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Not so young military officer always open to advice
Old 09-22-2010, 05:00 PM   #1
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Not so young military officer always open to advice

Hi everyone,
I've been lurking for a good 6 months, but feel some questions coming on and want to introduce myself before I get that far. I am an active duty (34 years old with 12 years of service so far) US Air Force officer stationed in South America. I plan to stay until 20 to get the pension. If our quality of life is still good, I’d like to hit 25 years which would give me a pension of 62.5% of my basic pay. However, all my planning is based around doing 20 years.
This is the first marriage for DW and me. We don’t have any kids and are able to save/invest 25% of my pay and allowances. DW is not allowed to work here, but we max out our Roth IRAs and my TSP each year. My friends think I’m cheap, but I don’t con anyone out of free meals or scoot away before the bill comes or anything like that. I just don’t like to pay full price for anything if I can get a discount by waiting, bargaining, or doing a little research--old fashioned LBYM.
I got into First Command 12 years ago (of my own free will without mental reservation or purpose of evasion), but am all out now except for the whole life insurance. I’m just waiting for my USAA term policy to kick in, but doing all the physicals in South America was much harder than one might expect.
This is my 7th duty location in 12 years, so we’ve never owned a house. We are building up a down payment by setting aside $1500 each month into CDs that mature the month I’m scheduled to leave here. Odds are that we might move to another Latin American country next. If that happens, we will have to think about another place to put that money until the day we can buy a house.
The breakdown of our $290K in savings/investments is:
47% = S&P 500 index fund (taxable)
18% = S&P 500 index fund (Roth)
6% = CDs (house down payment)
29% = TSP G Fund

So I don’t have any questions yet, but will in the near future. Thanks for all the great info I've already gleaned from many of you.
Thanks,
Pajaro
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Old 09-22-2010, 06:14 PM   #2
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Pajaro, welcome to the forum!

You certainly sound like a kindred spririt -- an LBYMer and a saver. You've got a darn good start on a retirement nest egg. My guess is you'll be in great shape when you hit your 20.

I'll be looking forward to your future posts.

Coach
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Old 09-22-2010, 06:17 PM   #3
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Welcome aboard, Pajaro. Glad you saw the light about First Command. Sounds like you're doing great.
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Old 09-25-2010, 11:38 AM   #4
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It sounds like you are off to a great start. Welcome to the board.
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Old 09-30-2010, 06:36 PM   #5
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Welcome aboard. I was a Navy officer and got into the predecessor of First Command. I am now "recovered." Although it cost me more in fees and commissions than I needed to pay, I do credit that experience with getting me in the habit of regular monthly investments. If only I'd done it with Vanguard I'd have more money now.

A couple of things I will point out:
- A military pension is a wonderful thing. Whether or not you work in a second career after you retire, you will always have a solid base of income.
- Things may change over the years, but my experience is that having TRICARE is another wonderful thing. Even after you get old like me (>65) and have to go on Medicare, TRICARE is always there as a second payer. AND, you get prescription benefits which can be really important as you age.

Thank you for your service and good luck in the remainder of your career.
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Old 09-30-2010, 07:21 PM   #6
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Pajero,
- Welcome to the board.
- It sounds like you are doing a very good job of saving.
- Don't forget that you can withdraw your contributions to a Roth IRA (not the interest/growth) at any time without penalty. So, some folks use their Roth as a means to save for the downpayment on a house, etc. rather than using a non-tax sheltered account as you are doing. It's not a clear "no brainer", since once you take that $$ out of your Roth it's not earning tax-free money to support your retirement. Still, it's an option, and if you aren't maxing out your Roth before saving for the house downpayment each year, you might want to do some figuring to see which route leaves you better off.
- Also, think hard before buying that house while you're still in uniform. We did both (rented and bought) during my USAF career, and definitely came to favor renting. It's a great relief not to have to sell a house each time you PCS--just give the landlord notice and you are done. It's also hard to make money on a house if you're just there for 3 years.
Welcome, I look forward to your posts.
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Old 09-30-2010, 08:35 PM   #7
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Originally Posted by samclem View Post
Pajero,
- Welcome to the board.
- It sounds like you are doing a very good job of saving.
- Don't forget that you can withdraw your contributions to a Roth IRA (not the interest/growth) at any time without penalty. So, some folks use their Roth as a means to save for the downpayment on a house, etc. rather than using a non-tax sheltered account as you are doing. It's not a clear "no brainer", since once you take that $$ out of your Roth it's not earning tax-free money to support your retirement. Still, it's an option, and if you aren't maxing out your Roth before saving for the house downpayment each year, you might want to do some figuring to see which route leaves you better off.
- Also, think hard before buying that house while you're still in uniform. We did both (rented and bought) during my USAF career, and definitely came to favor renting. It's a great relief not to have to sell a house each time you PCS--just give the landlord notice and you are done. It's also hard to make money on a house if you're just there for 3 years.
Welcome, I look forward to your posts.
My experience has been otherwise (although I will admit it is dated).
- Bought first house in MD suburb of DC in 1976. Spent 3 years in it. Rented it out for 5 years. Moved back for 5 years. Sold in 1989 for $235,000. (Obviously, I had some expenses over the years and we made some improvements so it wasn't all profit.)
- Bought house in VA Beach, VA in 1979 immediately after leaving the MD house behind. Paid $58,000; sold for about $75,000. I did take back a 2nd mortgage since the buyer assumed my VA mortgage. He sent me regular payments and paid off the loan when he sold in 1983.
- Rented house in Pensacola, FL that the owner really wanted to sell. As I had only a one-year lease, he pressured me to buy or leave. I bought with an FHA mortgage and then got short-toured so I only owned it for a year. I was lucky to break even on the sale.
- After living in base housing in ME for 3 years, moved back to MD (where I no longer owned real estate) in 1992. Bought a brand new house in a new development for about $280. Lived there 13 years. (The last 5 years of my Navy career and the 7+ years of my "second career.") Sold that house for $600,000.

