Military FIRE: Financial Independence Retire Early Complete Guide
Bottom Line Up Front: Military members can achieve FIRE (Financial Independence Retire Early) faster than civilians due to: 20-year pension (worth $600K-$1.5M), free healthcare (TRICARE), housing allowance, TSP with match. FIRE number: 25x annual expenses. Save 50-70% of income, invest in TSP C Fund, live below BAH, retire at 42-45 with pension + investments = $80K-$120K/year passive income. Aggressive but achievable for disciplined service members.
FIRE Basics for Military
What Is FIRE?
Financial Independence: Your investments generate enough income to cover expenses (you don't NEED to work)
Retire Early: Leave workforce before traditional retirement age (62-67)
The 4% Rule:
- Save 25x annual expenses
- Withdraw 4% per year
- Money lasts 30+ years (historically)
Example:
- Annual expenses: $60,000
- FIRE number: $60,000 × 25 = $1,500,000
- Safe withdrawal: $1,500,000 × 4% = $60,000/year
Why Military Is Perfect for FIRE
1. 20-Year Pension ($600K-$1.5M Value)
- Retire at 38-42 (join at 18-22, serve 20 years)
- Pension: $2,500-$4,000/month for life
- Equivalent to $750K-$1.2M invested (at 4% withdrawal)
2. Free Healthcare (TRICARE)
- Saves $500-$1,200/month vs. civilian
- Equivalent to $150K-$360K invested
3. Housing Allowance (BAH)
- Live below BAH = save $500-$1,500/month
- 10 years = $60,000-$180,000 saved
4. TSP with 5% Match (BRS)
- Free money: $87,000-$150,000 over career
- Invest in C Fund: Grows to $300,000-$500,000
Total advantage: Military FIRE is 5-10 years faster than civilian FIRE
Military FIRE Path (Step-by-Step)
Years 1-5: Foundation Phase
Goals:
- Build emergency fund ($10,000)
- Max TSP (5% minimum for match)
- Pay off high-interest debt
- Learn investing basics
Savings rate: 20-30% of income
Example: E-4 ($45K/year total)
- Save: $9,000/year (20%)
- After 5 years: $50,000+ saved (with TSP growth)
Years 6-12: Accumulation Phase
Goals:
- Max TSP ($23,000/year in 2025)
- Live below BAH (save difference)
- Consider house hacking (buy rental property)
- Increase savings rate to 40-60%
Savings rate: 40-60% of income
Example: E-6 ($70K/year total)
- Max TSP: $23,000/year
- Live below BAH: Save $800/month = $9,600/year
- Total saved: $32,600/year
- After 6 years: $250,000+ (with growth)
Years 13-20: Final Push Phase
Goals:
- Max TSP + additional IRA ($6,500/year)
- Real estate portfolio (2-4 rentals)
- Side income (if allowed by branch)
- Savings rate: 60-75%
Example: E-7 or O-3 ($100K/year total)
- Max TSP: $23,000
- Max IRA: $6,500
- Real estate: $10,000/year profit
- Total saved: $40,000+/year
- After 7 years: $400,000+ additional
Age 42: FIRE Achieved
Assets:
- TSP: $800,000-$1,200,000 (20 years of max contributions + C Fund growth)
- Real estate: $300,000-$500,000 equity in 3-5 rentals
- Taxable brokerage: $100,000-$200,000
- Total: $1,200,000-$1,900,000
Income sources:
- Military pension: $30,000-$45,000/year
- TSP withdrawal: $48,000/year (4% of $1.2M)
- Rental income: $12,000-$24,000/year
- Total: $90,000-$113,000/year
Result: Retire at 42, live on $90K-$113K/year without working!
