Military Career Path Decisions Part 1: What’s an MBA Worth?

Today will begin the first of a three part series aimed at examining the financial outcomes associated with potential courses of action a Soldier, Sailor, Airman, or Marine could take at the end of their contract or service obligation. Fully acknowledging that everyone has different reasons to continue their military service, pursue a different career path, or continue their education, this series will focus solely on financial outcomes associated with each path. For the sake of simplicity, we will examine three choices: leaving the military and pursuing an MBA, leaving the military and pursuing a new career, and continuing to serve until retirement. The financial outcomes for each will assume that the service member has completed a 4-year degree (either through commissioning or through tuition assistance), is eligible for full post 9/11 GI Bill, and has served honorably prior to exiting the military. Today we will examine the financial costs and benefits associated with pursuing an MBA.

COSTS

The costs of an MBA include both the financial cost of the program and opportunity cost associated with lost wages for 2 years while completing the program. For this reason, one might consider pursuing a new career and earning an MBA either through night classes or in an online setting. Many of the actual costs incurred, however, will be covered by the Post 9/11 GI Bill. If you’re not familiar with the program, please do some research as you’ll find it covers housing (E-5 with dependents rate), tuition, and a book stipend. In addition, many programs cost much more than the annual G.I. Bill allotment for tuition. Yellow-ribbon program eligibility and financial aid can cover these additional costs.

The chart above reflects the cost with yellow-ribbon program for out of state residents at each school (not including any university grants or financial aid). A green circle indicates that the Yellow-Ribbon program and G.I. Bill will cover the school’s cost entirely. While this is a good look at the average cost, you may want to discuss the actual costs with the institution prior to making significant decisions. The low end of these programs would cost you absolutely nothing for a 2-year MBA and the high end would cost around $100,000 in tuition alone.

BENEFITS

The benefits of an MBA when leaving the military are multifaceted. First, an MBA is an excellent way to transition into the business world as the program enables you to spend two years with peers from top companies around the world. The effects of being around talented peers alone could be worth the cost. Second, you gain valuable skills that you can combine with your military experience to sell to potential employers. Third, an MBA is said to double your salary according to some research — at least for those in traditional, non-military career fields. Given that we are looking at strictly financial outcomes today, we’ll take a look at what that potential salary entails.

Post-MBA salary is largely driven by the quality of the institution you attended. The chart above gives the post-MBA salaries of what are widely held to be the top 10 MBA programs in the United States. An MBA from one of these programs is certainly a ticket to higher future earnings, but not all MBA programs yield similar results.

The field you choose to work in also drives earnings potential for an MBA program. While the salaries reflected above certainly don’t match the astronomical salaries seen by the top 10 programs, there is a clear difference in what individuals make in different sectors. Consulting is the clear winner with an average salary of over $130,000 while non-profit employment earns less than $60,000 annually. While this analysis is solely financial in nature, remember that different career fields have positive and negative aspects as well as non-monetary benefits such as vacation time and work-life balance.

FINAL FINANCIAL VALUE

To compare the three options previously discussed, we will obtain a range of future potential earnings for acquiring an MBA and then pursuing a career, going directly into the work force after leaving the military, or remaining in the military until retirement. To compare these options, we will make the following assumptions.

1. You begin the MBA or join the work force at age 30, the average age of an MBA applicant who is eligible for full GI Bill (assuming commissioned or used TA for Bachelor’s) which means beginning post-MBA employment at 32
2. Your salary increases at 2% per year to remain on pace with inflation
3. You work continuously until age 65 with no breaks, layoffs, or sabbaticals

The table above details the least lucrative post-MBA career field, the most lucrative post-MBA career field, and the average salary from the top MBA program from an earnings perspective (Stanford Graduate School of Business) and sums those earnings from age 32 to age 65. As you can see, the earnings vary greatly depending on the institution you graduate from and your chosen career field. Thus, from a purely financial standpoint, you can expect to earn between $2,764,000 and $8,487,000 with a post-military MBA transition. Please remember that these numbers are based on average salaries and do not include all monetary and non-monetary benefits. At the end of the day, it is important that you choose a career or path that is right for you!

For those that are interested, our next blog post will focus on the total financial compensation for pursuing a career without an MBA, and the following will examine the financial benefits of a full military career. $

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Any accounting, business or tax advice contained in this communication is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion.