Hello!

[WM]

Hi everyone!

I've been lurking around periodically for the past six months or so, and have found the discussions very informative. DH and I started daydreaming about ER soon after we got married (about 10 years ago, in our early 20's) and we've been looking for ways to accomplish that goal ever since, although I don't think we really thought it was possible, at least initially.

DH is in the military (USMC) and his career has gone well enough that at this point we're planning for him to stay in until he can get a pension at 20 years. I've been mostly in school and working part-time, plus doing the financial planning.

Our "Grand Plan," as we call it, is to FIRE when DH retires from the military. Our income at that point would come from his pension and money that we're currently saving/investing, plus (after 3 more years) rental income from a house we own in San Diego. We have been fully funding Roth IRAs that we will leave alone at least until we're 60.

It feels early to know what will happen, as DH's 20-year mark is still 8.5 years away, but it's a great feeling to know that FIRE might be possible at that point, or that we'll at least have made substantial progress. No kids yet, so that may change things, plus we may have some aging parents to care for, and who knows what else? In the meantime, it's fun to think about and nice to have a forum where others are sharing their experiences. Glad to be here!

 

[Nords]

Welcome to the board, WM!

ER'ing straight from the military is pretty rare-- congratulations on breaking the second-career programming. I know of only one other Marine, a CWO-4, who retired without immediately searching for another job.

There may not be much mutual ER support from your spouse's Marines or their families, but you'll find that here.

You guys are already maxing out the TSP, too, right?

 

[donheff]

Welcome to the board, WM!

ER'ing straight from the military is pretty rare--

But the few that do are happy. We have Nords to prove that. And there was a guy who posted a lot on the rec.windsurfing newsgroup who retired at 20 moved to the Columbia River Gorge and was happy as a clam sailing with nary a day at work.

 

[WM]

Thanks for the welcome!

congratulations on breaking the second-career programming

(Sorry, haven't figured out how to cut and paste correctly, I think?)

It wasn't hard DH and I were both thrilled when we realized we were each secretly thinking about how great it would be to take a year off and go live on the beach in Hawaii. So we figured, why stop there?

You guys are already maxing out the TSP, too, right?

Actually, no, and I'd be interested in opinions on this. As I understand it, money in the TSP is not accessible (without penalty) until age 59 1/2, or thereabouts. Since we have been maxing out Roth IRAs for the past 10 years and will continue to do so, I feel pretty good about having enough to live on at that point. My bigger concern has been how to fund the large "gap" between our early 40's when DH retires and age 60. To that end, we've been putting money into regular taxable accounts (savings and index funds), and refinanced our house in San Deigo to a 15-year loan so that it will (hopefully) generate a nice supplemental income soon after FIRE.

This plan has come together rather recently, so now that things seem to be settling out ok I'd certainly consider putting money into the TSP as a next step.

 

[Nords]

Actually, no, and I'd be interested in opinions on this. As I understand it, money in the TSP is not accessible (without penalty) until age 59 1/2, or thereabouts. Since we have been maxing out Roth IRAs for the past 10 years and will continue to do so, I feel pretty good about having enough to live on at that point. My bigger concern has been how to fund the large "gap" between our early 40's when DH retires and age 60. To that end, we've been putting money into regular taxable accounts (savings and index funds), and refinanced our house in San Deigo to a 15-year loan so that it will (hopefully) generate a nice supplemental income soon after FIRE.

The contribution limit is up to $15K/year and offers a variety of funds at 0.05-0.07% expense ratios. (In a combat zone you could contribute up to $44K/year, not that I'm suggesting this is a good idea.) Those expenses are lower than even Vanguard, let alone any other mutual-fund companies. I'm willing to trade a lot of inconvenience for low-cost tax-deferred accumulation.

Keep in mind that you guys will be pulling down a military pension (boosted by a COLA) with cheap healthcare (~$40/month TRICARE premiums) so you'll probably cover the basics and not spend a lot of your ER portfolio initially. (Of course if kids appear then all bets are off!) You may be able to bridge the gap to age 59.5 solely by burning the funds in your taxable accounts. In fact if you're willing to delay Social Security until age 70 then you can continue burning the taxable funds with the security of knowing that if things don't work out you can always pick up two additional COLA-adjusted pensions by starting SS.

