My DW and I joined in March and really enjoy the site - we are so happy we found ER.org! It has taken a while to find time to introduce ourselves, my apologies for being remiss.
I am 47 ½ and have served in the Army in one capacity or another since 1984
DW is 29 ½ and has worked in a variety of jobs since we married. Being a military spouse can make a career problematic; DW must hunt down a new job every time the Army moves us. We've lived in 5 different states in the past 7 years just to give a bit of perspective.
We’ve discussed early retirement for the past few years, but have only been seriously planning for about a year or so. Both of us are aggressive savers – we’ve always been that way. We save roughly 63% of our income.
Our asset allocation is VERY skewed. Based on our ages and health, we believe we can afford a high level of risk. A big factor behind our logic is my defined benefit Army retirement we’ll start drawing as soon as I retire. We believe we can live solely off of this with a comfortable lifestyle. Our savings and investments we envision covering fun, travel, providing for emergencies, and increasing our financial quality of life in the long term.
A quick snapshop of our finances:
- Zero debt beyond our monthly credit card bill. We try to pay for everything using a credit card to earn travel miles. We jump credit cards based on mileage deals.
- We can cover 4+ months of expenses with what we keep in our checking and money market funds.
- We have an additional 55K in cash saved for future purchases/expenses (new-used car, new furniture, unforeseen tax situation, charity, etc…). This could be reprogrammed for an emergency if ever needed.
- We have two distinct timelines for our retirement accounts, based on our 18 year age difference.
- I have 355K in an IRA and TSP (earliest draw in 12 years – 2025)
- DW has 95K in her IRA and TSP and a small annuity (earliest draw in 30 years – 2043)
- Based on our age difference, I have Long Term Health Care insurance - $250 a month cost for $350 a day benefit with 5% annual increase in benefit, 30 day exclusion.
- Additionally, I will elect for the full Survivor Benefit Program (SBP) – this will cost 6.5% of my pension check. It will pay DW 55% of my monthly pension. Good news is that it is deducted before taxes, lowering my tax basis. SBP is paid in full in 30 years, so if I make it to 80, the payments stop.
- We have roughly 1.3M in taxable accounts
- We also have a rental property (paid off) that is worth roughly 100K
- My retirement pension is worth roughly $6450 a month pre-tax. We anticipate a 15% effective tax rate, so we believe we’ll draw $5480. My retirement benefit increases roughly $1.25 a day for every day I serve until I retire, so the longer I serve, the higher my pension, and the smaller the amount we’ll need on top of my pension.
Our retirement budget includes each month: SBP premium, dental insurance, Long Term Health Care insurance, Tricare (health insurance), auto insurance, homeowners/rental insurance, umbrella liability, housing (rent or mortgage, prop tax), heat/ac, electric, internet access, cell phones only, cable (if we decide we want it), Netflix, car maintenance savings, gas, future car savings, groceries, restaurants, travel, DW hobby, crossfit membership, clothes, grooming, tax savings, my hobby, and a buffer for unforeseen expenses. We have pegged these by looking at what we currently spend, and typically increasing them because of factoring in more time at home running the a/c, more driving around because we like to, acquiring hobbies, that type of thing. Items we are considering adding: electronic life cycle savings category (new computer, new tv, ect..) as the ones we have die, major appliance lifecycle (washer/dryer, fridge type stuff), considering increasing restaurant budget as wife likes a drink or 3 occasionally.
Based on our forecasts above, we believe we’ll need $7600 a month post tax to enjoy the lifestyle we’d like to have. The good news is we recognize the difference between “need to have” and “like to have.” We believe we “need to have” $5400 a month…my pension can cover that! However, we’d “like to have” $7600. The delta between the two numbers is money for travel ($1000 a month), hobbies ($700 a month total), and money for an emergency buffer ($500 a month). Note: We budgeted $700 a month for hobbies…but we don’t have the hobby part figured out yet…gardening, photography, ? We need to work on this!
To cover the $2200 “shortfall,” we’ve already built part of our taxable portfolio into a dividend generator. We have roughly 230K of our portfolio invested in high yield stocks (WIN, MAIN, CODI, HPT, SDRL, BWP, MPW, TCAP, CLMT, VNR, BBEP, NMM and PSEC). I purchased enough shares of each company to produce roughly $100 per month in dividends. With dividend growth so far, we average $1500 a month. We reinvest these dividends. I have enough cash saved to make 3 more $100 per month return investments, and we are on track to save enough cash to invest in an additional 4 X $100 per month return investments before we retire. With these 7 additional investments we’ll hit our $2200 per month. Between now and retirement, I anticipate the dividend payments will increase another $200 a month based on the dividends reinvesting. I do not count this additional money in my calculations…I’m making the assumption that some of the stocks may cut or cease paying their dividends. I also assume some will increase their dividends (MAIN, TCAP, HPT, PSEC and CLMT already have), and that this can help offset any reductions.
As a backup…we like backups and redundant systems…we have another account worth roughly $380K that already pays $1600 a month in dividends (we reinvest this money). We have no current plans or need to draw from this account. It is designed to help us keep pace with (or beat!) inflation. Primary investments are GE, KMP, FGP, PBA and RIT. KMP is one of my all time favorites stocks!
Subtract the two dividend producing accounts from our taxable accounts leaves us roughly 690K in various accounts for portfolio growth.
I am planning on retiring on January 1st 2016. Factoring in leave/vacation time, I see my last day of work as Monday, August 17th 2015. 840 days
from today…but who is counting? Besides DW and I that is!
There is a chance we will delay a year or possibly two, but only if my next assignment is in Texas – where we want to retire. If we get stationed in Texas AND I enjoy the job, I’ll happily serve a few more years. The additional accumulation will be a benefit, but the reason for staying is the love of the work. I wish I could say the same for my current job…I’m very much looking forward to my next assignment!
We aren't planning on drawing Social Security. I don’t trust our politicians to keep the program solvent. I believe if the program still exists when I am eligible to draw benefits, it will probably be means tested and we won’t qualify. My present SS benefit is estimated to be just over $2500.
We feel comfortable we already have enough money to retire. Every scenario we run on FireCalc gives us a 100% success rate.
What we are having a challenge with is figuring out how we will spend our time in retirement! A little extra sleep, more reading time, walks together, crossfit or a run every day may take up 4 or 5 hours. We’re both concerned about how we will spend the rest of our time. We’re sadly use to working 12+ hour days routinely. What will we do with the extra free time? We think about travel, more leisurely cooked meals, volunteering, helping people that need it, etc… Although we think we have the financial part of retirement taken care of, we look forward to reading more about how early retirees enjoy spending their time.
If you’ve made it this far into our long introduction, thanks for sticking with us! We optimistically await your comments and ideas. We look forward to hearing your thoughts on things we may have overlooked. Is there something we should be doing, or thinking about that we aren’t? We would enjoy hearing your thoughts on the high-yield stocks I’ve purchased and any ideas for others I may have overlooked too.
Our thanks to all that have made being a member or ER so enjoyable! We’ve learned so much already! Excellent counsel on effective tax rate vice marginal tax rate (I had been using marginal!). Wonderful post on what to do in the months, weeks and days just before retirement. Great counsel by both moderators and members….we’re so happy to be here!