Officers being offered great jobs in the civilian sector

Capt Private RallyPoint Member — Tue, 12 Nov 2013 16:28:32 -0500

I've heard of a Major who almost dropped his 14-year career to join a company who would pay almost triple what the Air Force was paying him including a full year of salary as a sign-on bonus. How does one go about making the decision between serving for at least X more years until retirement or going into the civilian sector? And has anyone here experienced offers from companies that would be willing to share details?

Response by MAJ Bryan Zeski made Nov 13 at 2013 1:14 AM

MAJ Bryan Zeski — Wed, 13 Nov 2013 01:14:13 -0500

I've been in about 14 years. If a stable civilian company offered me triple, I would definitely have to consider it. There are a lot of factors that would make me lean one way or another (location, job type, hours, etc), but, strictly from a financial standpoint, it makes more sense, I think, to take that 3x pay job rather than go for the 20 year retirement.

I mean, financially, let's say I make $80k now and when I retire (at 20 years), I get half... that's $40k. With that other job, I could continue to live the lifestyle I have now and put 2/3 my paycheck into savings ($160k/year). In 6 years (when I would have retired), I would have almost 3/4 of a million dollars just in savings. How many years of retirement pay is that? Actually, it doesn't matter because I could put that nearly 3/4 of a million dollars into a moderate interest rate investment and get more than $40k out in interest every year... it'd be just like a military retirement except that I'd have the option to keep living large and keep working if I wanted to.

Response by MAJ Bryan Zeski made Nov 15 at 2013 11:58 PM

MAJ Bryan Zeski — Fri, 15 Nov 2013 23:58:02 -0500

MAJ Parker, I guess its a good thing that I have exactly zero offers that even come close to tempting me at this point... I am on track to retire at 20 and go the retired life on a warm beach somewhere where my retirement check goes a little further than it will here!

I absolutely agree that some of the "extras" of a full retirement are crucial to consider in any kind of retirement plan - especially health care (when Tylenol costs $8/pill at a hospital...). However, that doesn't preclude the option of a potential 15-year retirement at a reduced % but WITH the "extra" benefits if that magic $300k offer were to materialize.

Response by CDR Richard Tucker made Nov 16 at 2013 8:16 AM

CDR Richard Tucker — Sat, 16 Nov 2013 08:16:34 -0500

From a financial standpoint, the US Armed forces cannot compete with the large corporations for the best and the brightest. I had an early taste as a young man when my services were auctioned to the highest bidder in the Oil fields of Texas. I woke up one day and realized I was job hopping for the big bucks and would never have any stability. I enlisted in the Navy, had a great run and after 31 years hung it up. My retirement is such that I would not need to work if I did not want to. I immediately went to work for a large corporation, I love my job and have saved some projects from tanking with the gratitude of my bosses. Earlier this month, I was told, you do a great service for us, but times are hard and we are cutting your contract. Unfortunately, in the big corporate scheme, you are just a number. I would recommend to anyone that if you go past 10 years, do the time, it is worth it.

Response by SFC Private RallyPoint Member made May 13 at 2014 4:00 PM

SFC Private RallyPoint Member — Tue, 13 May 2014 16:00:59 -0400

I've had two chances to part ways with the Army, as contracting has become popular. Its still a growing need and I was told I could make 712 a day for 90 days in three larger periods for the year. I would receive a 40-50,000 dollar bonus once I completed their in-doc program and was located within a group. The money is good and they carry in between a half million to two million dollar policy on me that my family would never see, but would carry a 500,000 to million dollar policy on me for my family. Health and Dental is on me through their company. The would pay for travel and moving my gear but that's it.
So I would ruffly make 220,000 for nine months on the year. If I could do it over and over for five years, the amount of time I have gone while in the Army; it would almost equal my retirement if I lived to 75. It's tempting till I figured it out that I could lose a leg or the wrong finger and they would drop me and there is where I would be.
Right now if you dont have many years in you could part ways, but when you get to that 10-14 year mark you start having a notice of that finish line being in place, and it's a good feeling.

