46, wanted to retire at 50, feeling unprepared

[Mook1e]

Hello all! Greetings from Germany.


I retired from 26 years in the military in 2018 and am now working as a Government Civilian. I have some unique skills which could allow us to move just about anywhere for me to continue to work.


My wife has been a homemaker the last five years in order to concentrate on setting our kids up for success leaving the home, but she previously worked for the DoS and Military as a civilian traveling the world with my PCS cycle. We have been in Germany for 5 years now with our four children. Our oldest three are now in the Army and our youngest is a senior in High School looking to attend the Air Force Academy next summer.



My wife and I own a home in the USA which we are renting to pay the mortgage. We still owe about $200k and the home is worth about $400k.

For the longest time, my wife and I intended on living simply on my retirement overseas (preferably Penang, Malaysia) for a few years of "retirement" once our youngest was for sure on his way.



The biggest concern I have is that we never "planned" by saving or investing besides about $100,000 worth of stocks I picked up on a hunch (AMD and NVIDIA dirt cheap in the early 2000s.)
We currently don't have much by way of assets outside of our rental home, the stocks, about $60K in TSP (which I am now adding to with maximum contributions), and the contents of the home we rent here in Germany.
I'm making good money here and I have my military pension and VA disability. Our annual budget basically fits within the pension and disability. We have a LOT left over which I'm trying to figure out what to do with for the next 3-4 years. I would like us to be able to take as much time as we want to do whatever we want, or live a financially independent lifestyle once I complete 5 years in Government service and qualify for another pension.
Lol, just to throw a turd in the punch bowl, I strongly desire (and have convinced my wife) taking a few years to live on a catamaran ($300K purchase)



Cliffs:
46yo married military retiree w/ mil pension ~$35K/yr and $40K/yr tax free from va disability, want to be FI at 50


Children are taken care of (making their own way like their old man) but we want to be able to help them whenever they need.


Live well below means (extra $5-8K a month to invest/save)


$200K remaining on rental home worth $400K




I've been lurking for the past few weeks, so I really appreciate the ability to read about everyone else's experiences and recommendations. I welcome any advice, sharp-shooting, murder boarding, what-have-you.


Cheers everyone, and be safe.

 

[njhowie]

46yo married military retiree w/ mil pension ~$35K/yr and $40K/yr tax free from va disability

Live well below means (extra $5-8K a month to invest/save)

You're good to go. Nothing to worry about.

$200K remaining on rental home worth $400K

Personally, I'd consider selling prior to retiring. It's just extra baggage in my view. Sell, take the $200k equity and throw into savings as your backstop.

 

[Mook1e]

You're good to go. Nothing to worry about.



Personally, I'd consider selling prior to retiring. It's just extra baggage in my view. Sell, take the $200k equity and throw into savings as your backstop.

Thank you for the response.
Would you recommend putting equity in savings, or investing?
I forgot to include $50K currently in savings for emergency fund (or catamaran deposit )

 

[njhowie]

Thank you for the response.
Would you recommend putting equity in savings, or investing?
I forgot to include $50K currently in savings for emergency fund (or catamaran deposit )

As always, it depends on your objective and risk tolerance.

What's your goal? Capital preservation? Appreciation/growth? Do you have a high risk tolerance or looking for more safety? Aggressive/passive?

Having the $50k emergency savings is great, and provides even more flexibility. At this instant, we have the "everything bubble", so regardless of what you put your money into (as far as equities or fixed income) there is above average potential for losses in the near-term.

If I were in your position, I'd opt for one of the following (or some combination):

1. Put the entire $200k into a balanced (60/40) fund or combination of funds. Then with the monthly amount you have left after expenses, put half into the emergency savings and the other half into the 60/40 (or whatever allocation you are comfortable with).

2. Put (most of) the entire $200k in with the emergency savings and then put the entire month end available for savings into the 60/40 (or whatever allocation you are comfortable with).

I like something closer to #2 with most going to the savings right now and slowly growing the investing side over time. Near term, things will likely be rocky for the markets, and again, I believe there is above average potential to see (paper) losses. That's just my opinion. I wouldn't want to put $200k in to an investment account at this time and at some point in the next 6 months see it down 20% or more. If you are more risk tolerant, then go for something closer to #1. Again, just my opinion.

 

[WyomingLife]

Thank you for your service.

You are 46 and, by your own admission, have almost no assets. I don’t really know how to calculate your NW based on what you provided. And you want to retire at age 50 and buy a $300K boat at some point. And you want to live overseas. And you are counting on another government pension based on a few years of additional service.

Do you keep track of your expenses?

