How much do IMA reservists make?

It is not easy to quickly decipher military pay tables for us IMAs. In order to do some recent financial planning, I had to calculate my pay. I’m an O-4 with between 14 and 16 years of service. Here is what I did.

IDTs

You can find the official military pay tables from the DoD comptroller but I found militaryrates.com to have the 2015 data that I couldn’t find on the official site.

Here, I saw that based on my years of service, my drill pay is \$962.83, which is 4 IDTs, or 16 hours, so I get paid \$60.17 an hour. For 48 IDT’s (Cat A), this means I get paid

$$ \frac{\text{drill pay}}{4} \times 48 = \$11,553.6 $$

for IDTs. Drill pay is higher than basic pay. I assume this is because drill pay is burdened by all the things you don’t get as an IMA: health benefits, BAH, BAS.

Annual Tour

Now, to calculate the annual tour (AT) we use the regular military pay tables. On the first page of the scale is your monthly military pay. First, find the pay that applies to you based on your rank and time in service. If you divide that number by 30, that gives you your daily pay. Multiply that number by the number of annual tour days you are required to do (14 in my case as a reservist) and you’ll have your before-tax annual tour pay.

$$ \frac{\$\,7221.22}{30} = \$\,240.71 \; \text{daily pay} $$

then $ \$ 240.71 \times 14 = \$ 3,369.90 $, which is appears to be exactly half of what I would get if I got IDT pay for the annual tour.

All together, this means \$15,000 a year in gross income from the reserves.

How do you value the retirement benefit?

To collect on retirement benefits, you have to attain age 60, not be entitled to receive military retired pay through any other provision of law and complete at least 20 years of qualifying uniformed service. So how much would I have to invest this year to have this benefit?

Should I make it to that age, on Tuesday, August 12, 2036, I will be 60 years old (21 years from now). Here I have to make some assumptions:

  • I retire as an O-6 in 6 years from now.
  • Officer pay rises with inflation
  • Discount rate of 6{aaa01f1184b23bc5204459599a780c2efd1a71f819cd2b338cab4b7a2f8e97d4}

So, 6 years from now O-6’s will be making a base salary of \$119,726.16. The defined benefit plan for DoD is 50{aaa01f1184b23bc5204459599a780c2efd1a71f819cd2b338cab4b7a2f8e97d4} highest salary or roughly \$60,000. In then-year dollars that would be \$71,479.65 a year. So, avoiding all fees, if I wanted to have enough cash to provide me with an annuity that paid \$71,479.65 a year in 2036, I would have to have \$1,191,327.50. So, if I wanted \$1,191,327.50 in 2036, how much would I have to save per year when I started the reserves? It is easy enough to compute the payment amount for a loan based on an interest rate and a constant payment schedule. In my case, this comes to \$20,138.61 a year that I would have to invest to get that benefit. You could see the math behind all this on wikipedia. Now, one might question the value of \$71,000 in 2036. If we experience several years of high inflation (which we will) that might not be worth much. For example, in current year dollars assuming a 4{aaa01f1184b23bc5204459599a780c2efd1a71f819cd2b338cab4b7a2f8e97d4} rate of inflation, the retirement benefit is only worth roughly \$31 thousand annually.

What about other benefits?

Now, you also have to compute the value of medical benefits, etc. Military discounts, commissary, etc, which are going to be highly dependent on the individual, but I would personally pay no more this year than $500 to get. (The medical benefits might be huge as might the post-9/11 GI bill.)

The other big benefit is career diversity and having a broader network and official connectivity to two government organizations. This alone might be the biggest benefit of the reserves if a member is very transparent and wise in how they use this opportunity.

So, in total, I would say that I make \$35,500/year in reserve benefits. What is the downside? I could be spending my reserve time on my main career which could lead to more salary in the right field. I could also be building a start-up with that time that also might pay off and doing something that might be closer to my passion. I could be investing in my faith, house, family or health. However, the fact I work for the government means that I can actually do a form of approved side work. Other jobs/consulting would be much more difficult and uncomfortable. I could certainly have much less stress if I gave this up.

Would love any thoughts, particularly those which correct errors in my thinking above.

References

  1. ADA568422.pdf
  2. AFI 36-2254
  3. MOAA National Guard/Reserve Retirement Benefits

2 thoughts on “How much do IMA reservists make?

  1. You don’t take into account that the reserve retirement amount is based on your retirement points multiplier. Therefore as a reservist you won’t receive 50{aaa01f1184b23bc5204459599a780c2efd1a71f819cd2b338cab4b7a2f8e97d4} of the basic pay unless you have 7200 points. You will receive the percentage equal to your total number of retirement points divided by 360 (this will give you # of years multiplier) times 2.5 percent. That final percentage is then multiplied by the basic pay amount to find out how much retirement pay you will actually receive at age 60.

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