31 year old with potentially 26 years left

[J277]

I'm currently a single 31 year old working for the fed making around 120k range in a MCOL area. I collect a bit of VA disability on top of my salary (about 20k per year). Currently all of that goes into VTSAX. I also max out my Roth IRA and my TSP with a 5% match. I'll probably reach my FI number within the next 10-15 years. But plan on working all the way to my MRA of 57 along as I enjoy my line of work. All hitting my FI number early will do is allow me to turn down overtime and assignments I'd rather not have without fear of lower income.

I had ten years of military time that I'm in the process of buying back. I was going to do a full 20 but decided against it for my own health.

I'm currently trying to balance saving for FI while also enjoying my income today. I basically do this by saying along as I max my retirement accounts I can enjoy most of whatever is left over. I still stick to budgets but am a little more flexible with my spending money allotment each month.

[Bigdawg]

Quote:

Originally Posted by J277 I'm currently a single 31 year old working for the fed making around 120k range in a MCOL area. I collect a bit of VA disability on top of my salary (about 20k per year). Currently all of that goes into VTSAX. I also max out my Roth IRA and my TSP with a 5% match. I'll probably reach my FI number within the next 10-15 years. But plan on working all the way to my MRA of 57 along as I enjoy my line of work. All hitting my FI number early will do is allow me to turn down overtime and assignments I'd rather not have without fear of lower income. I had ten years of military time that I'm in the process of buying back. I was going to do a full 20 but decided against it for my own health. I'm currently trying to balance saving for FI while also enjoying my income today. I basically do this by saying along as I max my retirement accounts I can enjoy most of whatever is left over. I still stick to budgets but am a little more flexible with my spending money allotment each month.

Awesome job so far and thank you for your service. Sorry about the VA dis but it is nice to get that extra tax free cash every month. Since you are asking, this is what I would do in your shoes: TSP (401k) only up to employer match (so 5% fed), then max HSA account. Don't use HSA to pay your medical bills. Pay those with your salary. Let HSA grow (save all paid receipts). Max ROTH IRA. Any extra I would put into taxable. I would buy a muti family house (duplex/triplex, quad) and live in one unit while collecting rents. I would also only work fed until you qualify for the pension (maybe 10-15 years), then go contractor and start your fed pension at 62. Or stay fed. Your call. Best of luck. Many more people will chime in. Lots of good advice on this site.

[J277]

Quote:

Originally Posted by Bigdawg Awesome job so far and thank you for your service. Sorry about the VA dis but it is nice to get that extra tax free cash every month. Since you are asking, this is what I would do in your shoes: TSP (401k) only up to employer match (so 5% fed), then max HSA account. Don't use HSA to pay your medical bills. Pay those with your salary. Let HSA grow (save all paid receipts). Max ROTH IRA. Any extra I would put into taxable. I would buy a muti family house (duplex/triplex, quad) and live in one unit while collecting rents. I would also only work fed until you qualify for the pension (maybe 10-15 years), then go contractor and start your fed pension at 62. Or stay fed. Your call. Best of luck. Many more people will chime in. Lots of good advice on this site.

Why exactly should I put income over the 5% into a taxable account? Just ease of access? I've always been told to max out TSP as its such a well managed option with low fees. I'm planning no doing Roth conversion ladders from TSP into a Roth IRA while living off of the cash from my taxable brokerage. (Although I'm somewhat worried that the hammer might be brought down on conversion ladders in the future).

I do need another 3.5 years until I'll be able to collect a deferred pension at 62 that'll be 15% of my high three. So leaving the fed could be an option depending on stress levels.

Also I held off switching to a HDHP last year. I'll be switching it this year as it makes sense until I get married as my future spouse has some pre-existing conditions that won't make it worth it.

edit: I wish I had been smarter about housing earlier. As of now my mortgage is insanely low (3bed 2 bath on a quarter acre for less than I paid for a cheap 2 bedroom apartment) and cheap at right at 2%. Plan on finishing some renovations and selling in 4 years time.

[NomDeER]

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Originally Posted by J277 Why exactly should I put income over the 5% into a taxable account? Just ease of access? I've always been told to max out TSP as its such a well managed option with low fees. I'm planning no doing Roth conversion ladders from TSP into a Roth IRA while living off of the cash from my taxable brokerage. (Although I'm somewhat worried that the hammer might be brought down on conversion ladders in the future). I do need another 3.5 years until I'll be able to collect a deferred pension at 62 that'll be 15% of my high three. So leaving the fed could be an option depending on stress levels.

If you're concerned about Roth conversion in the future, or if the math just doesn't make sense, then consider having some or all of your TSP contributions be Roth TSP contributions. (Matching funds for TSP cannot be Roth, but your own contributions can be.) I wish I had started doing that earlier. I don't think that my tax bracket is necessarily going to be better for most of my retirement and am not sure that the tax rate will be great on Roth conversions once I factor in my annuity and capital gains/dividends. The rules for the TSP and withdrawals/rollovers seem to change intermittently, so it probably makes sense to have at least some Roth IRA outside of your TSP, even if the management fees are slightly higher than TSP at a place like Vanguard. At Vanguard, the fees and costs in an index fund comparable to the C Fund or the S Fund are pretty low and Roth IRAs do seem to have more flexibility and ease of use than Roth TSP.

[The Cosmic Avenger]

Yes, I'm heavy in tax-advantaged accounts and wishing I had put some of that into a taxable account as a bridge to Medicare/SS age. it gives you more flexibility particularly when you're too young to withdraw from some of your accounts. Although you say you won't want to retire until at least 62 now, a lot can change, and the one thing in retirement planning that is probably as or more important to me as my bottom line is having flexibility.

Anyway, if your service qualifies you for VA benefits, you have even less to worry about, as that's much of the reason people need more money when retiring before age 65 and qualifying for Medicare. But still, +1 on the HSA; at worst, if you don't need the HSA for health care (which it's hard to say), it'll still be somewhat equivalent to having that money in a Roth IRA after you turn 70.