Greetings!!! Military Officer approaching retirement

[surferLife]

Greetings ER Community! Long-time lurker, first-time introduction. I learned about the forum from Nords book (The Military Guide to Financial Independence and Retirement), and have since enjoyed reading through the forum here and at Bogleheads, while getting ready for my own ER.

I'm 43 yrs old, an O-5 with 20 years of service, and will be retiring in 3 years as an O-5 with 23/yrs. I am married, DW is in mid-30's (yeah!), and one DS, 1 yr old. We are hoping to have a few more children, most likely through adoption. DW is a SAHM, but has a significant income potential. She will likely go back to work when I retire because she wants to, at which time I will become a SAHD, homeschooling our children. Her potential income my range from 30k/yr to 160k/yr, just depending on what she wants to do. The important thing is that we hope to be in a place where she can choose to do whatever she wants to do and doesn't have to pursue a j*b just for the money. Here are our stats:

Retirement accounts: 600k (combination of TSP/401k/Roth TSP/Roth IRAs)
Taxable accounts: 340k (75% of it in a 1% savings acct for impending home purchase)

Expected military pension: 50k/yr after-tax (high-three, and slightly under-estimated on purpose)

I have looked at the disability schedule and plan on having around a 30-50% disability rating, and since that process is so complex, I don't have any idea how much that will affect my pay other than knowing it will increase it. The above 50k/yr figure does not reflect this assumption.

I have signed over my GI bill to DS and he will get around 30 months of benefit (3-ish years of school). We are NOT doing college savings/529s because once the kids are in college, we will be able to pull from retirement accounts without penalty. Also, we want them to pay for some of their education (not all). That 30 months of benefit will be spread out among the rest of the kids if/when they come.

We are currently renting in the states and it's frustrating not being able to build equity in a home; we will be moving again in a few years, location unknown. We are aggressively saving so that we can purchase a home outright at retirement. This is a primary goal for us. With a paid-for house and military retirement, I think we should be okay, even if DW doesn't go back to work. We are not big spenders and believe in driving used, paid-for cars. Anything we don't spend on the house when retirement comes, we will use to fill the gap before we reach age 59 1/2. The biggest unknown is "where will we retire?" We can't currently answer that. Obviously, Silicon Valley is out of the question, and we don't want to live in the mid-west (no offence), but the west coast offers the furthest distance from family, and that is appealing. We would like a couple acres, so there is also that.

We would love to have any feedback on our plan. Looking forward to learning more and sharing those milestones when we reach them!

 

[kitesurfer2]

a plan on 30 to 50% disability....

 

[DFA]

Welcome to the forum and thank you for your service. I retired USAF in 1996, but got a j*b in IT for the last 18 years waiting on DW to retire with 32 years USAF/ANG and 25 years civil service (delayed because of MEB now).

Your saving and pension are looking good, but you did not mention your spending and that is a big piece of the ER puzzle.

Have you owned a house before? If not, you will find that even new ones have a lot of costs; we are looking to update our Master bath and it will cost around 20K for a medium upgrade, then there is painting, appliances, and lots of other stuff.

We don't have kids, but I understand they are expensive too.

One other thing I found out is that if you get a VA rating of less than 50% they offset your retirement pay by that amount (I was enlisted with 30% VA, I believe that they do the offset for everyone with less than a 50% rating, but I may be mistaken, let me know).

Things we found out about the VA process; get a copy of your medical records before you retire and they are sent to archives, this is very important and can help the VA process since it can take up to several months to go to archives and then to the VA for evaluation. The VA process is slow, DW has been waiting about 9 months so far since the process starts and stops a lot. Also, use one of the service agencies such as DAV, American Legion, there are others, they do this all the time and are a great resource.

 

[surferLife]

Yes, of course, the budget. We spend under 50k/yr.

We have been homeowners before and understand the costs involved.

For the disability, I know enough to be dangerous and understand the offset. I will be on the border so that can be a swing of a few hundred a month. With the figuring I have done, I'm guessing it will increase the pension by around 500/mo ($476 to be exact), but I don't want to "count on that", so I don't include it in projections, other than, it will be something. I'd rather under- than over-project. I'm also aware that the number of kids you have affects that, and that number is with 1 kid, but God-willing, there will be a few more.

