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Young-ish military family hoping to get on track with FIRE
Old 08-01-2017, 12:10 PM   #1
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Young-ish military family hoping to get on track with FIRE

My husband and I are both 31 and have recently started off on the path to FIRE. We have one son, but are planning on having more children. We are currently stationed in Texas. We have been saving and investing for retirement and have never led extravagant lives with debt or excessive spending so we aren't necessarily starting from scratch, but we were following the advice of only putting away 15% of income in savings. We have since changed this as of a few days ago!

We practice frugal living and do not have new cars or fancy clothes, we have zero debt besides our mortgage. We plan to sell our house when we PCS next year and are planning on renting or living on base depending on the location, etc.

My husband is in the Air Force and has about 8 years left until he retires from active duty. We wish to retire in 8 years and collect his pension. We still plan to work, but only work we enjoy! We have $20k in his Roth TSP allocated between C (60), S (20) & I (20) funds, $24k in one Vanguard Roth IRA, $24K in another Vanguard Roth IRA, $7k in a Vanguard Index Fund/Money Market and $20k in our savings account. We were not maxing out his TSP, but will start that next year and have already increased it for this year. We earn a combined $96k/year. Our expenses are about $40k per year.


I am a disabled veteran and I receive disability so that is a steady source of income for us. I am finishing up my Master's degree with the remainder of my Post 9/11 GI Bill and will stash all of the BAH into investments/savings for the next year. My husband has his Bachelor's degree and is getting ready to test for E-7.


How are we doing? Is $20k enough in our savings? Should we stop putting money into our savings account? I never know how much to keep in savings. We plan to max out Roth TSP, two Roth IRA's, invest some into an index fund and then continue to build in a high interest saving account every year. Am I missing anything? Are we pretty much on track to FIRE? Any advice/tips are appreciated...



P.S. We just started reading Nords book: The Military Guide to Financial Freedom and Retirement and plan to research everything and weigh our options BEFORE military retirement. I just want to make sure we are doing everything we can as early as possible. Thanks in advance and look forward to learning and implementing as much as possible!
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Old 08-01-2017, 12:16 PM   #2
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Welcome and thank you and your husband for your service. Great idea re: Nords book. Lots of great info and resource links. Have you thought about keeping the Texas house as a rental? If you are in it that means a follow on Air Force person would probably like to live there too.
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Old 08-01-2017, 04:46 PM   #3
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Never stop saving! OK, maybe not never. It has been said on here before. Don't let life pass you up while you save for something that may never happen. Nord's book is a great start.

I retired in 87 with about $60,000 in the bank, two kids, one of which started college in 67. I looked at my retirement income and I looked at what it was going to take to maintain our life style. Between my wife and I we had to come up with about $1,000 a month after tax income. We both went to work. Did we have to? In hind sight most likely not, however, we now have a low six figure retirement income, a two comma savings account and live exactly where we want and do what ever we want when ever we want.

I am not like some of the folks on here, work was not something i hated. I think you will be in the same boat. If you are doing what you want and have the time for kids and family, why not.

I doubt this helped. But good luck. You have the basics down. LBYM's.

Added: Keeping and renting the home is good advice. We did that and it gave up a start when we left the Air Force.
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Old 08-02-2017, 04:18 AM   #4
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being frugal is good. being too frugal is not. TSP is retirement, right? You have A WHILE to retire so put it all in the C fund and let it ride.
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Old 08-03-2017, 10:07 AM   #5
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You have a $56k/year difference between spending and earnings (before tax?). Being military, the tax hit is not going to be as bad (thanks to BAS/BAH), so I'll guesstimate a net $45k difference.

$11k to Roth IRAs (max for each of you) and $18k to Roth TSP accounts for $29k of that. Leaving ~$16k/year.

You already have 6 months worth of expenses and at least one job that has fairly secure prospects, as well as your disability income. Given that situation, I'd say that is more than enough to serve as your emergency fund. Thus I'd stop putting money into that unless it is for some other form of savings (vacations etc).

