When officers hit 20 years, one of the most common thoughts is, “I can make more on the outside.” For many, the plan is to retire as a Lieutenant Colonel, take the pension, and step into a high-paying civilian job — maybe in the airlines or another industry — and start building that second career. On paper, it looks like a no-brainer. But when we run the numbers in detail, the story often changes. The increased pension from making Colonel and serving three more years can be worth far more than most people realize, and it can significantly change your lifetime earnings picture.
At 20 years, retiring as a Lieutenant Colonel provides a pension of about $66,000 a year in 2025 dollars — roughly $3,300 for each year of service. Staying in for three more years and promoting to Colonel raises that pension to about $88,000 per year — a $22,000 annual increase for life. If we assume you live 45 years past O-5 retirement, that additional $22,000 per year is worth $487,000 in today’s dollars when valued as the equivalent of an annuity.
If we treat that $487,000 as “earned” during those three extra years, it’s like adding an extra $162,000 per year in value to your Colonel salary. Think of it as a company contribution to your retirement account. In other words, while you’re making around $204,000 in active-duty pay and allowances as a Colonel, you’re also effectively “earning” another $162,000 per year in future pension value. That means your total annual compensation during those last three years is closer to $366,000 when you account for the pension upgrade.
This is where many people miscalculate. They compare O-5 pension plus civilian pay to O-6 pay alone and assume the outside wins. But when you combine O-6 active-duty compensation with the future pension value you lock in, those last three years are often the most financially rewarding period of your entire career.
For those transitioning to the airlines, the higher O-6 pension also helps cushion the probationary year when pay is lower. While this isn’t the main reason to stay, it’s a real benefit that eases the first-year income gap before your civilian pay ramps up.
Using planning software and modeling an identical post-military career for both officers, with both retiring at age 65, the results are clear: the Lt Col path finishes at about $8.46 million in total lifetime income, while the Col path finishes at about $9.02 million. That’s a difference of more than half a million dollars over a lifetime, even after accounting for the delayed start in a civilian career.
Staying isn’t right for everyone. There are important trade-offs. On the pro side, you lock in a guaranteed higher pension, increase your SBP base, add three more years of full medical coverage for potential issues, gain the prestige and potential career boost of O-6, and delay the airline probationary year while increasing total income over the period. On the con side, you could face another PCS or even two, risk additional deployments, delay starting seniority in a civilian job, endure three more years of CBTs and PT tests, and possibly delay VA disability pay.
Beyond the math, there’s the intangible value of continuing to serve. The military is more than a job — it’s one of the most satisfying callings there is. It’s service to your country, working alongside the greatest peers you will ever have. Serving three more years not only boosts your financial future, it extends your time in the most rewarding and honorable profession in the world.
No one’s situation is exactly the same. If you’d like to work with me to model your own scenario and see the numbers for yourself, you can book an appointment directly through my website: HighFlightFinancial.biz. You can also find all of the MQFPs here.
You can also view my video on the topic at:
