Starting to question military pay < civilian pay

[Volatile]

I am currently paying back my Air Force hpsp obligation (owe 4 years for a 4yr hpsp scholarship, I was civilian deferred for anesthesiology). My question is why do so many speak poorly about earning potential in the military? I am actually feeling the exact opposite, my currently salary is much higher than I was expecting (I suppose due to some of it being tax free), and will continue to increase in the future with increases in rank, time in, and retention/ board pay bonuses that I am not currently entitled to. I also used a retirement calculator, looks like retirement may be worth close to ~8million (used 7% for my tsp growth). The pension alone is worth over 5mil (if I live until 90yo) In order to create that same pension in 20years I would have to save >$250k a year. Im actually having a tough time calculating how I could even create that same earning potential as a civilian anesthesiologist in 20years. I also love being in the military so far, I have always wanted to join (I know I have not been in long so I suppose that may change). Any thoughts? Seems like a good deal to me.

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[turkish]

Lots of hopeful assumptions here.

Is your TSP making 7% right now?

4% of males live to age 90. (Actuarial Life Table) Probably fewer vets do.

I am a civilian Xologist. My wife is a civilian in the same field. She makes between 2-3x what I do depending on where we live, both working five days a week. Doing so for 20 years gives her a huge jump on me when compounding interest is factored in, even with the retirement.

It can be a decent deal, depending on your specialty. Unfortunately, those specialties for whom it is a good deal to stay in usually get deployed much more often.

 

[militaryPHYS]

Ah yes, the age old question. What is the TRUE value of military service and its accompanying benefits and how does it compare to a comparable civilian.

The numbers are easy to calculate (sort of) but come with a lot of assumptions. If the differences aren't worth it financially then don't stay in. If you are OK with what you'll be making as a military doc then consider staying in. The problem is when will you hit your "saturation point" of military service?! This is the x-factor that nobody really knows. A lot of people get fed up with the well discussed pitfalls of MilMed fairly early and this is the driving force for them leaving...not the financial difference. Some don't factor in taxes, loan repayment, military benefits (post-9/11 for kids), pensions, multi-year bonus opportunities etc. and get out because they think it is a slam dunk financially. The other thing that is impossible to put a number on is LIFESTYLE (working hours, call, deployments).

I'm with you...the pay gap is closing (nearly completely closed for most primary care specialties) but I think it will only continue to close across the board as insurance companies and administrators continue to blame physicians for the high cost of health care.

Bottom line is I think the societal assumption that ALL Military Physicians make less than civilians is false. But just like everything it all depends on what your specific situation is and you need a good spreadsheet that each person can easily input their own numbers and modify. Waiting on clearance to publish mine...

 

[DD214_DOC]

I did the math years ago before signing for HPSP. During that time, I calculated every specialty has a, "break even", point. This is the point at which the money saved due to the HPSP benefits and the higher-income than one's civilian counterparts during training becomes equal to the disparity in income to civilian counterparts after training. For my specialty, this point happened to be exactly the same as my post-residency obligation. Taking the math further to see what happens if I stay in beyond my initial obligation, it was very obvious I lose money every year that can never be offset by TSP or anything similar.

Although financial reasons isn't the only reason I'm getting out at my, "break even", point, it's a big one. It's hard to justify being subjected to all the military nonsense when one's functionally paying money to enjoy it.

 

[Gastrapathy]

I’ve said before that i lost money in an absolute sense by getting out at 13 years.* What I gained was the opportunity to take my dream job, professional satisfaction, professional development and happiness.

*this may not be true anymore, having a much higher income now meant being able to invest and buy real estate in the bull market of the past 5 years.

 

[haujun]

5 days locum pay is equivalent to what I make in one month in the military.
3.5 years to go before retirement and I get to live where I want and practice way I want. This is priceless

 

[j4pac]

There is some intrinsic value of military service. For the large part...military docs are overwhelmingly seen in a positive light for both medical training and employment.

I’m now at my residency of choice in my specialty of choice with literally endless opportunities regarding either continued training or employment. What is the monetary value in that?

Not everyone has had my experience, but I don’t think that it’s uncommon. The military does close certain doors for you, but could potentially open others. I don’t think that the military is ever worth it for the money alone, but I certainly wouldn’t see the financial loss as a deterrent if it’s something you want to do. You only live once.

 

[orbitsurgMD]

Lots of hopeful assumptions here.

Is your TSP making 7% right now?

4% of males live to age 90. (Actuarial Life Table) Probably fewer vets do.

Actually, it appears that if you reached age 65 as of 2015, your chances of living to age 90 are 22%. That doesn't disprove your claim, but for it to be true, a large number of men, the majority, need to die before age 65.

 

[Chonal Atresia]

Bottom line... the only specialties where the financial compensation is anywhere close to comparable between civilian and military are FP, Peds and IM.

Everyone talks about how great military retirement is but remember, it is taxed and likely at a rate during your working years between 35-40% (depending on current tax law) plus state income taxes in most states.

