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Am I crazy?
Old 04-17-2007, 05:50 PM   #1
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Am I crazy?

I'm a military dude and my wife and I have convinced ourselves that upon the golden 20-year mark or thereabouts we can sever ties to the workaday world. I guess I was hoping someone else could take a look at our situation and let us know if we're way off-base here.
The stories and progress every details on this site is incredibly inspiring, especially Nords' own success. I hope to follow in his footsteps. I'm approaching the 8-yr point in my career with a little way to go to make Captain (I'm a prior enlisted type) and getting near the end of a long, long road into a fighter jet (if I can ever get over the constant airsickness). My wonderful lady recently finished her nursing degree but only had a few months in her new job before quitting when we discovered to our great joy that we're expecting our first child. I'm hoping to make O-5 with some luck or at least Major around that 20-years in service point in 2019-2020.
Financially, we have an excellent safety fund in our savings account, close to $65K in IRA and TSP accounts, about 80K in equity in our 200K home, one paid off car (but another new car with a five year loan), and I make about 60K/year after taxes.
We figure she'll be back working in about a year making somewhere around 50K. Our expenses are around $36K/year, leaving us 24K per year to play with or 74K/year once she's working again and we can save her whole salary.
Obviously the USAF can throw a few wrenches into our best laid plans, but I may have the opportunity to stay at my current base for up to seven more years. The plan is to drop as much as possible into our mortgage and try to pay off the house within 2.5 years (2009-2010 or so). From there, we figure we can just bank all that mortgage money (about $12K/year) on top of our discretionary income, giving us $86K (74+12) or more, especially once I make Captain and the flight pay increases start hitting.
At that point I'll have a decade to go in the service til the earliest retirement point. Keeping it at the purely conservative knuckle-dragger lieutenant level of math, I figure that's 86K times 10 years = $860K. I imagine that we'll probably get some pay raises, perhaps bonuses, and interest an such along the way...so possibly resulting in a million or so. ( I like round numbers)
Alright, so that leaves us with a paid off house, almost a million bucks, a pension worth $45K/yr or more if I'm lucky, expenses around $30K/yr (all these figures are today's dollars), and whatever is in the IRAs and TSP for down the road with age 60 rolls around. I'm 29 now, so all this would happen around age 41-42. Oh yeah, we'd have a little one getting ready for high school before too long as well.
The goal is for us both to quit, never work again, and basically be able to do whatever we want (within reason) for the rest of our (hopefully long) lives.

Opinions on the plan? It seems too simple and almost too easy... I feel we MUST be missing something huge here that invalidates this whole idea. Otherwise, why doesn't everybody do the ER thing?
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Re: Am I crazy?
Old 04-17-2007, 06:05 PM   #2
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Re: Am I crazy?

A few observations:

1. Kids are not free, in fact they are quite expensive, especially if you want to help with college/weddings/cars/houses. You do not seem to have accounted for this in your calculations. If your wife goes back to work after a year then you will at least probably have some child care expenses.

2. If you say your expenses are around $36K/year, I'm just guessing but it sounds like you haven't actually tracked your expenses and are just guessing at $3K per month, maybe by adding up your regular monthly bills. In my experience, you can add anywhere from 25-50% on top of that regular monthly number for irregular expenses such as clothing, car repairs, doctor visits, taxes, birthday gifts, etc. So if your regular monthly expenses are at $3,000, I think most people end up spending $3,750-$4,500.

3. Depending on where you stick that $86K per year, you're actually probably looking at closer to $1.5 million due to compounding.

4. Your plans won't work if wife doesn't work. She may change her mind after the baby is born.

Just some constructive comments/criticisms.

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Re: Am I crazy?
Old 04-17-2007, 06:13 PM   #3
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Re: Am I crazy?

Kubrikiri, welcome to the forum.

Are you crazy? I can't answer that question, but your ER plans certainly don't indicate you are.

Quote:
Originally Posted by kubikiri
... and getting near the end of a long, long road into a fighter jet (if I can ever get over the constant airsickness)...
My condolences. I came within a hair of washing out of the program for that same reason, but I somehow managed to bag get my wings. Good luck to you.

Quote:
Originally Posted by kubikiri
Obviously the USAF can throw a few wrenches into our best laid plans...
Very true, but just wait and see what else life in general throws at you. All you can do is plan, work the plan, adjust the plan, etc. And your plan sounds good to me. You are miles ahead of where I was at your age.

