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Revived: Retirement Planning for Young Military Member
Old 12-26-2013, 09:38 PM   #1
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Revived: Retirement Planning for Young Military Member

I couldn't respond to the original thread because it had been some 800+ days since it was active, but I wanted to keep this one going:

6 February 2008:
Hello all, I was hoping to present my personal situation and with any luck, garner some value added input from you readers who are smarter than I.

I'm a 29 year old 10 year Air Force veteran and plan on staying in for at least 10 more years to reap the benefits of the military retirement system. I'm stationed in the Middle East right now and will be until December of 2008.

Living here, I pay no State or Federal taxes and get paid a little bit extra by the nature of the local environment. I invest 25% of my base pay (comes to about $1266/mo) in the TSP (spread between the C, S, and I Funds) and I also invest in a Roth IRA (PRSGX: Spectrum Growth) maxing it out at $416.66/mo.

The current value of my TSP is about $28,000 and my IRA is about $10,000. I have $10,000 sitting in a savings account that earns 10%APY while I'm here and the rest of my savings is in a high yield savings account with EmigrantDirect. I plan to continue to invest heavily in stocks clear through my 30's. Yes, I'm aware of diversification, and I am diversified...in small, mid, large, emerging, equity, international, etc...stocks. I'm not so interested in bonds and other "lower risk" options at this point in my life. I could lose it all today and still be just fine as far as I'm concerned.

I have no debt whatsoever and already have my MBA that was paid for by the military.

With all that being said...I want to retire early, and would like to know if I'm saving too little, too much or just enough AND is there anything else I should consider (non retirement vehicles)?

I will be eligible for military retirement when I am 38 yrs old and potentially will make about $55,000 per year on military retirement alone. That figure comes from looking at a Lt Col's pay (rank I will potentially retire at) today at 20 yrs of service and applying a 3% increase per year over the next 10 years to estimate the amount (at 50%) when I am due to retire.

Being so young retiring from the military, I will most likely get another job for a few years just to keep me busy but would like to have financial freedom earlier than the "typical" 59 1/2.

Your thoughts?

3 October 2011:
I can't believe it's been over 3 years since I submitted this post. I thought it would be interesting to provide an update.

I'm now 32 with over 13 yrs in the service. I'm up for promotion to Major (O-4) and given my career history, I'll have no issues getting promoted.

I now live in the US again after having lived in the Middle East for 1 year then Okinawa Japan for 2.5 years.

The current value of my TSP is $60,000 (I stopped investing in TSP in 2009 to save for property purchases) and my IRA is $27,000 (I continue to contribute the max every year). I currently have about $1000 in savings, primarily because I just closed on my fifth property in 3 years.

Since posting this 3 years ago, my faith in the stock market has changed. I haven't pulled anything out, but my future contributions will be very limited as I'm focusing my attention more on investment properties. Granted, there is great risk in real estate, but "owning" a piece of dirt with a house on it means more to me now than owning an "unrealized" stock or fund in a market that is so overly manipulated, the risk is not worth it....to me.

I purchased all of my investment properties with 20%-25% down and got a great 5.25% 30 yr fixed mortgage (doesn't get much better than that for investment loans). The properties are all rented and earning positive cash flow (most of the mortgages (PITI) are around $500, rental income right at $1000). I live in oneof the homes currently.

The plan is to pay down the mortgages early, hopefully all of them within 7-10 yrs then see how things are going from there.

I will probably stay in the service closer to 30 yrs to get closer to a 75% retirement as a Colonel (O-6).

Overall, I think I've played my cards right so far.

26 December 2013:

I figured it was time for another update to the board and my status on how things have been going with my "plan".

In the past 2 years and 2 months, I have nearly reached 16 years of service in the AF. I was promoted to Major (O-4) in February 2013. My promotion board for Lieutenant Colonel, 2 Below-the-Zone is in 2015.

I've added zero funds to my TSP and the current value is $66,889 and also zero funds to my IRA which is now valued at $50,141 for a total of $117,030.

I currently have about $10,000 in savings and I save about $4,000-$4,500 per month.

I still own 5 homes, 4 of them are rentals which bring in about $1800 per month positive cash flow. I am not making any additional mortgage payments as I had previously planned. I'm using the savings as a safety cushion and to cover rent vacancies, repairs and other risks associated with real estate investing....and of course savings.

