Hi All - Rowdy Checking In

[Rowdy]

Hi everyone, I'm Rowdy. Here are my details:

- 50, married, with 1 teenager in high school and 1 graduated college.
- Engineering Manager & Navy Reserve Officer {Captain (O6)}. Retiring from Navy Reserve soon after 27+ years. Total income approximately $100k+.
- Shy of $300k in various accounts; mostly 401ks, IRAs, less in Roth IRA, and some in non retirement accounts. Emergency fund on my to-do list as well as increasing my Roth contributions. Annual savings rate including company match around 15%. 90% equities & 10% bonds.
- Pensions: Navy Reserve pension (COLA adjusted) about $30k at 60; increasing to about $45k at 67 following VSI payback. Corp pension {from previous, not financially stable company} about $7k (not COLA adjusted) starting at 60. Plan to wait until 67 for SS. All amounts are PV.
- Tricare Medical starting at 60.
- Youngest covered for college by new GI Bill (spent a year in Baghdad for this) & college savings.
- Mortgage for the foreseeable future; affordable payment {low interest, 30 yr}. Have equity in house.
- Small amount of consumer debt.

Realistically won't be able to retire until 59 or 60 (according to FIRECalc) assuming spending at about 60% of current income. Would love to pull the trigger earlier if possible! I've been working the budget pretty aggressively, but don't want to get too crazy. I'll publish my budget in another post; was able to reduce hundreds of dollars per month by going after some low hanging fruit (axing cable, driving cars longer, increasing deductibles, discounts, taking lunch to work, etc).

Ideal situation in ER would be 8 months in Midwest and 4 in Hawaii; or maybe 12 months in Hawaii!

Questions:
- How to ER a few years earlier than 59 or 60. Just bought a lotto ticket today!
- How to pull off this Midwest/Hawaii snowbird plan.
- How to decrease spending now and increase savings without living like a pauper.
- How to put together a realistic retirement budget; I have one at 50% of current income, but would likely have to stay put in the Midwest with this one. I think at 60%, we could possibly snowbird for a few months each year...Or maybe I'm just dreaming...

Thanks for your comments and suggestions.

Rowdy

 

[obgyn65]

Hello Rowdy and welcome. Have you entered your numbers in this free tool :

Merrill Edge| See Where You Stand

 

[Nords]

Welcome, Rowdy, and thanks for the book review!

Can you tell if your Reserve retirement calculator is using the correct O-6>30 pay scale for your pension? That's what you should be paid at (not "just" O-6>26) since your retirement longevity will rise to max out by age 60.

If you haven't bought one yet, spouse and I have found the life membership in AUSN to be a great way to keep up with the changes.

I don't know how much of a difference it'll make to your retirement calculations, but you can move non-deductible conventional IRA contributions to the TSP. Even better, next February you may (even as a retired Reservist) be able to contribute after-tax dollars to a Roth version of the TSP. They're still writing the rules so I don't know whether it makes a difference whether you're drilling, IRR, or retired.

Ideal situation in ER would be 8 months in Midwest and 4 in Hawaii; or maybe 12 months in Hawaii!
Questions:
- How to pull off this Midwest/Hawaii snowbird plan.

Waikiki is filled with snowbirder's condos. A couple years ago I was invited to one of their morning gatherings in the Hale Koa lobby where over a dozen of the veterans met for coffee & muffins. I can put you in touch with one of them if you're interested.

Another good option is VRBO.com.

 

[Gumby]

Welcome aboard, Rowdy.

 

[chinaco]

Howdy Rowdy!

Welcome to the forum.

 

[donheff]

Welcome Rowdy. Those are mostly questions you will have to work out for yourself although the references to % of income seem like the wrong perspective. Better to add up all of your actual expenses for a year or two, add in a reasonably thought through cushion for cyclical things (roof repair, new car, etc) and then run a few tax scenarios through Turbo tax or the like. That will give you an idea of what you will really need. It may also disclose places where you could cut back in hard times - or, it might disclose that you are already pretty bare bones and need to add more cushion. Either way, that is better than speculating about 60% or 70%. After you get a grip on expenses run it through Firecalc to see where you stand.

