, may or may not really be worth anything. But it deserves some consideration.

Civilian jobs paying $500K can be had in my specialty (anesthesiology), but the outlook for them being around for the next 8 years isn't so rosy. The ones that will pay that tend to have some drawbacks ... high CRNA supervision/direction ratios, lots of call, a high hospital subsidy (dangerous to count on), high hours. I don't have any real networking connections (outside SDN

) so getting my foot into one of the rare >90th %ile MGMA groups seemed unlikely.

I did have a standing job offer with the group I moonlighted for the last few years, which would've paid something near $500K, but it was 1099 with no benefits. And I have some doubts about the group's long term stability, given that another group in the area was underbid by a management company and an all-MD group suddenly found itself unemployed.

So for me, staying in was a relatively easy financial choice.

This also factored into my decision.

At some point in the next few years, I'll spend a year as a fellow, getting paid the above ~$500K-ish equivalent salary to be a fellow.

I also transferred my GI Bill benefits to my kids. I won't know how much that will be worth until one of my kids finishes using up the benefit, but a safe estimate is over $100K. (In fairness, the 4-year commitment to transfer benefits was up before my ADSO, so I shouldn't include that in the stay-or-go math. It may apply to someone else's math though.)