I did want to add, I bought the houses in AZ for $92K, $90K and $94K. Today they are estimated at $185K, $181K and $170K respectively. The house in Vegas I bought for $165K, it's worth about $143K today. The home I live in now was purchased in 2011 for $175K and is estimated at $193K.

In October, my 2006 VW Jetta was stolen and I didn't have full coverage, so that was a total loss. I replaced it with a $10,000 2007 Audi A3...pretty good deal. In November I had about $6000 of repairs to one of my rentals because the tenant smoked and caused a lot of damage. I have zero credit card debt but have five mortgages and two small vehicle payments. The plan was to have all the car loans paid off by now but the stolen car put a damper in that. Will have the remaining car payments closed out by June 2014.

I will be moving again this Summer and won't know where until March and will likely purchase another home at that location and turn our current residence into a rental.

My current net worth is $560,000. Things are going well so far. Merry Christmas and Happy New Year to you all.
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Old 01-11-2014, 02:23 PM   #2
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Things are going well so far. Merry Christmas and Happy New Year to you all.
Congratulations, LeBlanc!

I'd say that by the time you hit 20 years of service you'll be working more for the love than for the money...
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Old 01-12-2014, 08:36 PM   #3
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I am impressed with your timeline if you'll be eligible to retire from active duty at 38 years old as an O-5. That must involve enlisting at 18, completing a bachelor's degree faster than most full-time students while also serving on active duty, immediately making the transition to officer, and at least one below-the-zone promotion(?).

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Old 01-14-2014, 10:20 AM   #4
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Nords, I'm not so sure i agree. Using the calculator at militarypay.defense and planning factors of 3.5% inflation, 2.0% pay raises (it won't go lower unfortunately) and a tax rate of 28% I have the following results;

Retire at 20 as O-4 in 2018 = $3713/mo (before taxes)
Retire at 23 as O-5 in 2021 = $5,179/mo (+$1466, 28% increase)
Retire at 29 as O-6 in 2027 = $9,221/mo (+$4042, 44% increase)

Tim,
I enlisted in 1998 when I was 18. Promoted to E-5 with one early promo. Finished my undergrad in 2.5 yrs and commissioned in 2003. Finished MBA in 2007. Promoted to O-4 in 2013. My in-the-zone promotion board will happen 2017 (two-below the zone is 2015, never count on that obviously). I'll pin on O-5 in '16 or '17. Next In-the zone promo for O-6 is 2023 with likely pin on in '24 or '25.

And no, I'm not being presumptuous that I'll make rank. I happen to be in a career field that promotes like this as long as you're a strong leader/performer, which I happen to be.

It's a decent outlook, but I'll have lots of opportunities. I'm a Level II certified program manager as well and working on getting PMP certified through PMI. It's been quite the experience broadening into acquisitions. I'll be heading back to my core aircraft maintenance field this Summer and hoping to take my first command in '15 or '16.
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Old 01-14-2014, 11:17 AM   #5
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Sounds great!

Just don't end up like this guy:

Homeless veteran Air Force colonel now lives out of his minivan as he can't find a job - despite three graduate degrees and experience with the military's top brass | Mail Online

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Old 01-14-2014, 06:25 PM   #6
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... Finished my undergrad in 2.5 yrs...
That will do it. Impressive.

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Just don't end up like this guy...
This is bizarre. The article says he has a $40k/year pension, but it should be more like $62k/year for an O-6 with 30 years. It's hard to imagine living in a van on that kind of income, but it does mention the divorce and college tuition. I suppose he might be paying 1/2 his pension in alimony, and two kids in college at sticker price could run up to $100k/year.

Tim
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Great!
Old 01-14-2014, 08:05 PM   #7
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Great!

I just wanted to say congratulations! I JUST stumbled across this site an am very motivated by your story. I'm a Navy O-3 (Almost at 6yrs) with some lofty retirement goals and hope to be in similar shoes as I get closer to retirement.
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Old 01-14-2014, 08:35 PM   #8
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Tax Rate

Are you using your marginal tax rate in your calculations, or your effective tax rate?

I was using my marginal rate (25%), but after looking at my tax returns for the past few years, realized my effective rate was really just under 15%.

The 10% variance really made a big deal in my calculus.

Thanks for defending the Nation!
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Old 01-15-2014, 10:25 AM   #9
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The article is poorly written, and I suspect the author did not check his/her facts. My ex-military relatives had a grand time tearing it apart on FB Anyway, I'm not worried about OP going the same sad route, since he seems very smart and has a planning/project management b/g to boot Just a little cautionary note, is all.

