Military Mathematics

Should Michael withdraw from his military pension early to pay off debt, or leave it in there for retirement?

QUESTION: Michael is in the Marine Corps and can either take a $30,000 bonus now and a hit on retirement of about 10%. Should he use that to almost get out of debt?

ANSWER: If you take the money and invest it in a good mutual fund, it will grow to more than enough to support more than the 10% you lost. Also, when you die, that money stays in your family. It survives you, while your pension does not. Take the money only if you don’t squander it. Now, is it squandering it if you pay off debt? If you pay off $30,000 in debt, would you build up more wealth using the payments you used to have? Mathematically, the answer is yes. But the math keeps working when the people quit working. So this has to do with your behavior. If you followed through, this ends up wise. But if you pay off debt and then buy a new red truck, it breaks it all down. You have to decide that about you and yours. Commit to following through.