waterglass.jpgI've always liked letters from people in military service. One reason: They tend to be brief, well-organized and "mission oriented." Another reason is that service is their primary motivation. The money stuff is just part of making it possible, and I like that.

A recent letter, however, triggered some thoughts and comparisons that all of us should consider. A career officer wrote to ask about the dilemma that virtually all military people face: Long before people realized that IBM stood for "I've Been Moved," military personnel were being moved with great regularity.

The first move is often exciting, particularly if you are single and in your 20s. The second move is OK. The third is harder.

The officer had realized that moves were probably the hardest part of military service. What worried him, in addition to the emotional stress it caused his family, was that he felt disenfranchised from homeownership. If you move regularly, he explained, it didn't make sense to buy a house. For one thing, it might not go up in value. Worse, it was unlikely to rise enough to cover the costs of buying and selling.

So homeownership was a non-starter. The same happy choice that has benefited millions of civilian workers was a major financial hazard for a career officer. Since homeownership is also how most Americans accumulate much of their net worth, a military career compounded the stress of moving with a loss of financial opportunity.

Did I have any suggestions?

In fact, I do.

The first is to start with a new perspective.

The traditional sources of financial security for civilians have been (1) Social Security, (2) homeownership, (3) employer pensions and (4) savings in taxable or tax-deferred plans. Read the figures on income sources at retirement and you learn that Social Security is the ball game for many Americans.

Homeownership is important, but it's really a kind of national ZIP code lottery. Buy a house in an appreciating area on the East or West Coast, and you win the lottery. Buy a house in Fargo or northern Michigan and, well, you own a house--- maybe against your will.

Outside of government service, however, pensions are headed for extinction faster than any creature on the endangered species list.

According to recent figures from EBRI, the Employee Benefit Research Institute, the number of workers covered by single-employer (non-union) pension plans has declined from 22.2 million in 1988 to only 16.2 million in 2005. Over the last 20 years the number of single-employer plans has plummeted, falling from 112,208 in 1985 to only 28,769 in 2005.

Military personnel, however, have a powerful pension plan. It provides 2.5 percent of base pay per year of service. So a person with 20 years of service will leave with 50 percent of pay covered. After that, they will have an annual cost of living adjustment. This is about twice the crediting rate of corporate pensions, which range from 1 percent to about 1.5 percent per year of service. Corporate pensions are seldom inflation-adjusted. Inflation adjustment adds about 50 percent to the real value of the military pension.

To put the inflation adjustment in perspective, its financial value--- alone--- is likely to exceed the value of the house an officer could afford to buy and finance.

Military personnel can also participate in FERS, the Federal Employee Retirement Savings plan. This plan offers the least expensive index funds on the planet, delivering investments at a cost of 4 to 5 basis points. That's 0.04 percent or 0.05 percent. As a result, military personnel are likely to enjoy returns that are at least 1 percent a year greater than the returns experienced by civilians in moderately inexpensive 401(k) plans.

What this all comes to is that the military benefits system, compared to the benefits available to private-sector civilian workers, provides added financial benefits greater than the financial value of owning a home. And it does it with far greater certainty---as it should.

Does that solve the problem?

Only the financial part. The point here is that the military glass isn't half empty, as it may feel without a home sweet home.

The unsolved part is the psychological benefit of homeownership. I'd like to hear how other readers, military or civilian, handle this. Send your comments and I'll post them with this column.

CORRECTION: The column on military homeownership and pensions, the TSP (Thrift Savings Plan) was incorrectly referred to as the FERS (Federal Employee Retirement Savings) plan. Military personnel are eligible for the TSP, not the FERS.