Military FIRE: Your Pension Is Worth $2.5-3 Million
Military officers reach Coast FIRE with 60% less savings than civilians. Your CPI-W indexed pension + VA disability creates a guaranteed income floor that fundamentally changes the FIRE equation. Here's how to value it correctly.
Why Military FIRE Is Fundamentally Different
The traditional FIRE calculation assumes you must fund 100% of your retirement from investments. But as a military officer, you have access to an asset class that has largely vanished from the private sector: an inflation-indexed defined benefit pension backed by the federal government.
This pension isn't just income—it's a comprehensive hedge against market volatility, longevity risk, and inflation. It fundamentally transforms your required savings rate, your asset allocation, and your timeline to financial independence.
The Pension-Adjusted FIRE Formula
Because your pension is COLA-adjusted, it can be treated as a reduction in real-dollar spending requirements, not a fixed income stream that degrades over time.
Coast FIRE: Military vs. Civilian
Target spending: $120,000/year | SWR: 4% | Investment return: 7% | Coast to age 60
| Scenario | Pension + VA | Gap to Fund | FIRE Number | Coast at 40 |
|---|---|---|---|---|
| Civilian (No Pension) | $0 | $120,000 | $3,000,000 | $775,000 |
| Officer (Pension Only) | $60,000 | $60,000 | $1,500,000 | $387,000 |
| Officer (Pension + 50% VA) | $75,000 | $45,000 | $1,125,000 | $290,000 |
| Officer (Pension + 100% VA) | $110,000 | $10,000 | $250,000 | $64,000 |
Key Insight: A high-disability officer essentially achieves Coast FIRE simply by completing 20 years of service. The $64,000 Coast target can often be achieved through normal TSP contributions during service.
Understanding Your CPI-W Indexed Pension
High-3 System
- 50% multiplier at 20 years
- Based on highest 36 months of basic pay
- No TSP matching during service
- Cliff vesting at 20 years ($0 if you leave earlier)
Blended Retirement System (BRS)
- 40% multiplier at 20 years
- 5% TSP matching from day one
- Continuation pay at 12 years (2.5-13x monthly pay)
- Portable TSP if you leave before 20
The CPI-W "Ratchet Effect" Protection
The military COLA is determined by the CPI-W change from Q3 of the prior year to Q3 of the current year. But here's the critical protection most people miss:
If CPI-W decreases (deflation):
- Your pension never decreases—it stays flat (0% COLA)
- It remains flat until CPI-W rises above the previous high-water mark
- This asymmetry protects you during deflationary crashes
While a fixed annuity loses purchasing power every year inflation is positive, and a stock portfolio can lose nominal value during crashes, your military pension preserves nominal value during deflation AND real value during inflation.
VA Disability: The Tax-Free FIRE Accelerator
VA disability compensation is 100% tax-free at both federal and state levels. This creates an enormous "tax-equivalent yield" advantage that dramatically increases the effective value of your retirement income.
2025 VA Disability Rates (with dependents)
| Rating | Monthly (Veteran + Spouse + Child) | Annual Tax-Free | Pre-Tax Equivalent* |
|---|---|---|---|
| 50% | ~$1,200 | $14,400 | $20,571 |
| 70% | ~$1,900 | $22,800 | $32,571 |
| 80% | ~$2,400 | $28,800 | $41,143 |
| 100% | $4,216 | $50,592 | $72,274 |
*Assuming 30% combined marginal tax rate (24% federal + state). Your actual rate may vary.
Concurrent Receipt (CRDP): The "Double Dip"
Historically, VA disability reduced your pension dollar-for-dollar. But the Concurrent Retirement and Disability Pay (CRDP) program changed this for veterans with 50%+ disability:
This combination creates an income floor so high that many qualifying officers accidentally achieve Fat FIRE simply by vesting their 20 years of service.
How to Value Your Pension (The "Golden Albatross" Method)
Military FIRE blogger Grumpus Maximus developed a methodology for valuing military pensions. The key insight: a simple 25x multiplier (inverse of 4% rule) undervalues your pension because it's risk-free and inflation-indexed.
Wrong: Simple 25x Multiplier
This treats your pension like a stock portfolio with sequence risk—but it has no sequence risk.
Correct: TIPS/SPIA Equivalent
This is what you'd pay for an inflation-indexed annuity providing the same income at age 42.