I think you need to know how you got to where you are before you can plan on where you want to go.

 

[Mook1e]

Minus rent and utilities, which is paid by my Living Quarters Allowance here, we spend less than $50k a year here in Germany. This is well below my passive income already.
The second pension will come, if I finish 3 more years of government service. I'm not really depending on it, but it would be nice to have, I guess.


Thanks for your input. I guess I'm correct to feel unprepared. I do feel better after reading through some posts on this forum and considering all of my retirement benefits.
I just don't want some unforeseen catastrophy to hit and not be ready.

 

[Retire52]

i RE 3 years ago after 27 years of AD from the Army. DW and I have 4 Children, 2 college grads, 1 in college and a highschooler. we spent 4 lovely years in beautiful Heidelberg and enjoyed many of the best parts of europe during our tour there prior to the iraq war.

you are already FI as your passive income covers your expenses. IMO you could retire today though I wouldnt want to given your savings level. $410k isnt too shabby, but life throws you curves and I'd want to build up the nest egg a bit prior to RE on a boat or any other domicile.

take the excess monthly income and plow it into a taxable investment account automatically. I would go with Vanguard bc I use them, but I heard good things about Fidelity also. I'd also put it into an Index fund. many to choose from but I like to track the US total stock market fund. continue to max your TSP contributions. at that rate, in five years you should be north of $1 million. plus an added small civ pension should put you in a stronger position to anchor away.

one concern would be for your spouse. if something happens to you, she would lose your pension, unless you signed up for SBP, or it would be significantly reduced to 55% if you did take the SBP. your VA disability would stop for her unless you either died from a service connected disability, or you died after 5 years of you being 100% disabled. in both cases she would receive DIC benefit of about $1500 a month. if you havent already done so, add a solid life insurance coverage for her.

also a long time forum member and a great financial mentor for vets, Nords, may have some additional advise for you. he searches for his name periodically, so he may drop by.

welcome to the forum and best of luck to you

 

[njhowie]

Thank you for your service.

You are 46 and, by your own admission, have almost no assets. I don’t really know how to calculate your NW based on what you provided. And you want to retire at age 50 and buy a $300K boat at some point. And you want to live overseas. And you are counting on another government pension based on a few years of additional service.

I think we can agree that the $75k/year in pension/disability money is a rock solid backstop that will provide the bulk of what's needed. Let's reverse engineer - that $75k/year is equivalent to $1.875 million locked up at a 4% withdrawal rate.

As for the $300k boat, 4 years of saving $5k-$8k/month between now and the retirement date will cover that. There are also alternatives to purchasing outright - possibly renting or getting a good deal on a used one.

Also, nothing says the purchase of the boat needs to happen immediately on the retirement date. Further, it could be financed and sold at the end of the trip.

I still believe the scenario is easily doable. Obviously continuing to save at $5k-$8k/month over the next 4 years will provide much more flexibility.

 

[Mook1e]

Thank you all again for your input. I appreciate all perspectives. I do have a LOT of questions and things to figure out.
I think my primary question is, does it make sense to pay off the mortgage on our rental home before RE in 4 years, or invest in a fund? I don't know if the rental income will be worth it over time.

We don't mind risk, we've taken A LOT our whole lives. My wife and I don't need much. What we do want is adventure. We still have my GI Bill, we plan to bounce around A LOT once my son steps off. We may stay in the USA for a time to be close(r) to our kids and parents. We will travel, Military AMC flights will help. We can live out of backpacks. We still need to decide if we want to have a home base. That's the primary reason we still have the home in the USA.
We know the catamaran will be a net loss over time. That's fine.
The COL in each area we want to live overseas easily fits within our passive income, and TRICARE will cover our health as long as the borders get back to normal.


Lots to figure out!

 

[WyomingLife]

I think we can agree that the $75k/year in pension/disability money is a rock solid backstop that will provide the bulk of what's needed. Let's reverse engineer - that $75k/year is equivalent to $1.875 million locked up at a 4% withdrawal rate.

I still believe the scenario is easily doable. Obviously continuing to save at $5k-$8k/month over the next 4 years will provide much more flexibility.

He is spending circa $50K with “housing” and other “allowances” covered. So what is his budget? Maybe I have misread this post.

It seems conceivable that his burn rate is in the 6 figures.

And they want to retire at 50. They could live another 40 years.

And the boat is a red flag.

Unless somebody knows what they are spending (or would be once the benefits were removed), I think it is impossible to judge one way or the other. All we know is what he has told us (minimal assets, and with a life that is largely subsidized). He wants a $300K boat. And he seems to have a plan that is dependent upon third-party payments.

