Should I retire as a W3 (Reserve), or E7 (Active Duty)?

I'm with MSG (Join to see) on this one ... bird in the hand and all that.

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Geeky math ahead. Turn back now if you are subjected to painful flashbacks to math classes.
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Assume you earn the "average" points a reservist picks up each year when drilling if they do no additional active duty time (78 - 15 from membership, 15 from AT, and 48 UTAs)

Let's assume you punch out at 20 years active (21.5 total) and that you spend your last three years as a SFC (high 3 retirement). That'll give you just shy of a 51% retirement. E7 with 20 years gets a monthly check of $5232.60 right now. That means a bit over $32k/year as a retirement pension (of course, it's going to be different because your annual pay will change with COLA increases and 'other stuff', but figure that as a good ballpark).

You'll be 42.5 when you punch out. Those intervening 17.5 years means that you'll have over $560k in retirement that you'll have received before you would be able to collect on a reserve retirement (again, that number if a SWAG .. COLA will make it higher). Add onto that the fact that you'll get medical as soon as you retire instead of having to wait until you're 60.

Even if you entertained going the TPU route, here's a rough SWAG at the numbers. You'll make WO2 after two years and assume you make the board and get WO3 five years after that. Add another three years on in order to get your high-3. That means another 10 years as a M-Day and you'll be 48 when you retire.

Again, assuming 78 points a year .. those 10 years (plus the 1.5 you have now) will give you another 897 points .. add your AD time and that gives you right at a 45% retirement (give or take a point).

So, you'll be pulling down $41.5k/year at 60 if you go the M-day route or $32k/year a year when you walk out the door if you stay the course being an AGR. For easy math sake, we'll give call the WO3 retirement route $42k/year ... that's a difference of $10k from the SFC route. The disparity between the two figures is offset by what you'll make in a drilling status (call it $15k/year as an average over the 10 years drilling)

As pointed out before, you'll make ~$560k before you would start collecting if you went the WO3 route. Knock that down by $150k that you would make over the 10 years of drilling. That means you'll have to live to an age of 101 just to break even on the monetary difference .. and that doesn't include the medical insurance angle (which may or may not make a difference depending on your civilian insurance, if any, but likely it WOULD be a factor).

So, you don't have to take our words for it .. you can breakout a spreadsheet and put all the calculations down yourself ... make adjustments based on "what if" scenarios (other things to throw in IF you decided to do this is a year by year breakdown of what you make ... assumptions of when you'll be promoted ... assumption of what COLA raise would be each year .. etc).

However, I think you're going to be very hard pressed to find something that makes more financial sense than staying the course on being an AGR.

I'd retire as an E7 active duty and embark on another career. You're so close! Think about the benefits. Half of your base pay PLUS another career's benefits? Why wait till age 60 (normally) to draw a pension? Juice isn't worth the squeeze.

OH, here we go..............

The financial question is do you take SFC retirement pay ASAP, or do you take CW3 pay later at age 60 which is 22 years away.

Over those 22 years you'll also earn reserve retirement points and your retirement factor will increase greatly over the current number of points your factor will be based on your 21.5 years as SFC.

Now............ I will spare everyone the details, but mention I used a 2% discount rate, and the latest pay tables I found on the internet. Otherwise all the information is out there to do the calculation I did.

I answered the question:
At what point in the future to the soldier's AGE are BOTH scenarios economically equal to each other.

Which MEANS!!!!!!!! if the soldier is expected to OUTLIVE that equilibrium age then of course the choice would be to postpone SFC retirement NOW and take CW3 pay LATER.

That age is 117. One Hundred and Seventeen.

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Summary

There are many finer details and nuances that will make up the retirement pay, but mathematically further nuances of semantics of retirement pay is overwhelmed by TWENTY TWO YEARS of postponed payments at SFC pay to get CW3 pay at a much later date in time.

Moreover, the income earned as a CWO during those 22 years is not considered because that income is WORKED FOR, whereas the SFC retirement pay is sit on your butt money.

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The BEST financial course of action is to retire as SFC ASAP then pick up a SECOND career and DOUBLE DIP. That DOUBLE DIP is effectively like going into the TPU program as a WO, but in that path you DO NOT get to collect your SFC retirement.

Where as one could do ANY civilian career path from flipping burgers to the CEO with a 7 figure income and BOTH could collect that SFC retirement pay.

The ONLY pathway in the future of the soldier that prevents him from collecting the SFC retirement pay is continuation in the USAR.

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Finally............
The Net Present Value I calculated for SFC retirement pay over the next 22 years is $776,000. That is the economic benefit postponed to collect CW3 pay at age 60, and it takes an additional 57 years until in year 58 that the soldier starts get a greater economic benefit.

Remember, all during that calculation timeline the SFC pathway is ALWAYS earning income. Where as the CWO pathway has $0 for the first 22 years.