Great recommendation about the DAV and others! I am a member of the VFW and will reach out to those organizations when that time gets closer. I have a few binders full of medical records at home due to all my issues. Getting a copy of them at retirement is necessary, but with the shift to electronic records, it's not like it used to be. You still have your old record, but now everything new is put into "the system", and it has been that way for a few years now. Do they just print it all out for you? I'm guessing yes, but we'll see...

 

[Dash man]

You may want to put your money that is marked for the house into a 5 year 2.25% Synchrony Bank CD instead of the 1% savings. It sounds like you're a few years away from actually buying, so the higher interest rate should offset the penalty you'll pay to close the CD early.
Another thing to consider since you don't have a retirement location picked out yet, is to rent for the first year when you do select a location to make sure you like the area. Rushing to buy a home in an unfamiliar place can be a very expensive mistake. Renting in an area allows you to learn the neighborhoods, schools, employment opportunities, recreation areas, etc. The emotional satisfaction of being a homeowner can evaporate quickly if you find it wasn't the right decision.

 

[DFA]

Well if your spending is less than your pension you shouldn't have any problems.

I was looking at the the VA rates with spouse and one child they are: 30% $491.75, 40% $699.36, and 50% at $976.13, tax free.

One other thing about the VA hospital system once you are in make sure you see a DR a least once or twice a year to stay active in the system, if you go over a year then you could be dropped out of the system and have to start the ~ 6 month process to get a Primary Doctor again, it happened to me and what a pain.

 

[surferLife]

Well if your spending is less than your pension you shouldn't have any problems.

I was looking at the the VA rates with spouse and one child they are: 30% $491.75, 40% $699.36, and 50% at $976.13, tax free.

One other thing about the VA hospital system once you are in make sure you see a DR a least once or twice a year to stay active in the system, if you go over a year then you could be dropped out of the system and have to start the ~ 6 month process to get a Primary Doctor again, it happened to me and what a pain.

Thanks for the VA rates, it has been a few years since I updated them, and I only took note of the 30% one. I'll be sure to put those in my spreadsheet(s). Yes, I'm very much the planner in the family. There's a big difference between 30% and 50%. If I recall, each additional kid adds a certain amount, but I forget how much, I just remember that it wasn't substantial.

I did not know about having to see a Dr to stay active in the system. That is fantastic information.

 

[surferLife]

You may want to put your money that is marked for the house into a 5 year 2.25% Synchrony Bank CD instead of the 1% savings. It sounds like you're a few years away from actually buying, so the higher interest rate should offset the penalty you'll pay to close the CD early.
Another thing to consider since you don't have a retirement location picked out yet, is to rent for the first year when you do select a location to make sure you like the area. Rushing to buy a home in an unfamiliar place can be a very expensive mistake. Renting in an area allows you to learn the neighborhoods, schools, employment opportunities, recreation areas, etc. The emotional satisfaction of being a homeowner can evaporate quickly if you find it wasn't the right decision.

After moving around for nearly 25 years, we are all too familiar with buying in unknown areas and we will take necessary precautions.

Yeah, the problem is that we don't know when we'll be moving and/or find a house, so it can be anywhere between 1 and 4 years. Agree on the renting, and we are not against that, it just depends on what the military does with us, that is the main issue we have to plan around, and we want to stay flexible. I can run the numbers again on the CD and see where we're at. We'll probably wait 6 months, which is when we'll know where we're moving to, and then we'll be able to decide then to buy a CD or keep it in the savings acct. From a planning perspective, that information will really set the stage for the next 4-5 years and we'll be able to make more sound decisions than we are able to do now.

 

[surferLife]

I'll also have about 10% combat zone disability, and I know that gets treated differently from regular disability, but I haven't figured that one out yet.

 

[Senator]

I think the disability rating switches some of the retirement money to disability money. I do not think it increases the actual money. That is then tax free. I am 10% disabled as well, but not retired military.

You get a National Park pass for free, plus many other Federal and State discounts. Here in MN, you can even ride the bus for free.

Good luck!

 

[DFA]

Other things to look at depending on VA rating is Education benefits through the VA for dependents and spouse title 35, license plate discounts or free, fishing and hunting discounts or free, property tax discounts or refund of property taxes paid and depending on rate and state you live in there are other discounts you can find them at the state VA offices or state VA website.