 

[Go-NoGo]

As for the $300k boat, 4 years of saving $5k-$8k/month between now and the retirement date will cover that. There are also alternatives to purchasing outright - possibly renting or getting a good deal on a used one.

If you do get the boat - remember to factor in 10% of the cost of the boat _annually_ for things like maintenance, dock fees, insurance and so on.

 

[pjigar]

You're good to go. Nothing to worry about.

No so fast cowboy! The numbers look good on paper but what concerns me that if you have leftover money every month then how come your investment bucket is so low at this age? Make sure you count all expenses including the long term expenses (car, roof, HVAC, Assisted living, etc.) HONESTLY. If expenses are below your pensions then you are good to go. But I highly doubt it. This is the time to think for the worst case scenario and not a rosy one. Good luck.



And thanks for your service.

 

[WhenIsItTime]

First, big thank you to OP and family for service to our country!

I recommend getting a real handle on budgeted savings rate and expenses both forecasted and history. The forecast is even more important if changing major variables: housing, COL, travel frequency, health care, kid transitions, etc.

Also agree on having provision for at least 10% of boat value as annual operating cost. I have the live-on-a-boat dream and follow a few blogs. Those who bought newer $300k+ boats to avoid issues just have more expensive issues (insurance cost and stipulations). The only ones who seem to have lower boat operating cost, selected an older monohull and do most of their own maintenance.

 

[38Chevy454]

The good: your military pension, VA disability, and potential future small gov't pension are all quite secure and you can count on that as a base every month/year. All current expenses are covered. Tricare medical is a big deal and can also be relied on. You are already FI by definition that now your expenses can be met by your pension and disability income.

Doing good: saving $5-8K/month now to help build up the savings, that's a great saving rate and amount. Cranking in full TSP contribution is great. Living way below your means now, keep it up into retirement will help you long term.

Could be better: you know that total savings is low and you are working to increase this. Your retirement is very biased to the pension and disability income, and (currently) not much savings; kind of a one leg stool for you until SS can kick in minimum 12 years for that.

Potential Issues: the boat cost and maintenance will take a hit on your budget, but is also offset by living on it and not having a housing expense. Are you able to do your own repairs and maintenance? That can save a bunch of expense. The rental house could need some big repair expense, or other issues where the rental income doesn't cover all of the expenses. What is your plan for after the few years of boat living? What about need to be closer to home for parents? Your savings is not very diversified, and you are subject to a high effect if one or more has a negative issue.

The bad: you say kids are doing good and will not need any assistance, but things can change. Are you sure on this, I appreciate that you have instilled them to be self sufficient. Also your plan is based on good health, which is probably OK since you are younger now. But there is some assumed risk. Will you always have access to good medical when out around the world traveling?

My overall thoughts: you are in reasonably good position, once you complete the next 4 years and build up the savings to be a better safety net. Go ahead and do the boat living and travel if that is what you want to do. Have contingency plans if something out of your control happens. Building up savings as much as you can to have a better 2 legged stool, even if one leg is still the dominant income source. I think you should sell the rental house and get that off your back, use the money to supplement savings. As for savings, I think you can be pretty aggresive, your pension and disability give the stability, so go for higher equities. Your stock should be more diversified, I think an easy plan is to sell the AMD and NVIDIA, and put into a total market index type fund. Use rental house proceeds in similar diversified equities investment. Whether you actually planned it, your military service has worked out well for your future. Thanks for your service. Work hard the next 4 years and save what you can, but still enjoy your current life and location.

 

[HenryD]

As someone with concrete plans to buy a boat, albeit a bit cheaper than your plan, in 4-5 years, I would caution you to do a lot of research. We even bought a practice boat to spend the intervining years using, breaking, fixing and upgrading. I obsess about it as much as our money plans. So many systems, so many variables.

Depending on how much you know how to DIY, where and how you plan to use it is going to make a massive difference in the cost. Cruising boards are littered with posts from folks that think they can just jump onboard and go sail around the world. Don't be those people

 

[Mook1e]

He is spending circa $50K with “housing” and other “allowances” covered. So what is his budget? Maybe I have misread this post.

It seems conceivable that his burn rate is in the 6 figures.

And they want to retire at 50. They could live another 40 years.

And the boat is a red flag.

Unless somebody knows what they are spending (or would be once the benefits were removed), I think it is impossible to judge one way or the other. All we know is what he has told us (minimal assets, and with a life that is largely subsidized). He wants a $300K boat. And he seems to have a plan that is dependent upon third-party payments.

