“I bet it could probably be done with as little as 100 thousand at enlistment.”
At historical rates of return in the stock market, say 7% real rate of return, $100K would become nearly $400K in today’s dollars ($387K) by the time 20 years was done. Assuming an enlistment age of 18, a 48-year old could buy a lifetime annuity of $1885 monthly with no inflation protection or $1623 monthly with a 3% inflation rider.
I have no idea how these figures compare to the standard annuities given to military retirees, but if they waited until age 65 to collect it, it would grow to $1.2 million in today’s dollars. That amount could generate an annuity of $6,600 monthly without an inflation rider or $5,251 with a 3% rider. Again, I don’t know what the norm is, but these strike me as reasonably generous guaranteed retirement income amounts—especially if they also qualify for a Social Security benefit (do they? Sorry, I have no idea).
Anyway, your proposed amount could be adjusted as needed so that the results better matched whatever retirees now can count on from the system. What I like about pre-funding in the fashion proposed is that we could allow those who leave before 20 years to obtain a pro rata share of the amount vested. For example, if they retire after 10 years, they’d be entitled to half of the $100K plus whatever earnings had been generated to date. So even if the back end benefit were not quite as generous as it is today, I would assume this restructuring might be attractive since I believe military can’t collect their retirement until/unless they’ve served 20 years.