Quote:
Originally Posted by kubikiri
I feel we MUST be missing something huge here that invalidates this whole idea. Otherwise, why doesn't everybody do the ER thing?
If you hang around the forum for a while you will learn that very few people "get" the ER thing. Obviously you do.



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Re: Am I crazy?
Old 04-17-2007, 06:36 PM   #4
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Re: Am I crazy?

Welcome to the board! Your plan seems very workable, though I have not doube-checked your numbers. Your plan is very close to what my wife and I did. Here are some observations:
-- PCS moves: You know your situation better than anyone, and you've been around long enough to know how things work. Is this idea of being at your present locaton for "up to 7 years" realistic? It is the unusual guy who stays in one place for that long--and you definitely won't be staying put once you get more senior. As a nurse, your wife has a highly transferable set of skillls, so that reduces one problem consideably. As far as buying houses--I've never been badly burned due to a PCS move, but I've been very lucky. We were far happier when we rented.
-- You're puting a lot into savings, and I noticed a lot of references to "we" rather than "I". That's a good sign--I take it that yor bride is fully on board with the living below your means (LBYM) lifestyle.
-- Banking al/most of your flight pay--excellent!! If you get into the habit of saving a bg chunk of each pay raise, you'll e able to stash away a lot of dough with minimal pain.

I'll send you a PM in a minute.

Flight training: Remember--pull back on pole, cows get smaller. Then no cows. Then cows get bigger.

Again, welcome.
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Re: Am I crazy?
Old 04-17-2007, 07:02 PM   #5
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Re: Am I crazy?

As a younger reader I dont always feel right responding to posts like this (normally i like to read plans and how toher posters respond).

I do have one little tiny thing I noticed and think is worth my input. If you have a 5 year loan on a car why wont you pay that off before you pay off your house? The interest on the car is just an expense, but the interest on the house is at least someone deductible.
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Re: Am I crazy?
Old 04-17-2007, 07:35 PM   #6
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Re: Am I crazy?

SecondCor521: Absolutely; the baselines I mentioned do not account at all for kid expenses. The lady and I are generally pretty frugal and we hope to keep kid costs down within reason, but that will definitely play a role. As for our expenses, the 3K a nice round number that generally jives within a few hundred tracked over the last year or so from our accounts online. We definintely do have some months into the $4K range but rarely do we get down below $2600 or so. Still looking to cut expenses (liberal air conditioning and highspeed internet are just too dear..). Another good point about post-baby work; while my wife is enthusiastic about getting back into the workforce (mainly to pursue these same retirement goals), it just may be the best thing if deployments and such get in the way for her to just be home. If that's the case, then this plan of course goes out the window and we'll reassess. Oh yeah, $1.5 mil sounds even better.

REWahoo! and samclem, always good to see other aviators!

Deetso: We've actually looked into the house interest deduction both on this home and a previous townhome we once owned, but we have never amassed enough deductions to make taking anything other than the standard tax deduction worthwhile, so the mortgage interest hasn't done us any favors yet.

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Re: Am I crazy?
Old 04-17-2007, 08:55 PM   #7
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Re: Am I crazy?

Welcome to the board, Kubikiri!

Tomcat98, whose contrail you're tracking, will be along shortly to fill you in on all the details. Hopefully you're keeping your head below the RIF horizon?

Quote:
Originally Posted by kubikiri
and getting near the end of a long, long road into a fighter jet (if I can ever get over the constant airsickness).
OK, USAF aside I think that settles the "am I crazy?" question...

Quote:
Originally Posted by kubikiri
Obviously the USAF can throw a few wrenches into our best laid plans, but I may have the opportunity to stay at my current base for up to seven more years.
Clearly you should do everything in your power to hide this opportunity from your assignment officer. And maybe your chain of command, too.

Quote:
Originally Posted by kubikiri
Keeping it at the purely conservative knuckle-dragger lieutenant level of math
(*snork!*) Oh, this is too easy. I'll let someone else take that one!