 

[Dash man]

I know people have different experiences with the VA, but when I got out in 1995, I gave it one shot and never went back. My issues were not as serious as many have today, but my nephew has more problems and is having a terrible time getting the care he needs. A newly retired Lt Col neighbor of mine isn't having much success either. I wish you the best in your efforts.

 

[DFA]

I know people have different experiences with the VA, but when I got out in 1995, I gave it one shot and never went back. My issues were not as serious as many have today, but my nephew has more problems and is having a terrible time getting the care he needs. A newly retired Lt Col neighbor of mine isn't having much success either. I wish you the best in your efforts.

I know what you mean on having trouble with the VA, my BIL, had two heart attacks, and a host of other issues and is still fighting with them about his rating. His issue is that he did not complain to the doctors while in and there is nothing in his medical record for his health problems, he also did not get a copy of his medical records before getting out and they seem to be lost and he can not prove service connection for health problems, that is why I recommended getting a hard copy for yourself before getting out.

DW had back fusion surgery this year and is still fighting with VA too going on 9 months and now she was to retire at the end of the year, but is being held up for MEB.

Sorry about the short hi-jack of the thread.

 

[Katiek]

Welcome to the forum. You've done a great job saving while in the military, and as long as you have a good idea of what you spend and in what categories, it sounds like you're well set.

 

[alistair]

I think the disability rating switches some of the retirement money to disability money. I do not think it increases the actual money. That is then tax free. I am 10% disabled as well, but not retired military.

You get a National Park pass for free, plus many other Federal and State discounts. Here in MN, you can even ride the bus for free.

Good luck!

At a 50% or higher disability rating, the money switches from replacing retirement pay to supplementing (tax free).
"VA math" is complex but can be figured out via spreadsheet once you know your rating.

--

Curious if you have used any of your GI Bill? Normal benefit is 36 months which is generally good for four years of school (9 months / year).

---

w/rt retirement pay, don't ignore the increase in taxes you may have to pay after retiring and with your wife making something close to or above 6 figures.

State income tax could be a significant surprise if you don't pay any now.
Replacing your tax free housing/food allowance with equivalent income (with aim to have same take home pay) can be another surprise.
Thankfully, medical shouldn't be a huge burden unless you need more than Tricare (a steal at $600/yr).

---

Anyway, welcome aboard!

 

[mickeyd]

We would love to have any feedback on our plan. Looking forward to learning more and sharing those milestones when we reach them!

Thanks for your service SurferLife. I see that you are not a newbee, so I won't welcome you to the group.

Looks to me like you have a solid plan that is well thought out SurferLife. As long as you LBYM you will retain the high ground.

 

[Gumby]

As long as you LBYM you will retain the high ground.

Or as we Navy guys say, you'll retain the weather gage.

 

[haloFIRE]

Concurrent Receipt

A VA disability rating of 50% or higher triggers Concurrent Receipt. At that point the VA gives you tax free dollars in addition to your military retirement.

For instance: if your military retirement is $X and you have a VA rating less than 50%, the VA will replace a certain amount of your military retirement with tax free VA disability dollars. You can look up the amounts on the VA website. So, imagine your military retirement is $1000 a month, and you have a VA disability rating that equates to $200. The $200 from the VA replaces $200 from DOD. You will still get $1000; 800 for DOD and 200 from VA. The benefit is that VA dollars aren't taxed.

If your VA rating is 50% or higher, VA pays additional tax free dollars....without reducing your military retirement.
So again, if your military retirement is $1000 a month and your VA rating is greater than 50%, you will receive $1000 from DOD and additional dollars from the VA. I think married with 1 child equates to roughly $900 at 50%. So You Would Draw $1900. $1000 taxable from DOD and $900 tax exempt from VA

Hope this helps

 

[Van-Guard23]

surferLife,
Welcome to the forum and thanks for your service! I retired from the Army as an O-5 a couple of years ago after 20+ years (turned down BN CMD and retired here in Hawaii instead). My wife is also an O-5 and will retire from the Army effective next month...so we are enjoying our ER life...many thanks to Nords for giving us the confidence to retire early and not feel compelled to rejoin the rat race of a bridge career and civilian employment.

It looks like you are on track. You are getting some very good advice here.

I just wanted to second the recommendation to consider CDs to hold your future down payment for your home purchase. I use Ken Tumin's website to check on current rates: https://www.depositaccounts.com/savings/ Would at least double your APY from what you are getting currently from your savings account. Heck, about a year or so ago, PenFed even offered a 5-year CD with a 3% APY (with modest EWP)...quite a coup in this low-interest environment.