So, over the years, owning real estate was good to me during my military career. BUT, things have obviously changed and I'm not so sure I would do as well if I were starting out now.

I'm not sure how things work in the AF, but in the Navy there are often places you can be fairly certain you will return to (Norfolk, San Diego, Washington DC.) If you can buy a house in a place like that early in your career, rent it while you are stationed elsewhere and count on returning, owning an be a good deal. With housing prices not going up dramatically these days, if you are only go to be in a location for 3 - 4 years and have no hope of returning, renting (or base housing) may be a better deal.
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Old 09-30-2010, 09:43 PM   #8
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You seem to be very well on top of things, so perhaps you have thought of this as well.
Before you graduate with 20 plus years, make it a point to obtain the highest possible security clearance. I don't mean the run of the mill "top secret" that every officer gets, but the top of the line, whatever the Air Force currently calls it. You may have to beg, plead or bribe--but get it.
You will not believe the doors that will open to you as a civilian because of that credential alone.
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Old 09-30-2010, 10:08 PM   #9
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If nobody else has said it, thank you (and your wife) for your service to our Country
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Old 09-30-2010, 11:32 PM   #10
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Originally Posted by jpatrick View Post
you seem to be very well on top of things, so perhaps you have thought of this as well.
Before you graduate with 20 plus years, make it a point to obtain the highest possible security clearance. I don't mean the run of the mill "top secret" that every officer gets, but the top of the line, whatever the air force currently calls it. You may have to beg, plead or bribe--but get it.
You will not believe the doors that will open to you as a civilian because of that credential alone.
ts-sci
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Old 10-01-2010, 12:24 AM   #11
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You may have to beg, plead or bribe--but get it.
You will not believe the doors that will open to you as a civilian because of that credential alone.
Although by the time you get it, and you do the things you're supposed to do with it, you may regret it...

It's just like combat pay and hazardous-duty pay. You really really didn't want to get paid for that stuff in the first place, and it's never worth the risk/effort. But it looks good on your resume.

Shucks, I'm probably still not allowed to travel to PRC or DPRK.
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Old 10-02-2010, 12:51 PM   #12
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Shucks, I'm probably still not allowed to travel to PRC or DPRK.
You know, I've looked into North Korea many times from the south side of the DMZ, and I'm pretty confident that you're not missing much by leaving it off of your vacation destination list.

China, on the other hand, is a great place to visit.
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Old 10-02-2010, 03:23 PM   #13
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Nords: :"Although by the time you get it, and you do the things you're supposed to do with it, you may regret it..."

And the crap you have to or need to forget....the process is a lot more onerous now to get the clearance. I guess I am interested in other things now - but then I had another job and profession I could fall back on as well.

Actually - Pajaro you are well on your way, so I wouldn't worry so much (unless the pitchforks of the citizens demand a reduction or rescinding of the pension benefits - low probability in my estimation for the military, maybe not so much for some govt civilians). If you have an interest for a follow-on career or hobby or something like that, you might start investigating that right now to see if it's possible. I'm a Reservist and left the active service to pursue my other career desire - I've managed to combine the two well and will probably have a decent early retirement assuming I want to totally drop my third career, consulting, which I can do at my leisure.

I believe the key is LBYM and investing in the AA that meets your needs - you can afford to be more risky with your investments as your pension acts like a bond fund, dividend fund or annuity - additionally, the comment about TRICARE is spot on - although we have yet to see what happens to that with healthcare reform - all bets are off until it all settles out over the next few years.

Welcome to the board and best of luck in your plans!
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Old 10-02-2010, 03:51 PM   #14
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You know, I've looked into North Korea many times from the south side of the DMZ, and I'm pretty confident that you're not missing much by leaving it off of your vacation destination list.
China, on the other hand, is a great place to visit.
Good to know. If Chinhae is the best that either Korea has to offer then I won't be back anytime soon. First (and last) time I'd ever had a port brief warn us about hepatitis. And it wasn't the food, either.

I think our China visits will be by way of Hong Kong & Shanghai.

Our kid is filling out her NROTC NAC paperwork this month, and I can't wait until the investigators realize what her parents did for a living...
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