Your True Net Worth Calculation
Military officers often feel "behind" civilian peers on net worth by their early 40s. But this ignores the pension's Total Dollar Value (TDV):
Example: Officer with $300k TSP, $80k pension, and $50k VA disability:
Visible: $300k | Pension TDV: ~$2.5M | VA TDV: ~$1.25M
True Net Worth: ~$4 million
Military FIRE Asset Allocation Strategy
Your pension functions as a massive "bond tent" that never folds. This means your TSP and IRA allocation can be far more aggressive than civilian counterparts who need bonds to dampen volatility.
Typical Civilian at 45
Needs bonds to reduce volatility since they have no guaranteed income floor.
Military Officer at 45
Pension provides the "bond allocation"—maximize equity for long-term growth.
Sequence of Returns Risk Mitigation
The biggest fear for early retirees is a market crash right after retirement. But if your pension + VA covers essential expenses (housing, food, healthcare), you've essentially neutralized sequence risk for survival needs.
- Essential expenses covered = no forced selling during crashes
- TSP/IRA can remain invested through downturns
- Higher equity exposure = greater long-term wealth compounding
The 3 Biggest Military FIRE Anxieties (And How to Address Them)
The "Golden Albatross" Trap
Around the 15-year mark, you may be burnt out, facing family strain from deployments, or suffering moral injury—yet feel trapped because leaving before 20 means the pension is worth $0 (cliff vesting).
The fear:
"My military skills (command, logistics, warfare) won't transfer to civilian jobs. The pension is the only thing keeping me financially viable."
Reality check: Military leadership, logistics, and project management skills ARE transferable. Many officers successfully transition to consulting, government contracting, or corporate leadership roles. The fear is often overblown.
TRICARE Valuation Shock
Active duty pays $0 for comprehensive healthcare. Upon retirement, you transition to TRICARE Select/Prime with actual premiums for the first time.
The fear:
- Taking a civilian job that disqualifies me from cheap TRICARE
- Political changes hiking TRICARE fees significantly
- Network access issues in rural areas
CPI-W Inflation Divergence Risk
The CPI-W tracks goods for "Urban Wage Earners"—it heavily weights transportation and food but underweights healthcare compared to the CPI-E (Elderly index).
The fear:
As you age, medical costs may outpace your COLA adjustments, slowly eroding purchasing power. Additionally, Congress could switch to "Chained CPI" (grows slower) to cut deficits.
Mitigation: Maintain a separate health savings fund (HSA if eligible), keep TRICARE as long as possible, and don't assume pension alone will cover healthcare costs in your 70s+.
Your Military FIRE Action Plan
Calculate Your Pension's True Value
Use the TIPS/SPIA equivalent method, not simple 25x. Your $70k pension is worth ~$2.2M, not $1.75M. This changes your entire FIRE target.
Recalculate Your Coast FIRE Target
Subtract pension and VA from your target spending, then apply 4% rule to the remainder. You likely need 50-90% less than you thought.
Maximize TSP Contributions
In 2025, contribute up to $23,500 (or $31,000 if 50+). Consider 100% C/S Fund allocation since your pension IS your bond allocation.
Document Everything for VA Claims
Every service-connected condition adds to your tax-free income floor. Get injuries documented while on active duty. The difference between 40% and 50% is CRDP eligibility.
Plan Your TRICARE Strategy
Understand which civilian jobs preserve TRICARE eligibility. Budget for the transition from $0 to $600-1,000/year. Consider a healthcare fund for late-life medical costs.
Frequently Asked Questions
How much is a military pension actually worth for FIRE?
Can military members achieve Coast FIRE faster than civilians?
What is the Golden Albatross in military FIRE?
Is VA disability income counted in FIRE calculations?
What is Concurrent Receipt (CRDP) and how does it affect FIRE?
How does the military pension COLA work?
Should military members hold more stocks since they have a pension?
What is the biggest financial risk for military retirees pursuing FIRE?
How does TRICARE affect military FIRE planning?
What's the difference between High-3 and BRS for FIRE?
Calculate Your Military Coast FIRE Number
Enter your expected pension, VA disability, and target spending to see how your service has already moved you toward financial independence.
Last Updated: January 2026 | VA rates reflect 2025 COLA adjustment
Sources & Further Reading
This guide is for educational purposes only and does not constitute financial advice. Consult with a qualified financial advisor familiar with military benefits before making retirement decisions. Individual circumstances vary significantly.