May 25, 2023

Is the Reserves or National Guard Worth It for Transitioning Service Members?

Is it Worth it?

Are you considering joining the reserves after completing your military service? If so, you may be wondering if it's worth it in terms of financial benefits or fulfillment. So many times, we hear that it is a “no-brainer: to go into the Reserves after your time on active duty. This can certainly be a great decision for some, but the wrong decision for others. In this post, we’ll explore the qualitative and quantitative considerations of joining the Reserves or National Guard to help you make a more informed decision.

Brief Introduction to the Reserves and National Guard

The Reserves and the National Guard are opportunities that are presented to transitioning service members to continue on their service and earn retirement benefits on a part-time basis. I can speak from experience that it is actually required to correspond with both a Reserves and National Guard recruiter on the way out of service for the Air Force and likely the other services as well. These jobs can be based all over the country and you don’t need to be in the same location as you can travel when you have to work. The usual requirement for the Reserves is one weekend a month, and then two weeks per year. There also may be deployment opportunities and chances to go on active duty orders. There are many advantages and disadvantages to continuing to serve in this fashion that members need to consider.

Advantages of Joining the Reserves or National Guard

The qualitative benefits of joining are pretty compelling for the right person. You get to continue to serve your country on a more flexible schedule, with the ability to choose where you serve. This is appealing to many that have spent years building their career and identity in the military and don’t want to throw that all away. This also may be appealing for those that love the sense of purpose that continuing to serve gives them, and they value that more than being part of a civilian company.

I find that a commonly cited reason for joining the Reserves or National Guard is for the financial benefits. The most notable benefits are very affordable healthcare through TRICARE for Reserves, and a pension starting at 60. For the Reserves, a “good” year is 1 year toward retirement which is earning at least 50 points. Traditionally, one weekend a month and two weeks a year will earn you around 74 points, so for our calculations I'll assume every year of service in the Reserves is equal to 74/360 or ~0.2 years. Therefore, a quick formula for years of service would be this: Active Duty years of service+ Reserve Years*0.2 = Total Years in Service. Years of service multiplied by base pay and by 2%  (assuming the BRS, it would be 2.5% for the High 3 system) would get you to your pension.

For example, If I get out at 5 years and do 15 in the Reserves, my years of service would be 5 + (15*0.2) = 8. Assuming I retire as a Lieutenant Colonel, according to the military pay charts, my pay would be 11* 2% * 10,544 = $1,687 per month starting at age 60.

The other huge financial benefit is the healthcare. TRICARE for Reserves is usually a great deal while you are still serving, and then TRICARE for Life starting at age 65 when you begin Medicare. This benefit can be worth anywhere from $20,000 per year all the way up to millions depending on how much healthcare you need.

Disadvantages of Joining the Reserves or National Guard

As appealing as the benefits may be, there are definitely drawbacks to staying on in the Reserves or National Guard after active duty. Reservists may have to put their civilian careers on hold to serve on active duty, and may also face challenges in balancing their military and civilian obligations. There also may be limited opportunities in terms of jobs and locations for a job. You may incur cost to travel to your Reserve job that may or may not be reimbursed depending on your deal. You will also have to keep up your fitness and uniform, making this an unusually burdensome part-time job. Lastly, you could be called back to active duty or deployed, which can have severe impacts on your career and family life.

Beyond the qualitative considerations above, the quantitative downsides can be just as if not more compelling depending on your age and years in service. Intuitively, if someone gets out of active duty after only 5 years of service, they have to do 15 years of part time work to earn the pension and healthcare benefit. Not only will they have to do more time, but this will also be a much smaller benefit than someone who has 14 years of service and only has to do 6 years of Reserve time. This can be seen graphically below where I computed the hourly wage of Officers going into the Reserves at different ranks and years of service.

Hourly Civilian Equivalent Income to Equal Total Military and Reserve Compensation for Officers

You can see that as you have more years of service, the Reserves or National Guard becomes more and more worth your time. You not only have to do less time to get your pension and healthcare, you also have a much larger benefit coming your way at 60 due to your active duty time which is 360 points for every year of active duty. These benefits become even more valuable the older an individual is. For example, a 12 year O-4 that is 34 years old is going to value a career in the Reserves much less than the 12 year O-4 that is 54 years old. This is due to the time value of money. The 54 year old will receive a pension immediately when he is done with 8 years of Reserve service, while the 34 year old will have to wait for 18 years for his benefit to kick in. This is a useful exercise to look at the benefits on an hourly basis so that you can not only compare it to what you made on active duty, but compare it directly to what you are going to make in your civilian career or what you value an hour of your time to be worth.

Putting Together Numbers and Feelings to Decide What’s Best for You

Deciding whether or not to join the Reserves or the National Guard is a personal decision that depends on a variety of factors, including your career goals, financial needs, and military aspirations. Before making a decision, it's important to carefully weigh the qualitative and quantitative benefits and drawbacks of joining the Reserves or the National Guard. What might be the right decision for one person, might be the completely wrong decision for another. For example, for one family that has health problems and makes around $75,000 in the civilian world and enjoys the sense of purpose in the military, the pension and healthcare benefits of being in the Reserves might be worth it. For another family that will make $250,000 on the outside, doesn't want anything to do with the military, and is in relatively good health, the benefits probably aren't worth it. You need to weigh the qualitative aspects of your desire to continue to serve with the math of the actual hourly wage that you will be earning during your time. After conducting this analysis can you make a better informed decision about what is best for you when it comes to a career in the Reserves or National Guard.

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