Thank you for the critical look.
I'm working overseas and renting, but the rent and utilities are part of my compensation.
The 50K expended does subtract our (very expensive) rent and utilities here, but includes the mortgage on our rental property and our living expenses otherwise.


My pay, plus retirement, plus disability is about $17K/month after taxes, SBP/medical/dental/vision, and TSP max contribution. Subtract $4K for housing and utilities (yes, expensive here) which I won't be spending once we leave and I retire. I have between $8K and $10K left over each month to invest/save/pay into the mortgage.



My wife would like to have the "home base" in the USA, so we will probably pay off the house in 36 months as our first priority. After that, we're saving for the deposit on the boat and about $100,000 for a cruising kitty/emergency fund.



And if we live another 40 years, that doesn't change how much I get for retirement or disability. Those amounts only go up. And then ss, and then another pension on top, and tsp.



The rest will go into investments. I've got some job prospects making more, but more than likely they will not be government positions which come with another pension after 5 years.

 

[Mook1e]

As someone with concrete plans to buy a boat, albeit a bit cheaper than your plan, in 4-5 years, I would caution you to do a lot of research. We even bought a practice boat to spend the intervining years using, breaking, fixing and upgrading. I obsess about it as much as our money plans. So many systems, so many variables.

Depending on how much you know how to DIY, where and how you plan to use it is going to make a massive difference in the cost. Cruising boards are littered with posts from folks that think they can just jump onboard and go sail around the world. Don't be those people

My wife and I are approaching it pretty realistically. We both grew up on or near water. I have my coastal navigation and RYA competent crew, we both want to get international sailing certifications, charter before we look to buy. We'll use some of my GI bill to learn to work on systems...or not. We know this decision isn't set. It will be a process.

 

[Nords]

also a long time forum member and a great financial mentor for vets, Nords, may have some additional advise for you. he searches for his name periodically, so he may drop by.

Thanks, Retire52!

I'm making good money here and I have my military pension and VA disability. Our annual budget basically fits within the pension and disability.

You seem to be fine as long as you keep this part going, and I don't have any advice to add to that...

I strongly desire (and have convinced my wife) taking a few years to live on a catamaran ($300K purchase)

... but I'd find a way to rent for a month or to hire out your relocation services before you go whole-hog on a used boat.

We knew a retiree who spent her first few years after the military getting her sailing license and then being hired to drive other people's boats up & down the coast to wherever they wanted to start their travels. She could spend the weeks (or even months) getting their boats prepped and to the right place so that the owners could launch their two-week vacations at their preferred location. She said it was the perfect combination of try before you buy without having to put up with the actual clients looking over her shoulder while she was driving... and she still got paid to do it.

By the time she was ready to stop sailing for other people, she knew exactly what she wanted and where to buy it at a discount.

 

[Mook1e]

Thank you Nords for your input.
We do plan to at least charter before we purchase. We are also looking to crew for a longer period, and we intend to take as much time as necessary sailing littoral waters before taking on 'the world.'

 

[Mook1e]

You seem to be fine as long as you keep this part going, and I don't have any advice to add to that...

My wife and I will most likely live as nomads our first year of FIRE. Let's hope the coronavirus lockdowns and such are over. We will travel to a few places we've never been (Central and South America), as well as travel to visit our Active Duty kids wherever they may be (pretty sure our oldest will be on the Pacific Northwest, our second daughter in Seoul, and our youngest will still be at West Point... Our son... Hopefully at the Air Force Academy). We will definitely maximize use of AMC flights. We used them extensively when we lived in Asia.

We have recently decided to focus our last working years on paying the rental home mortgage off first (it's close to the AF Academy.)

We hope to use our nomad year as a time to relax, focus on us, clear some of the clutter from our lives and minds, and then make the best decisions on how we want to move forward from there.

 

[Mook1e]

I think we can agree that the $75k/year in pension/disability money is a rock solid backstop that will provide the bulk of what's needed. Let's reverse engineer - that $75k/year is equivalent to $1.875 million locked up at a 4% withdrawal rate.
.

I've always wondered about this. As Nord has pointed out, historically, military pension (and disability) have averaged 2% COLA. The entirety of the disability will always be tax free, leaving us pretty much locked at 12% tax rate until at least 15 years from now when the pension and COLA grows to the higher bracket. What would be the NW calculation of them both?
Is this calculator correct?
https://www.hughcalc.org/cola.php
If so. I'm not worried.