Response by CPT Private RallyPoint Member made May 13 at 2014 4:18 PM

CPT Private RallyPoint Member — Tue, 13 May 2014 16:18:00 -0400

I am an Army logistician who has just hit the 6 year mark and I haven't seen anyone offering me anything yet. I probably wouldn't even consider something on the civilian side until I get my Masters Degree (probably logistics or supply chain management). So until then, I will probably focus on what I love; taking care of Soldiers, training and leading. Unless someone offered me a boatload of money to do similar work in a nice location, I will probably stay in for a while. But we all have our price... Just not sure what mine is yet!

Response by COL Vincent Stoneking made Jan 8 at 2015 11:10 AM

COL Vincent Stoneking — Thu, 08 Jan 2015 11:10:48 -0500

Realize that this is an old thread, but when comparing compensation between military and civilian, it is important to consider the "total compensation package."

I don't necessarily mean the "what the Army times says it is equivalent to", but it does work along those lines.

Take that MAJ with 10 YOS, "earning" approx $6659 a month. Add on their tax-free housing allowance of $1752 at JBLM (a bit over $2K with dependents. It is worth noting that not only are you NOT going to get a housing allowance from 99.999% of civilian employer, you are also not going to get any pay differential due to having dependents. So I'll assume single for this exercise.). Add on the tax free BAS of $253. Direct compensation has moved from $6659 to $8664 per month, with roughly 1/3 tax free. The $80K has become $104K in direct compensation, with $24K tax free. This is all simple math, except I haven't tried to do the Army Times "tax advantaged equivalent" thing.

Next, look at cash-equivalent benefits. It gets a little squishy here, and everyone will need to do their own calculations...

Free medical care without co-pays (at least for most active members on a post). This DOES NOT EXIST in the civilian world. The employer MAY offer a medical plan. They may even pay for it 100% (though that is rare). It may be part of a "cafeteria" benefits plan. The employer may not offer, period - forcing you to buy on the open market - an option becoming perversely more common since the law changed a few years ago. A privately purchased plan will cost anywhere from a few hundred to a few thousand per month. There will be deductibles and co-pays, as well as medical procedures not covered. This is all over the map, and people have different desires, so there can't be a one size fits all approach.

For reference, were I still on my employer's plan (currently Tricare Prime while on ADOS), I would be paying approximately $250 a month for myself, my wife, and my son with a family deductible of around $500 a year, and roughly $15% co-pays. My employer contributes approximately $650 a month for the total monthly premium of $900. Since it is an employer-provided plan, my $250 a month is pre-tax. This is considered (and is... I sold insurance for a while) considered an insanely good plan. It is worth noting that I work for state government in my civilian position. I would not expect someone going into the private sector to get a plan as good as this one.

Next up is time off. In general, more often than not, but subject to the needs of the service, Service members get 30 days of paid vacation a year and unlimited sick leave (Sick call/quarters). Very few civilian jobs will offer 6 weeks of vacation a year, most especially to start. (Yes, that is 6 weeks. 30/5). After 16 years at my current civilian employer I get 22 days a year, and I currently max out vacation accurual (i.e. it will NEVER be more, at least at this employer.). When I started, I think it was around 8-10 days a year. I get 8 hours a month of sick leave accrual. If I am sick more than that, I either have to burn leave or take leave without pay. It is also worth noting that if I go to a DR appointment, I need to TAKE LEAVE for that. It is NOT considered "my place of duty." That concept just doesn't exist in the civilian world (though some employers will turn a blind eye to a 1-2 hour appt occassionally). This, of course, will be all over the map from employer to employer. Some will offer NO paid leave, some will offer just generic "personal leave" days (vacation, sick, don't tell us. you get 15 days a year... My mother's employer uses this model. Her leave expires at the end of the year as well).

NOTE: None of the above is an attempt to say that the military don't "deserve" their benefits package. The point is to make clear the difference between the two worlds.

So, how do you put a price on that? Again, intensely personal. I have over 60 days of sick leave built up at my civilian employer. I care very little for it. I am lucky to be pretty healthy. If I had medical issues I might have different opinion. Vacation availability is very important to me (more so since I got married again). I would value 6 weeks of vacation at roughly 10% of my cash compensation. In the case of the 10 year MAJ above, I would add another $10K to the annual compensation.

So far, I as the MAJ above would value my $80K military job at a minimum of $123K ($103K+10K vacation +10K insurance) in total compensation, again not correcting for "tax advantage."