A.

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This is bizarre. The article says he has a $40k/year pension, but it should be more like $62k/year for an O-6 with 30 years. It's hard to imagine living in a van on that kind of income, but it does mention the divorce and college tuition. I suppose he might be paying 1/2 his pension in alimony, and two kids in college at sticker price could run up to $100k/year.

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Old 08-02-2016, 11:37 AM   #10
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So, another 930 days have passed since my last update to my FIRE plans. Here is the latest:

I'm now 37 years old with 18 1/2 years in service. I'm a deployed squadron commander. My in-the-zone promotion board for Lt Col (O-5) is coming up in 2017. I'm eligible to retire in January 2018.

I still have added zero funds to my TSP and the current value is $77,000 and also zero funds to my IRA which is now valued at $43,000 (I pulled out $20K penalty free for a downpayment on my primary residence) for a total of $120,000.

Last summer I sold my Las Vegas rental property for a $20,000 profit after it had decreased in value about $70K between 2007-2014.

I purchased my 6th property last month and now own 5 rentals and one primary and I have 5 mortgages.

I currently have about $60,000 in savings and I save about $6000 per month.

My VW Jetta that was stolen was found 6 months later and I still own it. It's free and clear. I also own my 2004 GMC Sierra Duramax, 2008 HD Street Glide and I recently picked up a 1968 Chevelle that I swapped a supercharged LS2 making over 600HP...all free and clear. So I save like a mad man, but I also play and have fun.

My current net worth is $780,000.

I'm starting to get tired of military life and seriously considering retiring at 20. My goal is to retire and secure a well paying job and pay off about $600K in mortgages over 5 years or so then FIRE around 43 years old. Shouldn't be too difficult with 20 yrs military leadership experience, MBA in Logistics Management, PMP certification and Level II Acquisitions Certified through the Defense Acquisition University.

The expectation is that I will live off my pension as a retired O-4 and about 5-6 rental homes bringing in about $6K-$7K per month in positive cash flow. That will put me at about $120K per year pre-tax dollars for doing nothing at all, with tons of options. Well, that's the hope anyway.

It's kinda fun to watch how this has progressed over the years. This is 8 years in the making.
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Old 08-02-2016, 12:44 PM   #11
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I'm starting to get tired of military life and seriously considering retiring at 20. My goal is to retire and secure a well paying job and pay off about $600K in mortgages over 5 years or so then FIRE around 43 years old. Shouldn't be too difficult with 20 yrs military leadership experience, MBA in Logistics Management, PMP certification and Level II Acquisitions Certified through the Defense Acquisition University.
I retired *just* shy of 22 years of service (FULLY retired). My only regret? That I didn't do it EXACTLY at 20 years. I have been retired for almost 2 years and it has been GREAT. Things just weren't as fun as when I went in back in '93 and as I understand...it hasn't gotten much better. Perhaps now that Walsh is gone, things will improve.

I am glad to report that I haven't felt the need to use my DAU certification (also level 2) or my PMP in retirement. You just mentioning DAU has brought back TERRIBLE memories of the horrible classes in Huntsville. Blah!

Congrats on your progress...it's great to read how your story has evolved.
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Old 08-07-2016, 12:30 AM   #12
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So, another 930 days have passed since my last update to my FIRE plans. Here is the latest:
I'm starting to get tired of military life and seriously considering retiring at 20. My goal is to retire and secure a well paying job and pay off about $600K in mortgages over 5 years or so then FIRE around 43 years old. Shouldn't be too difficult with 20 yrs military leadership experience, MBA in Logistics Management, PMP certification and Level II Acquisitions Certified through the Defense Acquisition University.

The expectation is that I will live off my pension as a retired O-4 and about 5-6 rental homes bringing in about $6K-$7K per month in positive cash flow. That will put me at about $120K per year pre-tax dollars for doing nothing at all, with tons of options. Well, that's the hope anyway.

It's kinda fun to watch how this has progressed over the years. This is 8 years in the making.
Thanks for the update, LeBlanc!

I'm assuming that $6K-$7K/month is after taxes and maintenance/repairs. But even if it's "just" $3K/month net you're still probably in great shape.

As you might already suspect I also vote for retiring at 20 to the minute (even if you're an O-5 having fun while getting to three years' time in grade) and only working if you want to. Aside from being self-employed a property manager, of course.
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