Quote:
Originally Posted by kubikiri
Alright, so that leaves us with a paid off house, almost a million bucks, a pension worth $45K/yr or more if I'm lucky, expenses around $30K/yr (all these figures are today's dollars), and whatever is in the IRAs and TSP for down the road with age 60 rolls around. I'm 29 now, so all this would happen around age 41-42. Oh yeah, we'd have a little one getting ready for high school before too long as well.
The goal is for us both to quit, never work again, and basically be able to do whatever we want (within reason) for the rest of our (hopefully long) lives.
You left out the $460/year healthcare insurance and the COLA boost on your pension. Even if you stall out (so to speak) at O-4 you'll still have enough to keep you in the style to which you're accustomed.

It really is that easy. Keep maxing out that $15K/year in the TSP (high in equities if you can live with the volatility) and both your IRAs. Bank all the flight pay, combat pay, and pay raises that you can. (If you can keep living like a lieutenant for the next decade then you'll be saving like a flag officer.) Keep tracking your expenses, develop an approximate post-retirement budget, and plug it into FIRECalc to confirm your instincts.

Quote:
Originally Posted by kubikiri
I feel we MUST be missing something huge here that invalidates this whole idea. Otherwise, why doesn't everybody do the ER thing?
Dude, I wish I knew. Your opinion is backed up by Russ Graves' survey data indicating that 85% (or more) of retiring officers are collecting a paycheck before they even get their first military pension check. It's too easy to blame it on the military mindset and the "get-a-job" approach of the transition planning process. Your insight into this phenomenon could someday help us all avoid work after military...
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Re: Am I crazy?
Old 04-17-2007, 09:52 PM   #8
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Re: Am I crazy?

Youre an anomaly. As youve observed, few people get the FIRE thing, especially as early as youre getting it. Your targets sound good to me and are fleshed out far better than my plans were at a similar juncture in my career. Prior to hitting 20, I was always focused on doing the next big career thing (not so much rank advancement but rather things that I wanted to do, adventures I wanted to have). There wasnt room in my imagination for a scenario in which my assignment prospects held nothing exciting (brother, has that changed!). I did have retirement young in the back of my mind, but was following the typical thinking that after the military Id find some enjoyable employment (now Im trying to figure out what employment that might be). Like many, I failed to do sufficient math on the issue until a couple years ago when I was already past 20 years. I also never became a savvy investor. If Id started crunching more numbers as early as you are, I believe Id have a heck of a lot more money now. On the other hand Id probably have frustrated myself, imagining a freedom so far in the future (from my perspective then its actually not so far).

When I did start seriously crunching the numbers, freedom became something of an obsession, although by that point Id also run out of military career ambitions too. I looked at my spreadsheet too often and found that I liked numbers associated with future dates but resented the time that stood between me and those dates. Military career irritants that had always been like water off a duck to me, began to feel more like burrs under a saddle on my back. As long you dont go there, it sounds to me like you are definitely thinking along lines that will see you well prepared to meet the future. As you say, the Air Force may throw some monkey wrenches into your plans. Its surely an expeditionary Air Force now. Good luck with that.
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Re: Am I crazy?
Old 04-17-2007, 10:53 PM   #9
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Re: Am I crazy?

Kubikuri, You are not crazy at all. It is very possible and simple because of the Cola'd military pension and healthcare.
I am an E-6 in the AF at the 12 year mark and my wife and I also plan on retiring from the work world after the military. I plan on doing 26 (or shorter)and with a conservative estimate of retiring at E-7 my pension will be a little over 30K and with our current savings rate we will have about 500k. So that would give us 50K a year to live on with a 4% withdrawal rate. Of course that is very conservative I could make E-8/9 and invest more once the house is paid off and future raises. I think you will have no problem with your plan with the amount you plan on saving. So it can definitely be done just look at Nords. I have read a lot of his posts and am also looking to him as inspiration. I can only find actual retired military on this board. Everyone at work is always talking about what their next career will be. I don't understand the mentality. Good luck on reaching your goal.
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Re: Am I crazy?
Old 04-18-2007, 09:11 AM   #10
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Re: Am I crazy?

Hello! We are counting on a military retirement also - DH is USMC, coming up on 12 years in (O4). I know what you mean about feeling crazy - we'd always been good savers, but I was still shocked to figure out that it actually might be possible to ER when DH's 20 years are up.