Savings Rates Required for FIRE
Standard FIRE (Retire at 42 After 20 Years Military)
Savings rate needed: 50-60%
Example budget (E-6, $6,000/month take-home):
- Savings: $3,000/month (50%)
- Living expenses: $3,000/month
- After 20 years: $1,000,000+ (with investment growth)
Aggressive FIRE (Retire at 40)
Savings rate needed: 65-75%
Example budget (E-7/O-3, $8,000/month take-home):
- Savings: $5,600/month (70%)
- Living expenses: $2,400/month
- After 18 years: $1,500,000+
Lean FIRE (Lower Expenses)
Strategy: Retire with less ($40,000-$50,000/year expenses)
Advantages:
- Need smaller nest egg ($1M vs. $1.5M)
- Achieve FIRE 2-3 years faster
- More geographic flexibility (live in LCOL areas)
Example:
- Pension: $30,000/year
- TSP withdrawal: $30,000/year (from $750K)
- Total: $60,000/year (enough for modest lifestyle)
Investment Strategy for Military FIRE
TSP Allocation (Core of FIRE Plan)
Years 1-10: 100% C Fund
- Maximum growth potential
- 10-11% historical return
- Ignore short-term volatility
Years 11-15: 90% C Fund, 10% G Fund
- Slight shift to stability
- Still aggressive growth
Years 16-20: 80% C Fund, 20% G/F Fund
- Protect gains
- But keep majority in stocks (you'll live 40+ more years)
After Retirement: 60% Stocks, 40% Bonds
- Income + growth
- Sustainable withdrawals
Beyond TSP (If Maxing Out)
After maxing TSP ($23K/year), invest in:
1. Roth IRA ($6,500/year limit)
- Tax-free growth
- Can withdraw contributions anytime (penalty-free)
- Withdraw earnings at 59.5
2. Taxable Brokerage Account
- No limits
- Invest in index funds (VTI, VTSAX)
- Capital gains taxed at 0-20% (lower than income tax)
3. Real Estate
- Rental properties
- House hacking
- Tangible asset + cash flow
Living Below BAH (Critical FIRE Strategy)
How to Save $500-$1,500/Month
Strategy:
- BAH (E-6 San Diego): $3,243/month
- Rent apartment: $2,200/month
- Pocket: $1,043/month = $12,516/year
Over 10 years:
- Savings: $125,160
- Invested at 10%: $200,000+
This ONE strategy builds $200K in 10 years!
House Hacking (Double Benefit)
Strategy:
- Buy duplex with VA loan
- Mortgage: $2,500/month
- Tenant rent: $1,800/month
- Your BAH: $3,243/month
- Net cost: $700/month (vs. $2,200 renting)
- Savings: $1,500/month
- Plus: Building equity ($500/month) + appreciation
- Total benefit: $2,000/month = $24,000/year
Common FIRE Mistakes for Military
❌ Mistake #1: Not Maxing TSP Early
Reality: Contribute 10% to TSP for first 10 years. Miss out on compound growth.
Fix: Max TSP ($23K) as early as possible. Front-loaded investing beats dollar-cost-averaging due to compounding.
Impact: $23K/year for 20 years at 10% = $1,446,000
vs. $10K/year for 20 years = $630,000
Difference: $816,000!
❌ Mistake #2: Lifestyle Inflation with Every Promotion
Reality: Get promoted E-5 → E-6 (+$500/month). Increase spending $500/month. Save $0 extra.
Fix: Keep lifestyle flat. Bank every raise.
Example:
- E-5 expenses: $3,000/month
- Promote to E-6: +$500/month income
- Keep expenses at $3,000
- Save extra $500/month = $6,000/year
❌ Mistake #3: Buying Depreciating Assets (New Car Every 3 Years)
Reality: Buy $40,000 truck. Trade in every 3 years. Lose $15,000-$20,000 in depreciation each cycle.
Fix: Buy used car ($15,000-$20,000), drive for 10 years. Save $100,000+ over career.
❌ Mistake #4: Not Using Deployment for Massive Savings
Reality: Deploy. Spend deployment savings on truck when you return.
Fix: Deploy = Save $20,000-$40,000. Invest immediately in TSP/IRA. Don't touch.
❌ Mistake #5: Giving Up Because "FIRE Is Impossible on Military Pay"
Reality: "I only make $50K, FIRE is for rich people."
Truth: Military pension IS financial independence. You just need $500K-$1M in investments (not $2-3M like civilians).
Fix: Adjust FIRE number for pension. It's achievable.
Action Steps
Year 1:
- ✅ Build $10K emergency fund
- ✅ Start TSP at 5% (get BRS match)
- ✅ Track expenses (every dollar)
- ✅ Pay off credit card debt
Years 2-5:
- ✅ Increase TSP to 15-20%
- ✅ Live below BAH (save $500+/month)
- ✅ Learn about investing (read "Simple Path to Wealth")
- ✅ Join r/MilitaryFIRE community
Years 6-15:
- ✅ Max TSP ($23K/year)
- ✅ House hack or buy rental
- ✅ Increase savings rate to 50-60%
- ✅ Track net worth quarterly
Years 16-20:
- ✅ Max TSP + Roth IRA
- ✅ Build real estate portfolio
- ✅ Plan post-military FIRE life
- ✅ Hit $1-$1.5M net worth
Age 42:
- ✅ Retire from military
- ✅ Pension: $30K-$45K/year
- ✅ Investments: $40K-$60K/year
- ✅ Live your FIRE life!
Related Guides
Remember: Military FIRE is real and achievable. 20-year pension is halfway there. Max TSP, live below BAH, avoid lifestyle inflation, and you can retire at 42 with $90K-$120K/year passive income. Thousands of service members are doing it - you can too.