 

[Mook1e]

Almost at 47, with less than 2.5 years to go. DW and I have agreed that we will at the very least begin a sabbatical to gage our (and our kids) position, start using our GI Bill and my additional VA benefits, and rest/recharge in December 2023. We're still saving at the same rate, and we have the same goals. Our youngest just finished High School and is enlisting in the Air Force this fall. We hope the empty nest and 'freedom' of mobility for me to choose/apply for new w*rk opportunities and locations will set us up well for the 2024 launch.
I've spoken with Military Retiree friends who have already retired on their pensions and VA benefits, and combined with Tricare for Life, it looks like we're in a great spot. The only concerns next will be Long Term Care concerns in 20-30+ years or so.
I'll return periodically, or when/if significant changes or developments occur.

 

[teetee]

Thank you for your service.

I have not read others' comments. The 300k house boat plan is not a wise financial decision (but likely a great life style decision). You can basically kiss that money goodbye since it only goes down in value with time. Make sure it is not a mid life crisis talking.

With low living cost and your frugal spending mentality, you should be fine after paying the house off. The monthly pension and disability (for life?) gives a positive outlook on top of your frugality. Though I would not choose to increase spending much after the retirement considering your net worth is less than $500k for two, unless you are set to be living overseas for good.

With four kids, a country like Germany would be the best for their education financially. It would be impossible for your retirement plan if they were planning to attend colleges in the US.

 

[Mook1e]

Thank you for your service.

I have not read others' comments. The 300k house boat plan is not a wise financial decision (but likely a great life style decision). You can basically kiss that money goodbye since it only goes down in value with time. Make sure it is not a mid life crisis talking.

With low living cost and your frugal spending mentality, you should be fine after paying the house off. The monthly pension and disability (for life?) gives a positive outlook on top of your frugality. Though I would not choose to increase spending much after the retirement considering your net worth is less than $500k for two, unless you are set to be living overseas for good.

With four kids, a country like Germany would be the best for their education financially. It would be impossible for your retirement plan if they were planning to attend colleges in the US.

We aren't expecting to make money or even break even as far as the catamaran is concerned. We're also proceeding cautiously concerning our abilities and enjoyment of the lifestyle before dropping a lot of money on the depreciating asset.


As far as the pension and disability, as well as our net worth, we are definitely planning to live overseas for an extended period, if not for good. Also, the pension and disability are both COLA'd and for life. I still have no idea how I would calculate my net worth including pension, disability, and "free" healthcare via Tricare for Life for myself and DW. Tricare for life now costs $25 a month with $3000 catastrophic cap for co-pay. The $25 a month is automatically deducted from my pension.

My service-connected issues aren't getting any better in the least since retiring. The years of having so much "fun" jumping out of airplanes and trouncing through deserts and jungles have taken their toll. My personal dedication to a healthy lifestyle otherwise is paying dividends. I'm healthier than most, despite my "gifts" from my years of service.


All of our kids' college will be paid for by their service in the US Military. Just like mine before them. They all followed in my footsteps in choosing highly technical specialties which pretty much provide for Associates degrees following technical schools while on active duty, not to mention Tuition Assistance providing for 100% of any college they take while on active duty (up to 16 credit hours a year.) They will all have 3 years of college (or technical training) paid for as well as housing stipend with their GI Bill benefits when they leave the service (all but my youngest daughter who is at the US Military Academy.)
I personally still have 2 years of GI Bill (with housing stipend) which I haven't used yet, and my wife has 6 months (with the same.) We intend to use these benefits to fund part of our sabbatical, and I will take as many nautical/sailing relevant trade schools as possible during that time. I will definitely re-certify for scuba (and I may get dive instructor certified as well), diesel engine repair, meteorology, and maybe even HVAC and plumbing certifications, all for free while receiving "rent/housing" stipend. There's even a program called Vet Tech, which doesn't use my GI Bill time and provides the same exact benefits when pursuing technical certification which would enable me to work remotely from the cat anywhere internet access is available. We're looking forward to all of these options once I can let go of these Golden Handcuffs of Government Service and travel opens up more.

 

[JDARNELL]

Well in theory your purchasing power is never gonna go down with the COLA benefits so I would calculate my NW based on my income divided by 4%. Then you figure out what spouse would get if you pass divided by 4%. Then figure out SS plays into it for her when you hit the DZ for the last time. Of course VA goes away.

Having TFL for healthcare is huge. As for LTC in reality Uncle Sam is gonna cover most of your stuff if not all. And your right service connected doesn’t really get better but time spent taking care of health is time well spent. We put in a small daily LTC policy for CINC house with unlimited time. That way she is protected in theory and we shift some portfolio risk to an insurance pool at a price. Between SBP SS and an investment portfolio she should be in descent shape.

IMO there are some great options to live outside CONUS to give you great late year quality of life if you decide to go that way.