I put away 18.5K in my 401K this year and with employer match and profit-sharing put away a total of 55K just this year. I’ve done this every year since I’ve been out. Plus last year, our multi-specialty surgical clinic started a cash balance plan (defined benefit plan) that you can contribute to IN ADDITION to the 401K. The max yearly contribution varies by age and at age 44, I can contribute up to 103K pre-tax per year. Obviously, my civilian retirement is going to be WAY BETTER than the pension that I would received if I wasted 20 of my prime earning years in the military. Remember, not many practices want to hire a surgeon in their late 40s/early 50s.

I realize all situations are different and my situation may be unique but the bottom line (as has been said over and over) is that the military is a BAD financial decision for almost everyone.

 

[psychbender]

When I was an Army anesthesiologist, I made about half of what my CRNAs make right now. If I joined the practice I'm in now right after residency as a civilian, and lived like I did as a young attending in the Army, then I'd have paid off my med school loans within two years. I have no idea where you're getting that your pay in the Air Force is anywhere remotely close to that if a civilian anesthesiologist.

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[narcusprince]

Another X factor with military service. The environment can rapidly change year to year. Commands can go from great to toxic and vice versa. The pay gap is huge, the control over where you live is priceless. I have seen many different climates. Right now its great and I don’t mind coming to work everyday. Currently at a very solid command with solid colleagues. I also am married to a working civillian spouse EM doc and I do not think its fair to drag her through another pcs. She is very well compensated for her work, but I actually have more regular days and less busy. I could happily be a contractor while waiting for a VA gig to open up.

 

[pgg]

Everyone talks about how great military retirement is but remember, it is taxed and likely at a rate during your working years between 35-40% (depending on current tax law) plus state income taxes in most states.

I agree some people get carried away talking about how great the pension is. But however you do the math (and it's not straightforward) it clearly does have a lot of value.

The average O5/20 retiree pension is probably worth around $1.2-1.5M, based on what it would cost to buy an inflation indexed single premium immediate annuity with the same monthly benefit. This isn't a perfect comparison, but it's ballpark accurate. It also comes with some flavor of access to Tricare, which is worth something. (Maybe nothing if the USA goes single payer.)

Yes, the payout is taxed at your current marginal rate. The flip side is that during the active duty years, acquiring that pension is comparable to being able to put pre-tax dollars into a defined benefit plan. If you need 8 years to get from the end of your ADSO to retirement, you can consider your income during those 8 years to be augmented by ~$150K/year of pre-tax contributions to that defined benefit / deferred compensation "pension account" ...

This value should probably be discounted a little bit because
1) no sane, young high earner would choose a SPIA as an investment vehicle
2) unlike invested savings, a military pension can't be left to heirs (but the spouse's survivor benefit mitigates that somewhat)

Also, for some specialties, the opportunity cost for delaying entry into a private practice group can be ENORMOUS. This is especially true of surgical specialties where it takes time to establish a practice, build a referral base, grow side income streams related to facilities or other office sales/services. Not so much for specialties like mine, where partnership tracks are a couple years and the referral base is whatever pops up on the hospital's surgery schedule.


Presently the Navy pays me about $275K/year (about $35K of that is untaxed)
I figure the pension in my case is worth about $190K/year based on the # of years between my ADSO and retirement
Add something in the neighborhood of $50-100K/year for moonlighting

So my total income as an AD Navy anesthesiologist (3.5 years away from retirement) is in the neighborhood of $465K/year. Moonlighting easily takes that above $500K. I could do that as a civilian, if I was willing to move where the work was and then work like a dog.

Staying in past my ADSO also got me a FTOS fellowship year. I was paid roughly $200K more that year than I would have, had I gotten out and gone to fellowship as a civilian.

Financially, staying in was easily the better decision for me. Now - after I'm eligible to retire, every minute spent on active duty is a very clear financial loss.

My practice environment is pretty good (coincidentally at the same place @narcusprince is).

 

[psychbender]

I agree some people get carried away talking about how great the pension is. But however you do the math (and it's not straightforward) it clearly does have a lot of value.

The average O5/20 retiree pension is probably worth around $1.2-1.5M, based on what it would cost to buy an inflation indexed single premium immediate annuity with the same monthly benefit. This isn't a perfect comparison, but it's ballpark accurate. It also comes with some flavor of access to Tricare, which is worth something. (Maybe nothing if the USA goes single payer.)

Yes, the payout is taxed at your current marginal rate. The flip side is that during the active duty years, acquiring that pension is comparable to being able to put pre-tax dollars into a defined benefit plan. If you need 8 years to get from the end of your ADSO to retirement, you can consider your income during those 8 years to be augmented by ~$150K/year of pre-tax contributions to that defined benefit / deferred compensation "pension account" ...

This value should probably be discounted a little bit because
1) no sane, young high earner would choose a SPIA as an investment vehicle
2) unlike invested savings, a military pension can't be left to heirs (but the spouse's survivor benefit mitigates that somewhat)

Also, for some specialties, the opportunity cost for delaying entry into a private practice group can be ENORMOUS. This is especially true of surgical specialties where it takes time to establish a practice, build a referral base, grow side income streams related to facilities or other office sales/services. Not so much for specialties like mine, where partnership tracks are a couple years and the referral base is whatever pops up on the hospital's surgery schedule.