If you needed the TSP funds to bridge the gap, another retirement option would be to roll over the TSP funds into a traditional IRA and start making 72(t) withdrawals. One of the TSP handbooks says there are several options:
"Partial Withdrawal —
• Receive part of your account in a single payment, leaving the remainder in the TSP to be withdrawn later (using one of the other three withdrawal options).
Full Withdrawal —
• Receive your entire account in a single payment
• Receive your entire account in a series of monthly payments
• Have the TSP purchase a life annuity for you with your entire account balance
You can also withdraw your entire account using any combination of the above three full withdrawal options. This is called a mixed withdrawal."

The decision doesn't have to be made until a year after you're retired. So at retirement you could roll over a portion of the TSP to an IRA for 72(t) withdrawals or let the whole thing ride until you're older. If you wanted ultimate flexibility you could max out TSP contributions until retirement, roll it all over into a conventional IRA, and leave 72(t) withdrawal decisions until you feel you need the money. Of course you'd be trading away a bit of an expense ratio for that peace of mind, but going to Vanguard or Fidelity index funds might only raise your expense ratio "all the way" to 0.09-0.10%.

If your rental property is returning any sort of cashflow then you may find that you're not in any hurry to touch the TSP money.

A final thought on asset allocation: the military pension (with its COLA) can be thought of as the equivalent in long-term TIPS or I bonds. Subject to your monthly cashflow needs, you may not care to hold any additional assets in bonds... especially when money markets are yielding 5%. Our ER portfolio is ~94% equities with a couple years' expenses in money markets & CDs.

The next step is to run all these scenarios through FIRECalc and choose the one you like the best.

 

[Khan]

You guys are already maxing out the TSP, too, right?

Actually, no, and I'd be interested in opinions on this. As I understand it, money in the TSP is not accessible (without penalty) until age 59 1/2, or thereabouts. Since we have been maxing out Roth IRAs for the past 10 years and will continue to do so, I feel pretty good about having enough to live on at that point. My bigger concern has been how to fund the large "gap" between our early 40's when DH retires and age 60. To that end, we've been putting money into regular taxable accounts (savings and index funds), and refinanced our house in San Deigo to a 15-year loan so that it will (hopefully) generate a nice supplemental income soon after FIRE.

This plan has come together rather recently, so now that things seem to be settling out ok I'd certainly consider putting money into the TSP as a next step.

The TSP can be accessed any time after retirement without penalty by buying an annuity or transferring it to an IRA or setting up a SEPP equivalent or some combination of the above.

http://tsp.gov/uniserv/features/chapter13.html#sub1

 

[WM]

Thanks, Nords and Khan, for the TSP info and links. You make a good case.

It also just occurred to me that if we were short on income during the "gap" years, the Roth IRAs could also be tapped, as long as we don't withdraw more than we put in. With the relatively new addition of the rental house to our FIRE plans, I am now thinking that we may draw much less on the taxable accounts than I had initially planned anyway.

A final thought on asset allocation: the military pension (with its COLA) can be thought of as the equivalent in long-term TIPS or I bonds.

This is a great way to think about it, thanks. I'd started thinking about how or whether to shift our asset allocation as we got closer to FIRE, and was leaning toward staying heavily in stocks but hadn't quite put it in those terms for myself.

Currently our ER portfolio is ~25% cash, earning 5+% in a savings account with USAA (I agree about the bonds), and 75% in US and International index funds. DH likes the security of having some cash, but perhaps we've reached the point where we have enough there and I can redirect our monthly cash deposits...maybe to the TSP

 

[Nords]

It also just occurred to me that if we were short on income during the "gap" years, the Roth IRAs could also be tapped, as long as we don't withdraw more than we put in.

Yep, Roth contributions can be withdrawn anytime and the earnings can be withdrawn for some special situations (education, first-time home purchase). It all depends on how much you need to bridge the gap and whether you'll need it every year.

With the relatively new addition of the rental house to our FIRE plans, I am now thinking that we may draw much less on the taxable accounts than I had initially planned anyway.

Yep, as long as you build in some slack for a prolonged vacancy or a major overhaul or a tenant eviction. But in general the spending drops in ER. Depending on how you want to allocate your assets and your taxable/tax-deferred accounts, you sacrifice a certain amount of return in exchange for convenience, flexibility, and security. And no matter how much financial sense everything seems to make, you still have to sleep at night.

DH likes the security of having some cash, but perhaps we've reached the point where we have enough there and I can redirect our monthly cash deposits...maybe to the TSP

Your spouse is bringing home a bucket of cash twice a month and arguably has the world's most guaranteed job security & employment continuity. I suspect you'll never notice it if you cut down on your cash position... or move it from USAA to PenFed's 6.25% CDs!

 

[wstu32]

welcome.... i love this sight...enjoy!!!