Next, we need to talk retirement. In the military, you have a defined benefit retirement that you don't contribute to (unless you argue that you are a taxpayer, in which case you are admitting that 100's of other people ALSO contribute to your retirement, making your contribution marginally $0). This retirement package pays roughly 50% of your base pay, assuming that you retire at 20 years. So, $40K a year for this MAJ (if he has 10 years in, he should be at least an LTC with 20 by the time he retires at 20.... but I'm aiming at simplicity of example over accuracy. Exact $$ are left as an exercise for the reader). If he walks away at less than 20, he has a straight up $0 retirement. So, what does it take to replace that retirement? This is a straight annuity calculation. Again, I am not going to do the math, but an annuity that pays $40K a year forever, at a 4% return (see how I make the math easy!! :-) ) requires $1MM in principle. In reality, that number is too high. you can PROBABLY do better than 4%, and you probably don't need perpetual annuity, unless you are the Highlander. Eating into principle at some controlled rate is probably acceptable. You might only want a 30 or 40 year annuity, depending on your risk tolerance and family situation. So I am arbitrarily going call it $500K, split over 10 years, or 50K a year. This jumps us up to $173K a year in total current compensation. Obviously, the closer you get to 20, the BIGGER this number gets (because of Army cliff vesting), and then it suddenly drops to near-zero on the day you qualify for your military pension (this isn't by accident, btw... the point of cliff vesting is to get you to stay right to that point). It isn't quite zero, because your pension % grows the longer you are in, as does your base pay.

You will find essentially zero civilian employers that offer a similar retirement package. First, defined benefit packages are a vanishing minority (I am happy to say that I have one! It more than makes up for my below-market base pay), second even the defined benefit packages require some contribution on your part. MOST pension plans, when offered - especially for newer employees, are some version of a tax-deferred 401K, which the employer may or MAY NOT contribute to, match, or just make available. Most civilian pensions, defined benefit or otherwise, don't allow you to withdraw from the retirement account until you are somewhere between 65-70 unless you take significant reductions. You will also generally take actuarial reductions - especially on defined benefit plans - if you want to ensure that your family keeps your retirement benefits if you die (this is true for your military pension as well, I just point it out because it is often overlooked).

The above analysis also overlooks growing your retirement account over time to keep pace with inflation, and a number of other factors. I'm just going to spitball and say that 50K a year continues to be around right. If the reply is "well I'm fine with not getting the retirement money and living off my income", my reply is "great, you're willing to work for less." Again, this was really shoddy analysis of the kind I wouldn't tolerate when I was in the financial services industry, but I am using it only to illustrate a point, not to be exact. It is also worth calling out that this analysis loses a lot of its power once you hit 20 years, as well as losing a lot of its power the LESS time you have in service.

But I'm not done yet, if I'm being through. I just took the easy stuff because I'm still new to being in an active status, and am in a stage of life where I won't take advantage of a bunch of the ancillary benefits. For instance, free tax prep. Nope, been doing it myself for decades. Subsidized child care? Don't need any. Etc. Again the value of such things will be subjective to the individual.For me, I am going to call that misc stuff equivalent to $2K, just to have a round number.

Our $80K MAJ is a $175K job seeker. Again, we are talking total compensation, not base pay. When the offer of the $100K job comes in, the question is - does it have $75 K worth of benefits?. The $150K job, does it have $25K worth of benefits?

The issues of culture and "do I like" the work" then come into play.

Response by BG Private RallyPoint Member made Jan 12 at 2015 12:57 PM

BG Private RallyPoint Member — Mon, 12 Jan 2015 12:57:27 -0500

In my experience, you hear about these stories and then get "the rest of the story". So you hear that it is triple the pay and when you enquire more, the job means going to Saudi Arabia for two years, working 80 hours a week, and they are only talking about triple your base pay, not your total pay.
Guys on AD are always thinking the grass is greener when I think that is rarely true. If a commercial airline Captain makes $200,000, what makes you think you are going to earn more than that?! I am a licensed engineer, two masters degrees and 30 years of experience and don't make anything near that. I do know one guy in our 15,000 person corporation that is a retired A-10 pilot and is a Sr. VP at age 49 and likely does make that much, but that's one guy.
If you do get out with 14 years, make sure you join the Reserves so you can get 20 or more and a least get some retirement and benefits from Uncle Sam.