Presently the Navy pays me about $275K/year (about $35K of that is untaxed)
I figure the pension in my case is worth about $190K/year based on the # of years between my ADSO and retirement
Add something in the neighborhood of $50-100K/year for moonlighting

So my total income as an AD Navy anesthesiologist (3.5 years away from retirement) is in the neighborhood of $465K/year. Moonlighting easily takes that above $500K. I could do that as a civilian, if I was willing to move where the work was and then work like a dog.

Staying in past my ADSO also got me a FTOS fellowship year. I was paid roughly $200K more that year than I would have, had I gotten out and gone to fellowship as a civilian.

Financially, staying in was easily the better decision for me. Now - after I'm eligible to retire, every minute spent on active duty is a very clear financial loss.

My practice environment is pretty good (coincidentally at the same place @narcusprince is).

For new people checking the forum, please note that pgg has been in for some time, and that his income is based on years in service/rank, plus MSP bonuses. During ADSO, the pay is nowhere near that. Also, as a current civilian anesthesiologist, I don't work that hard, and get $400k, plus a benefits package around $50k. If I did moonlighting on the weekends, like some of my partners, and did a little locums during vacation weeks, I could add a few tens of thousands onto that. I was 12 years from being eligible for retirement when my ADSO was up, so the math worked out in favor of leaving.

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[pgg]

Yes, I'm an O5 anesthesiologist, >16 yrs, under a 4-year MSP contract (now called a 4-year RB / retention bonus).

For a typical O3-O4 anesthesiologist under 10 years, repaying an education commitment, income is in the $150K range. Low, even accounting for the lack of a student loan burden.

Also, with the new blended retirement system, the value of the pension is going to be about 20% less (though offset a small amount by TSP matching).

The math is not straightforward.

 

[Cooperd0g]

There is also the GI bill as well, which can be transferred to kids and has a varied value depending on what school it is used at. But it is pretty valuable. Less so for people without kids. Once you cross the 9-12 year mark, you really need to account for the pension, GI bill and Tricare to make a fully informed decision as @pgg did.

This is why I say you don’t leave solely for the money once you are in that range. But you also don’t stay for the money if it is miserable or making life difficult; we are talking about levels of difference, not orders of magnitude.

 

[Gastrapathy]

You can get the GI Bill benefit during your initial obligation in many cases.

 

[Cooperd0g]

You can get the GI Bill benefit during your initial obligation in many cases.

Not if you just do GMO and out (well, you get one year of credit). And you don’t have the ability to transfer it.

 

[Gastrapathy]

Not if you just do GMO and out (well, you get one year of credit). And you don’t have the ability to transfer it.

Right. Hence “many” cases. No one who is GMO and out needs to do the math or will be swayed by that. Anyone whose obligated service takes them to 10 can transfer.

Since those are the people who have a real stay/go decision, the GI bill is not a factor.

 

[Cooperd0g]

Well, I had to look again and you can transfer after 6 years with a 4 year obligation. It used to be that you needed to do 10 years with a 4 year obligation. So it used to fall right in the middle of the career timeline, making it a valuable decision factor. I guess less so now.

 

[Chonal Atresia]

Well, I had to look again and you can transfer after 6 years with a 4 year obligation. It used to be that you needed to do 10 years with a 4 year obligation. So it used to fall right in the middle of the career timeline, making it a valuable decision factor. I guess less so now.

Not true.

I am a ‘02 USUHS grad who graduated residency in ‘07. I transferred my GI bill benefits in ‘09 (7 years active service) and finished my ADSO in ‘14. The 4-year concurrent obligation for GI bill transfer was up in ‘13 so I incurred no additional obligation.

The only reason I didn’t transfer in ‘08 (6-year mark) was that the program didn’t start till ‘09.

 

[Cooperd0g]

Well alright then. I must be just mixing up the 6 years plus 4 commitment with the 10 that I thought. It was moot for me until I was past 16 years anyway so I guess I just didn't pay that close of attention to it.

 

[militaryPHYS]

The confusion here is that the 10 year requirement is the total time you need to be on active duty to transfer GI bill benefits. You can’t transfer until you “request to transfer”. This "request to transfer" can't be made until you serve at least 6 years on active duty. After you "request to transfer" you are required to remain on active duty for 4 years (this is served concurrently with any other obligation).

Therefore, quickest way to do it is to request to transfer at 6 years, serve 4 more and be at the 10 year mark.

USUHS counts towards the 6 years. HPSP does not.

Therefore, USUHS people can request to transfer at the beginning of their PGY-3 year (or GMO year 2). Therefore all USUHS graduates can easily transfer benefits before commitment is up.

HPSP can't even request to transfer until beginning of PGY-7 year or GMO-6 year. Therefore most who want to do 4 and get out would have to extend their total time in service. Even someone who does a longer residency like Ortho would have to extend their total time in service by 1 year to transfer benefits. (Request to transfer at PGY-6 (Staff year 1) + 4 more years = 5 years as staff vice typical 4 for HPSP payback.