I think that where this line of thought misses the mark somewhat is that, as people become older and more senior, it's not just about personal income but household income. Plus, over the course of a 20 year career, the inability to purchase and build equity in a home is a huge financial hit.
Personally, I know that my wife would be happier if she were able to build a career, but that's not feasible because I will have to be exceptionally lucky to live in a place for more than 3 years (and I won't know it until near the 3 year point). I'd also feel more comfortable with my wife and kids dealing with deployments and hectic schedules if they had roots in the area -- close friends who they've known for a long time. So while I would take a paycut to O-3 pay leaving the Navy, the fact that my wife can build a career would more than make up for it. And the cherries on top are that my kids won't have to find new friends every 3 years and I won't ever have to go underway on short notice or miss birthdays/holidays/growing up milestones.
Then there's the fact that enlisted servicemembers want to start families, too, and they don't make anywhere near O-3 to O-5 pay while doing it. So when a flag officer who's set with a 6-figure income for life gets in front of a crowd telling them that they are overpaid, then it's a huge slap in the face.
My family is well off financially while I'm active duty, but if I look into the future retiring as an O-5 (assuming I even get selected), I'm trying to figure out how to send my kids to college in the next 3 years and how to purchase my first home while competing with people substantially younger than me for jobs. Meanwhile my wife is also trying to finally start to build a long-term career in her upper 40s. Quite honestly, the prospect of that is very scary to me. AD pay isn't going to make me stay/leave, it's what happens to my family when, not if but when, the Navy spits me out.
