The American Dream Costs How Much?!?!

You don't have to be plugged in to the news, politics, or even social media to be aware that most people in 2024 think the American Dream is under threat -- maybe even dead. Chances are you've heard it mentioned around the dinner table when you're home on leave, or maybe even from some of the more chatty members of your unit. On the other hand, most of these complaints about the state of America and its Middle Class today usually focus on something that is hard to measure, or just one person's opinion. Maybe they think the American Dream is dying because of "wokism", immigration, gas prices, or something else entirely. If the American Dream depended on any one of those things to survive, our nation would have been in deep trouble long before today . . . 

But these "doomsayers" still aren't necessarily wrong, even if they miss the mark. The reality is that the American Dream really is in great danger. That's because it has gotten so expensive to afford all the parts of that Dream that most people, including almost the entire Middle Class, will never be able to afford it. That means that instead of the American Dream being the "promised land" for the Middle Class, or something to aspire to achieve from the Working Class, it is now almost exclusively available only to the Upper Middle Class, or the Top 10% of Americans.

Cost of the American Dream in 2024

According to a recent report by Visual Capitalist on the cost of the American Dream in 2024, achieving a Middle Class lifestyle in America will cost $4,442,050 over the course of a lifetime. That breaks down to the following major categories:

• "Basic" Retirement - $1.6 million
• Home Ownership - $929,955 (purchase price + interest paid over a 30-year loan)
• Raising 2 Children - $832,172
• Car Ownership - $811,440 (payments only, NOT including fuel + repairs)
• Vacations - $179,109 (one car-based vacation per year, WITHOUT airfare, for 60 years)

The reality of course is that this is a gross underestimate of the cost for both obvious and not-so-obvious reasons. The obvious reasons include that these costs are frozen in time, but in reality they will go up with inflation; additionally, the survey missed some major categories and details:

• Lifetime Health Care Costs - $500,000
• Groceries, food, gas, clothes - $600,000+
• Taxes - $500,000 (Source)
• Vacations - most families will fly and buy travel packages for vacations, doubling the cost from $3,000 to $6,000 per year (+$180,000 total)

And the most important not-so-obvious reason is that $1.6 million is absolutely not enough for retirement by the time you want to retire. Within the Military Wealth Coach community, we encourage you to plan for at least $2.5 million (with a more optimal retirement savings goal closer to $5 million by age 65); most gurus and experts have begun arguing that $5 million is the magic number. (Source: "Grant Cardone: $5 Million Is Now the Magic Number for Retirement Savings")

Adjusted for reality, we're now talking about the American Dream costing $7.2 million over the course of a lifetime! And yet we also know that the lifetime earnings of the average American is only about $1.7 million, or $3.4 million for a married couple, which isn't even half of what you need. Even with a college degree, those earnings only rise to about $2.3 million, meaning a married couple might get just past halfway to the goal. With statistics like these, it's easy to believe that the American Dream is out of your reach. And yet with strong financial education, a Personal Financial Plan for you and your family, and a rock-solid budget, it's still very much within your reach.

The Cost of a Middle-Class Military Lifestyle 

Before you decide your Dream Life will be impossible to afford and give up -- and especially before you think you'll never be able to afford it on a military salary and get out -- take a moment to look at how the lifetime benefits of a military career level the playing field. With the right financial strategy, these benefits can turn a military career into a path to financial freedom and the American Dream. 

 1. Healthcare Savings with TRICARE: Single military members save $400-600 a month with free TRICARE compared to civilian plans; for a military family, this savings increases to an average of $18,000 per year when compared to the costs of a family health insurance plan under the Affordable Care Act (ACA). In retirement, TRICARE for Life premiums cost about $1,000 per year.

• Savings Impact: $400,000 - 500,000 over 60 years

 2a. Tax-Free Basic Allowance for Housing (BAH): Active-duty members living off-base receive tax-free housing allowances averaging around $30,000 per year. This allowance not only reduces the taxable income of service members, keeping them in a lower tax bracket, but also eliminates FICA taxes on BAH. For a household where both spouses serve, this tax-free benefit could save an estimated $6,600 per year in FICA and another $5,000 in federal taxes.

• Savings Impact: $220,000 over a 20-year military career

 2b. Room, Board, and Utility Savings for Enlisted Members: Enlisted members in the barracks receive free room, board, and utilities. These expenses amount to an estimated $1,300 per month or $15,000 per year for civilian single adults in their 20s.

• Savings Impact: $120,000 over two enlistments

 4a. Blended Retirement System (BRS) Matching: The BRS offers a 5% matching contribution for service members who contribute to their Thrift Savings Plan (TSP). This effectively creates a 5% “bonus” on top of the Base Pay, which can accumulate significantly over a career.

• Savings Impact: Over 40 years invested until age 65, your matching contributions from 20 years of service will grow to $300,000 - 500,000.

 4b. BRS Pension (Defined Benefit): The average military pension is roughly $24,000 per year (although about 50% higher for officers), and for the average retiree who separates around age 40-42, this will be paid out annually for 40+ years.

• Savings Impact: $700,000 - 1.1 million

For those in the military, benefits offered like healthcare, tax-free housing allowances, and the Blended Retirement System (BRS) matching contributions provide a critical financial advantage. In fact, your career in the military will pay you back with lifetime benefits that have a financial value of $1.75 million to $2.5 million. This means that you can afford the American Dream with 25-35% less income and savings than the average American requires.

Building Wealth and Securing the Dream with a Financial Plan 

The real secret to closing the income-savings gap (getting from a lifetime earnings of $2.3 million to the $5 million needed to afford the American Dream) is investing. When you invest and earn 8%, 10%, or 12% on your money, you can start to double your savings every 6-10 years. If you need $5 million by age 65, that means your savings portfolio should be worth about $2.5 million at age 56, $1.25 million at age 47, or just $625,000 at age 38. (That assumes you stop saving completely, but the reality is that you will keep saving of course!)

By harnessing the cash savings you keep from your military benefits, both while in uniform and once retired, and investing them wisely, you can easily hit these numbers and easily create and afford your American Dream. Let’s look at how investing the savings from military benefits over a 20-year career can create substantial wealth:

 • Enlisted Savings Potential: An E-5 living in barracks with TRICARE saves approximately $21,000 per year through room, board, utilities, and health care.

 • Annual Contribution: If an enlisted member or officer invests their savings of $21,000 annually at an 8% annual return, this amount could grow to over $1.5 million after 20 years.

 • Officer or Dual-Income Household Savings: A dual-income officer household can save up to $32,000 per year between tax-free BAH, health care, and tax savings on Base Pay.

 • Portfolio Growth: This cumulative investment return can cover the $2.2 million shortfall most households experience, creating a bridge to financial security and the ability to retire comfortably.

We're just talking about doing this for 20 years. Extended out another 20 years, and just letting that $1.5 million Enlisted Nest Egg grow in the stock market, you could have $12.7 million! The officer household's $2.2 million portfolio at the time they retire after 20 years at age 43 or 44 could grow to $19.5 million by the time they reach 65! Of course you'll take money out along the way, and not every year will bring great returns, but it should be clear that even just exploiting 1-2 of your military benefits can be life-changing.

Why Smart Budgeting and Investing is Essential 

Simply having military benefits isn’t enough, because if you spend the money you saved by not having to buy food, pay rent, purchase health insurance, or over-save for retirement to compensate for losing your military pension when you get out, you'll be right back where you started. The key is leveraging these savings effectively, which means (1) knowing where they are, (2) creating a budget so you can capture and not spend those savings, and (3) having a consistent and smart investment strategy to put that money to work for you.

At this point you should be able to "check the box" on #1, knowing all the ways your military pay and benefits translate into lower living expenses, which allows you to invest more of your paycheck. The next step is #2: budgeting. The optimal budget for anyone in the military is the 40:40:20 Rule, which means you spend 40% of your paycheck, give up 20% for taxes -- and invest the other 40%. If you can't reach a 40% savings rate right away at the start of your career, whether that's because you're paying off credit cards and cars, working on eliminating student debt, or starting a family, that's totally fine. Just make a plan that with each promotion and Time In Service (TIS) pay raise, you'll add that extra cash to your savings rate until you hit 40%.

Saving 40% can buy you financial freedom and the American Dream in 20-22 years. Sure, it's hard work, but imagine a lifetime of not worrying about money? Are you willing to cut back on things for the next decade or so in order to have 60+ years of worry-free living -- or would you rather keep spending, avoiding savings, and working and stressing about money well into your 80s?

Once you have the budget and the savings rate, you've got to invest your money. Check out our other blog posts and our Podcast in which we help break down exactly how to invest your money in a way that is aggressive, yet safe, and that balances long-term maximum growth in your retirement accounts with short-term guaranteed cash returns for immediate goals like a new car or your first house. 

Conclusion: How Military Wealth Coach Can Help 

The path to financial freedom for military families is not only possible—it’s closer than most realize, especially when compared to the average American household. You will make enough money from your military salary to keep up with the civilian Joneses, but then your benefits will help you leap ahead in the race to Financial Freedom. By acting now and using the tools and benefits available, military members can start 2025 with a plan that moves them toward wealth, not debt.

But navigating these financial options isn’t always simple. The Military Wealth Coach can help you create a personalized plan, teaching you to leverage your benefits, invest wisely, and achieve the financial goals you may have thought were out of reach. Don’t wait for New Year’s resolutions: take action now, and take control of your finances by scheduling a free consultation TODAY.