Regarding the VA...be prepared for a slow, long process. It's all a crapshoot! It took 15 months from date of submission for me to get my rating...while a buddy of mine who retired after me got his in like 6 months. Payments are all backdated so it wasn't a big deal, but it would suck for those veterans who really need that money.

 

[surferLife]

Curious if you have used any of your GI Bill? Normal benefit is 36 months which is generally good for four years of school (9 months / year).
---
w/rt retirement pay, don't ignore the increase in taxes you may have to pay after retiring and with your wife making something close to or above 6 figures.

State income tax could be a significant surprise if you don't pay any now.
Replacing your tax free housing/food allowance with equivalent income (with aim to have same take home pay) can be another surprise.
Thankfully, medical shouldn't be a huge burden unless you need more than Tricare (a steal at $600/yr).

Alistair,
I have used some of my GI Bill, not much though. DS should still get 75% or more of it.

Understand about state income tax, and yes, we don't pay that now and haven't for 20 years. We have not decided on our retirement location, but in the running is Texas, Florida and California. Very different states when it comes to taxes and cost of living. We are not calculating DWs income potential in our spreadsheet as it's so much up in the air right now, and she likes to volunteer. I know I said on the low end she could make around 30k, but she might just volunteer making nothing. Although she can easily pull down a 6 figure salary and then some, I don't think she'll decide to go that route when the time comes. That income comes at the expense of family and time, perhaps a cost that is too high for our family. If we weren't in the financial position we are now, or we're determined to live in NYC or San Francisco, then of course, she'd likely go back to one of those jobs. If she does that, that's fine, but I want her to make that decision out of desire, not out of need. Also, if she goes back to work and brings home 6 figures, then we don't have to do anymore retirement planning, because she will have esentially broken through the ceiling on all our planning, in a good way.
Honestly, if we had that much money coming in, I don't know what we'd do with it other than save it and keep winning at the game. We're pretty simple people and don't desire to be the richest people in the graveyard. As long as we can have a strong family, give our kids a great inheritance not just in money but with our time, values and world view, then I think we will feel as though we've won.

My FIL keeps mentioning to me that I need to get a job after retirement, probably because being a SAHD with 1 or more kids and homeschooling them isn't really work. He does not know our financial position, but he is the kind of person that will pursue money first and family second, even if he has enough money. In a bit of irony, those charactestics are the exact reason why we look at it differently, because both DW and I were products of such households. Kids don't care if you have 1 or 2 million, they just want mom and dad to be around. In the world we live in today, we think that spending that time with them is an investment in itself.

 

[surferLife]

A VA disability rating of 50% or higher triggers Concurrent Receipt. At that point the VA gives you tax free dollars in addition to your military retirement.

For instance: if your military retirement is $X and you have a VA rating less than 50%, the VA will replace a certain amount of your military retirement with tax free VA disability dollars. You can look up the amounts on the VA website. So, imagine your military retirement is $1000 a month, and you have a VA disability rating that equates to $200. The $200 from the VA replaces $200 from DOD. You will still get $1000; 800 for DOD and 200 from VA. The benefit is that VA dollars aren't taxed.

If your VA rating is 50% or higher, VA pays additional tax free dollars....without reducing your military retirement.
So again, if your military retirement is $1000 a month and your VA rating is greater than 50%, you will receive $1000 from DOD and additional dollars from the VA. I think married with 1 child equates to roughly $900 at 50%. So You Would Draw $1900. $1000 taxable from DOD and $900 tax exempt from VA

Hope this helps

So what you're saying is, once I reach 50%, my income rockets up an additional $12k/yr. That'd be great, and would be a nice kicker for all the damage that has transpired over the years. I think there can also be significant state benefits for a high rating as well (property taxes/license plates, etc), which essentially increases that even more. I do have a lot of issues, so I think getting to 50% would be possible. It's that dang VA math though. On the plus side, I do have an issue where I start at 30%, so that'll help. After looking at the VA schedule of disabilities, I have conditions that "should be" rated at 30, 10,10,10,10, and that doesn't even count the ones that are tenative. I think that gets me to 46%, rounded to 50%, but of course, you never know what they're going to rate you. I'm all too familiar with how long it can take to get your rating, and unfortunately, the fighting to get it increased.

