Is it possible for an enlisted person in the military to earn $1 million for retirement at age 65? The answer is yes, if the servicemember does the right sort of financial planning early in his or her career. Unfortunately, too few are doing so.

According to a recent study by MetLife, almost a third of American workers have not yet started a retirement savings plan, and nearly 70 percent do not have any kind of financial plan, even if they have started saving. The numbers for those between the ages of 21 and 30 are even lower.

If servicemembers began approaching their finances in the same disciplined, responsible way they do a mission or objective, they could find ways to save and become financially fit.

There are four steps servicemembers can take in order to have a stable and successful retirement. While some of the steps might seem easier than others, the keys to all of them are discipline and starting early.

1. Write down goalsIt doesn’t matter what plans a military family has for retirement, it is important to write them down. Even though goals likely will change over time, writing them down makes them more real by providing a tangible target.

2. Defining when and howWhile it’s almost never too late to start a retirement or savings plan, the earlier a servicemember starts the better. The reason for this is the power of “compound interest.” Compounding interest means investing interest earned on an investment back into the account. By doing so the interest earns interest. The power of compounding is directly related to how much money is invested and for how long. The longer the money has to earn interest, the more money will be there during retirement.

Since military pay is usually below that of the civilian sector, the key to “how” to save involves introducing discipline into financial management. The most basic way to introduce discipline into money management is to simply reduce spending. This might be the biggest challenge of all because many people don’t realize how quickly $5 and $10 purchases add up. For example, if the average annual rate of return is 10 percent, $6 spent on a weekly six-pack of beer would turn into $17,870 in 20 years and $138,089 over 40 years in a Thrift Savings Plan. The money otherwise spent on beer would be used for a “need” (a secure retirement), instead of a “want.”

Other simple tactics can help introduce financial discipline:

Create a budget. Know what income you have and what expenses you must pay each month.Track all expenditures. Keep a written record of everything you buy.Use allotments to automatically deduct savings from your paycheck. This develops discipline and prevents you from spending it.Use tax-free investments like the federal Thrift Savings Plan. This will maximize compounding interest.Set up an emergency fund of at least two months pay. This will help protect from unforeseen expenses that would otherwise require a military family to use a credit card or take out a loan.3. List income sourcesThere are many ways to have income after retirement: Social Security, interest from investments and a TSP or 401(k) plan are just a few. While many experts quote ratios of 60 percent to 80 percent of pre-retirement income, retirement spending could equal or exceed pre-retirement income depending on debt, mortgages, medical or insurance costs, and quality of life objectives.

Military families that do not remain in the service long enough to qualify for retirement compensation leave the military with no retirement pay or benefits. Many re-enter the civilian world less financially independent than they had hoped. Those that do retire with pay must remember that retirement income will be only a percentage of active-duty pay.

4. Put plan into actionMany people neglect to save and wind up with tremendous debt and poor spending habits and have to work well past retirement age. It is important to remember that all of the services have formal programs to help families successfully plan their transition from military service. These programs are available at every installation, are staffed with experienced career counselors and have resources to help plan the transition from active-duty to retired status.

If servicemembers apply the same discipline instilled in them by their leaders to money management, they can develop sound financial plans, adjust them when necessary and, most importantly, stick to them. Doing so can help avoid the debt traps into which so many fall. The key is to do so as soon as possible, because taking action today can help ensure a financially secure tomorrow.

For more information about TSP and understanding military retirement pay, visit and

Tom Holcom is president of Pioneer Financial Services Inc., a company dedicated to improving the quality of life and financial independence of military families. For more information about Pioneer Services visit

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