Thus, with the $16k remaining (assuming your budgeted $40k includes savings for vacations, home repairs, etc), I'd put that all into a taxable account and invest it fairly aggressively in low cost index funds (boglehead style portfolio if it were me).

I would double check your numbers however, unless you just relatively recently started saving, as your current savings/investments seem to be only about 2 years difference between expenses/earnings currently. Even taking into account lower pay likely in previous years, it still seems quite low relative to the disparity between your stated spending and earnings. Is $40k/year your spending, or just your bills (and not accounting for things like fun/eating out/vacations/etc)?
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Old 08-04-2017, 08:03 AM   #6
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Originally Posted by exnavynuke View Post
You have a $56k/year difference between spending and earnings (before tax?). Being military, the tax hit is not going to be as bad (thanks to BAS/BAH), so I'll guesstimate a net $45k difference.

$11k to Roth IRAs (max for each of you) and $18k to Roth TSP accounts for $29k of that. Leaving ~$16k/year.

You already have 6 months worth of expenses and at least one job that has fairly secure prospects, as well as your disability income. Given that situation, I'd say that is more than enough to serve as your emergency fund. Thus I'd stop putting money into that unless it is for some other form of savings (vacations etc).

Thus, with the $16k remaining (assuming your budgeted $40k includes savings for vacations, home repairs, etc), I'd put that all into a taxable account and invest it fairly aggressively in low cost index funds (boglehead style portfolio if it were me).

I would double check your numbers however, unless you just relatively recently started saving, as your current savings/investments seem to be only about 2 years difference between expenses/earnings currently. Even taking into account lower pay likely in previous years, it still seems quite low relative to the disparity between your stated spending and earnings. Is $40k/year your spending, or just your bills (and not accounting for things like fun/eating out/vacations/etc)?
Thanks! We were only putting about 15% of our income into savings. Early retirement is a new goal so we are adjusting things accordingly.
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Old 08-04-2017, 08:08 AM   #7
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Thank you both for your service.
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Old 08-05-2017, 01:11 PM   #8
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Quote:
Originally Posted by nanonova View Post
P.S. We just started reading Nords book: The Military Guide to Financial Freedom and Retirement and plan to research everything and weigh our options BEFORE military retirement. I just want to make sure we are doing everything we can as early as possible. Thanks in advance and look forward to learning and implementing as much as possible!
Thanks for reading the book!

It sounds like you're doing fine. Keep maximizing your contributions to your TSP and your IRAs and then put more way in taxable accounts.

You haven't mentioned it, but if you're getting your advanced degree and your spouse has his degree, then you might want to consider transferability of his GI Bill benefits for your kid(s). That requires his four-year obligation, and you may not want to do that, but if you're dead set on eight more years of active duty then that's one benefit you can exploit.

Quote:
Originally Posted by nanonova View Post
How are we doing? Is $20k enough in our savings? Should we stop putting money into our savings account? I never know how much to keep in savings. We plan to max out Roth TSP, two Roth IRA's, invest some into an index fund and then continue to build in a high interest saving account every year. Am I missing anything? Are we pretty much on track to FIRE? Any advice/tips are appreciated...
As long as you're on active duty, you probably don't need a big emergency fund. You could put a month or two of expenses in a fund, or you could put away savings for a replacement vehicle or a new roof.

On active duty you have a relatively high likelihood of continued employment as well as access to advance pay-- and possibly even low-interest loans or grants from your local financial-assistance organization.

If $20K helps you sleep at night (and handle any large home expenses) then you're good.

Once you've gotten out of debt the Dave Ramsey way, you can start discarding the rules which no longer fit your goal of financial independence-- like a large cash stash for emergencies and sinking funds. If you can tap other sources of funds (without getting into debt) then you're in good shape without rigid rule-following.
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