 

[DFA]

So what you're saying is, once I reach 50%, my income rockets up an additional $12k/yr. That'd be great, and would be a nice kicker for all the damage that has transpired over the years. I think there can also be significant state benefits for a high rating as well (property taxes/license plates, etc), which essentially increases that even more. I do have a lot of issues, so I think getting to 50% would be possible. It's that dang VA math though. On the plus side, I do have an issue where I start at 30%, so that'll help. After looking at the VA schedule of disabilities, I have conditions that "should be" rated at 30, 10,10,10,10, and that doesn't even count the ones that are tenative. I think that gets me to 46%, rounded to 50%, but of course, you never know what they're going to rate you. I'm all too familiar with how long it can take to get your rating, and unfortunately, the fighting to get it increased.

The VA has a chart of rating math that goes like this, starting with the highest rating and working you way down to the lowest:

30+(70*10)=37+(63*10)=43+(57*10)=49+(51*10)=54%

The chart is:38 CFR Book C, Schedule for Rating Disabilities - Web Automated Reference Material System subpart A 4.25 Combined Rating Table.

 

[surferLife]

The VA has a chart of rating math that goes like this, starting with the highest rating and working you way down to the lowest:

30+(70*10)=37+(63*10)=43+(57*10)=49+(51*10)=54%

The chart is:38 CFR Book C, Schedule for Rating Disabilities - Web Automated Reference Material System subpart A 4.25 Combined Rating Table.

With that math, I'm even closer to 50% than I thought; that is good news. Clearly, I need to go back and look at the math and update my spreadsheets. Thanks for this info, DFA, it's very helpful.

 

[ExFlyBoy5]

Yes, of course, the budget. We spend under 50k/yr.

We have been homeowners before and understand the costs involved.

For the disability, I know enough to be dangerous and understand the offset. I will be on the border so that can be a swing of a few hundred a month. With the figuring I have done, I'm guessing it will increase the pension by around 500/mo ($476 to be exact), but I don't want to "count on that", so I don't include it in projections, other than, it will be something. I'd rather under- than over-project. I'm also aware that the number of kids you have affects that, and that number is with 1 kid, but God-willing, there will be a few more.

Great recommendation about the DAV and others! I am a member of the VFW and will reach out to those organizations when that time gets closer. I have a few binders full of medical records at home due to all my issues. Getting a copy of them at retirement is necessary, but with the shift to electronic records, it's not like it used to be. You still have your old record, but now everything new is put into "the system", and it has been that way for a few years now. Do they just print it all out for you? I'm guessing yes, but we'll see...

I have a lot more to comment on, but time is short. I retired from the AF last December and yes, all STRs (med records) are electronic, but guess what? The VA never got them. I physically had to mail them to the evidence processing centers. Also, your mileage with a VSO may vary...I didn't use any because of the poor service several of my retirement brethren had to endure. I instead made sure I had all my ducks in a row and filed a FDC. It took 5 months to get processed, but would have been much shorter since I held off on sending my STRs until the VA gave up on the AF.

Also, can you clarify your understanding of the offset? Do you expect to pay that high of a tax to get an additional $400'ish a month? Just wanted to make sure that you truly understand that any disability under 50% will effectively be NO more than the tax savings of the offset.

Sent from my mobile device so please excuse grammatical errors.

 

[surferLife]

I have a lot more to comment on, but time is short. I retired from the AF last December and yes, all STRs (med records) are electronic, but guess what? The VA never got them. I physically had to mail them to the evidence processing centers. Also, your mileage with a VSO may vary...I didn't use any because of the poor service several of my retirement brethren had to endure. I instead made sure I had all my ducks in a row and filed a FDC. It took 5 months to get processed, but would have been much shorter since I held off on sending my STRs until the VA gave up on the AF.

Also, can you clarify your understanding of the offset? Do you expect to pay that high of a tax to get an additional $400'ish a month? Just wanted to make sure that you truly understand that any disability under 50% will effectively be NO more than the tax savings of the offset.

Sent from my mobile device so please excuse grammatical errors.

Regarding the offset. I understand it competely, and the tax savings, and when you hit 50% it's concurrent receipt. I think I must have had two thoughts going, sorry for the confusion.

Good to hear about you sending your info straight to the VA. I thought they had to receive the exam info from the military. I understand you sent your supporting documentation, but what about the exam?

Looking forward to hearing any other of your input!