From our experience, it's all about LBYM. We've mostly only had DH's salary to work with, since I've been in mostly in school and working just enough to cover my expenses. No kids, so I can't speak to that. We've also gotten a lot of benefit from the time I've spent getting educated about personal finance - mostly books until I found this board.

As we've gotten older, and salaries have increased for DH and his peers, there's more and more contrast between our low-cost lifestyle and that of DH's co-workers, which is starting to lead to funny looks. Our cars are much older (but repainted, so not complete junkers) and our house is about half the size of everyone else's, plus it needed some work. Needless to say, no one else that we know is planning ER.

My planning for us has gone through several iterations as I've gotten more knowedgable, starting with the kinds of calculations you're doing. I figure even if it doesn't work out exactly the way we're hoping, we'll still be most of the way there, or have a lot more options.

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Re: Am I crazy?
Old 04-18-2007, 02:18 PM   #11
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Re: Am I crazy?

Average Joe: You raise a point that hits home. Despite our goal time frame really only being just over a decade away, its very easy for me to lose perspective now and then when certain military related setbacks or inconveniences crop up. I tend to distract myself a little too much after a real bad day (or week) with thoughts of alternative things I could be doing. I always come back around eventually and get myself into a more positive frame of mind, as I have so much to be happy about. But from the valley, sometimes those peaks seem very high and far far away.

I can't say I'd consider myself a savvy investor of any sort. I like the simple solutions to keep the brain-bytes off of money. Our IRAs and TSP are tossed into Lifecycle/Target Retirement type funds so that I don't have to figure out the asset allocations myself. Given we have a pretty good time frame to go, that keeps the money pretty aggressive for this year group.

Nords: That low-cost healthcare is most definitely one of the best bennies (if it sticks around in the same form).

Retireinmy40s: I love seeing others doing the same thing. I had given up discussing this topic with other airmen as their future plans ALL had some type of ambiguous employment front and center.

WM: Right on. My wife and I have had a similar experience. After finishing her enlistment, she went to law school for awhile before changing majors and going to nursing school. It has definitely given us the experience of making the best of a single income (though she worked part time and had the GI Bill for college expenses) and at the same time allowed us to find ways of savings for our eventual home purchase. The second income after the kid comes along seems really pivotal for us; being able to bank and invest her whole salary appears to be the real financial force multiplier.

I have another question for the group: does it make more sense in our situation to pay off our house first before everything else? We have considered ceasing IRA/TSP payments while we dump every possible dollar into the mortgage to get it paid off (we'd be keeping a good safety fund though, about 6 months salary). We figure by doing that we'd be saving even more down the road, without having to throw cash away on the mortgage interest payment. Is this a good strategy, or should we keep the non-real estate investments maxed and use the leftovers for extra house principle payoffs?
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Re: Am I crazy?
Old 04-18-2007, 04:02 PM   #12
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Re: Am I crazy?

Quote:
Originally Posted by kubikiri
I have another question for the group: does it make more sense in our situation to pay off our house first before everything else? We have considered ceasing IRA/TSP payments while we dump every possible dollar into the mortgage to get it paid off (we'd be keeping a good safety fund though, about 6 months salary). We figure by doing that we'd be saving even more down the road, without having to throw cash away on the mortgage interest payment. Is this a good strategy, or should we keep the non-real estate investments maxed and use the leftovers for extra house principle payoffs?
Oh, good, another pay-off-the-mortgage thread.

I think you'd be missing out on a lot of tax-deferred compounding in one of the world's lowest-cost funds.

I'd max out the TSP ($15K/year) and the IRAs and then consider paying down principal.
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Re: Am I crazy?
Old 04-18-2007, 04:35 PM   #13
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Re: Am I crazy?

Quote:
Originally Posted by Nords
I'd max out the TSP ($15K/year) and the IRAs and then consider paying down principal.
Me too - money-wise, you'll almost certainly be ahead by investing the money.
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Re: Am I crazy?
Old 04-18-2007, 05:38 PM   #14
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Re: Am I crazy?

Quote:
Originally Posted by Nords
Oh, good, another pay-off-the-mortgage thread.

I think you'd be missing out on a lot of tax-deferred compounding in one of the world's lowest-cost funds.

I'd max out the TSP ($15K/year) and the IRAs and then consider paying down principal.
Heh. Just, uh, had to confirm my FNG status by forgetting that handy search function. Noted.
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