What civilians really make p1 - Military Transition - Military Times EDGE

When Dave Smith left the 10th Mountain Division in 2004, there was a puzzle he had to solve before he could settle comfortably into civilian life:

How much would he be earning?

“It’s very complicated,” said Smith, 34, now a project manager with manufacturing company G.A. Braun in Syracuse , N.Y. “When you are looking at job offers, most people tend to look at the salary and use that as the basis for making decisions, but there’s … a lot more that goes into it.”

The military’s total compensation package goes well beyond basic pay, and it can be tricky to take into account all those perks when comparing military to civilian paychecks. It’s rarely apples to apples.

“Just comparing salaries would be very misleading,” said Dr. Saul Pleeter, Defense Department assistant director of compensation. “There are lots of benefits that military members don’t pay a penny for, where civilians pay a lot.”

While there are plenty of good reasons to leave military service for a civilian career, take-home pay may not be one of them. In fact, thanks to hidden benefits such as tax-free shopping, multiple allowances, special pays, cost-of-living adjustments and more, you may be doing better than you think. Here’s how to run the numbers.

Salary is just the beginning

For those in uniform, base pay is just the start. Compensation takes many forms, starting with tax-free cash, which Pleeter described as one of the biggest financial benefits available to those who serve. As a civilian, “I pay federal income taxes on all my salary. I pay state income taxes. I pay Social Security taxes,” he said.

Smith found the tax burden staggering as he weighed civilian compensation packages against his military pay with combat-zone exclusions.

“In the military I was deployed a lot, so I hardly ever had any income that was taxable. And now my tax bill is tremendous, especially because I live in New York. The taxes are ridiculous.”

Consider, too, the Basic Allowance for Housing (BAH) and Basic Allowance for Subsistence (BAS). Together these average more than 30 percent of a qualified service member’s pay, and they are not taxable. That’s a big break.

Of course, the BAH and BAS are significant benefits even before factoring in any tax savings. These may amount to tens of thousands of dollars a year in compensation beyond what is shown in the paycheck. You won’t find that in most civilian jobs.

Nor are you likely to find such a generous retirement package, education benefits and extensive health-care coverage. You won’t get a Family Separation Allowance or Temporary Lodging Expense, either.

“You have to look at your base pay, but then there are all those hidden benefits that you take for granted when you are in the service. All those things add up,” said Cecilio Webb.

Webb, 32, served as a military engineer in the Army, including time in Iraq. He left the service in July 2006 and now works in the technology practice of HNTB Federal, a division of architecture-and-engineering consulting firm HNTB Corp., in Kansas City, Mo.

Webb learned fast to look beneath the surface of the numbers when talking to employers. He says he got several job offers that would have left him taking a pay cut compared with his military earnings — in particular because of regional cost-of-living differences.

He found that a $50,000 annual salary is worth a lot more in, say, Oklahoma City than Los Angeles.

“The hardest part for me was understanding how health care works on the civilian side. I went from high school to West Point to life in the Army, and I had never had to deal with any of that stuff,” he said.

Other benefits were just as baffling. “What is flex spending? What is an employee ownership plan? Does day care come out of my flex spending account? Coming from a military background, everything is provided. That’s all I knew,” he said.

Nor are benefits necessarily consistent between potential employers.

“It surprised me how wide the variety of options is out there,” Smith said. “Some companies have tremendous benefits, and some have not very good benefits at all. Coming out of the military, you assume benefits are pretty much the same, but really there can be quite a big difference” between companies.

Back of the envelope

There’s one quick and easy way to figure out how your military dinero translates into civilian shekels: It’s the Defense Department’s Regular Military Compensation Calculator, an online tool that offers a straightforward means of factoring in the major variables.

Take a single soldier, an E-8 with 10 years of service, drawing pay in Alaska. Base pay is worth just over $45,000, to which the calculator adds the value of BAH, BAS and the military tax advantages to end up with a civilian equivalent of $78,700 a year.

But not every civilian package is the same. While private-sector compensation may include perks such as a retirement plan, for example, those retirement benefits vary widely. Some companies may match an employee’s 401(k) contributions dollar for dollar up to a certain percentage, for example, while another may pay just 50 percent for every dollar you invest. The difference to your overall bottom line can be substantial.

“It’s a question that you have to ask because every company is different,” said Tim Coleman, president of Stratus Consulting, an executive search consulting firm.

An ex-Marine who gets about half his work from placing former military personnel, Coleman points out that with economic conditions being what they are, even a great 401(k) plan may not amount to much, regardless of matching funds or any other factor. “Right now the market isn’t performing well, so it could actually become a wash.”

More factors

While the calculators can crunch the numbers, there are other variables — such as the worsening recession — that should inform your decision-making process. Just because a computer network administrator averages $67,850 per year, according to recent statistics, it doesn’t necessarily mean that’s how much you will make in these tough economic times.

“We have placed a number of veterans in metropolitan New York, and they are competing with tens of thousands of people who have recently been laid off,” Coleman said. “So these are highly qualified people, and yet I know many of them are taking a decrease compared to what they were making in the military.”

“It depends on the industry, it depends on the skills, and it depends on the market,” he said.

In this light, DoD’s Pleeter said, BAH and 401(k) are just a part of the mental arithmetic that goes into weighing your choice to stay in or get out and find a civilian job.

“I would look at both the short run and the long run,” Pleeter said. “It’s one thing to just look at wages, but you also want to look at the opportunities for promotion, for increased responsibility, along with additional training and education. Too many people take the best-paying job that might be forthcoming, without giving sufficient weight to the future.”

Your priorities

Putting aside the intangibles, a rough balance of the tangibles may cause some to consider the virtues of staying in the service. So says the 10th Quadrennial Review of Military Compensation, a survey ordered by the President every four years.

Pleeter served as deputy director on that effort to assess the status of military versus civilian pay. The study found that the typical military employee — counting base pay, housing, subsistence and federal income tax advantages — out-earns 70 percent of civilians in comparable jobs.

Add state and local tax incentives, plus military health care and retirement benefits, and the figure rises to 80 percent.

But just what is a comparable job? Many military positions have no ready equivalent in the civilian world. So while the money may be comparable from one job to the other, the hours, the tasks and the sphere of responsibility all may be very different.

Smith, the 10th Mountain soldier, knew all this as he considered leaving the service, and he weighed the numbers carefully. In the end, he took a 10 percent cut in overall compensation in his move to the private sector. For this father of two, being able to spend more time with his kids ultimately tipped the scale toward civilian life, though hard numbers alone had suggested he should stay in uniform.

“I just wanted to be with them growing up,” he said.