 

[Rowdy]

OBGYN65: Thanks, I'll check out the link.

...although the references to % of income seem like the wrong perspective. Better to add up all of your actual expenses for a year or two, add in a reasonably thought through cushion for cyclical things (roof repair, new car, etc) and then run a few tax scenarios through Turbo tax or the like. That will give you an idea of what you will really need. It may also disclose places where you could cut back in hard times - or, it might disclose that you are already pretty bare bones and need to add more cushion. Either way, that is better than speculating about 60% or 70%. After you get a grip on expenses run it through Firecalc to see where you stand.

DONHEFF; good point, it seems a bit arbitrary to use some random percentage like "I'll need XX% of my current income". I've got the beginnings of a retirement budget in the works, but will need to add in the cyclicals (e.g. roof, car, etc) that you suggest. Thanks.

Welcome, Rowdy, and thanks for the book review!

Can you tell if your Reserve retirement calculator is using the correct O-6>30 pay scale for your pension? That's what you should be paid at (not "just" O-6>26) since your retirement longevity will rise to max out by age 60.

If you haven't bought one yet, spouse and I have found the life membership in AUSN to be a great way to keep up with the changes.

I don't know how much of a difference it'll make to your retirement calculations, but you can move non-deductible conventional IRA contributions to the TSP. Even better, next February you may (even as a retired Reservist) be able to contribute after-tax dollars to a Roth version of the TSP. They're still writing the rules so I don't know whether it makes a difference whether you're drilling, IRR, or retired.


Waikiki is filled with snowbirder's condos. A couple years ago I was invited to one of their morning gatherings in the Hale Koa lobby where over a dozen of the veterans met for coffee & muffins. I can put you in touch with one of them if you're interested.

Another good option is VRBO.com.

NORDS; your welcome, thanks for pulling all that valuable info together for the book.

Until I read your book, I didn't realize the longevity maxed out at 30; the info I listed above uses the 30 year O6 pay of $10,391/month. I'm taking my assumed max points (after 2 more years of reserves) of 5,689pts/360 to get an equivalent years value of 15.80. I then use the equation 15.80 x 0.025 x $10,391 to get $4,105 monthly. I then decreased this amount by about 6.5% for SBP to get $3,838 or about $46k/year. I took the VSI, so I've got to pay this back at a rate of 40% (new rule, used to be very high % pay back) per paycheck. That will take about 7 years to pay back, thus the 2 tier pay I list of about $30k at 60 followed by about $45k at 67. Have I missed something? What's your opinion of the SBP? FYI, since I started at the Boat School in 1979, I'm using the pre 1980 pay assumptions. Also, I don't really like the Navy's online calculator since the amounts listed are not PV.

I joined AUSN right before I mobilized to Iraq; I've since let my membership lapse. I guess I didn't see the value in continuing; I will be renewing my MOAA, as I am quite happy with their legislative work. Do you see value in continuing with AUSN?

I never took advantage of the TSP since I had access to employer 401ks. I do now see the value in their razor thin expenses. The 401k choices I have for index funds is still under 0.1, so it's not too bad. Since I'm currently in the IRR, it does not look like I'm eligible for TSP. I'll watch for any changes. I do probably need to simplify some of my investments, as I'm currently with 3 different 401k companies and am probably over diversified; I guess that's another discussion...

Probably a bit premature for me to contact any of the snowbirders, unless of course I can whittle away at my current ER date!

Thanks!

 

[Nords]

Until I read your book, I didn't realize the longevity maxed out at 30; the info I listed above uses the 30 year O6 pay of $10,391/month. I'm taking my assumed max points (after 2 more years of reserves) of 5,689pts/360 to get an equivalent years value of 15.80. I then use the equation 15.80 x 0.025 x $10,391 to get $4,105 monthly. I then decreased this amount by about 6.5% for SBP to get $3,838 or about $46k/year. I took the VSI, so I've got to pay this back at a rate of 40% (new rule, used to be very high % pay back) per paycheck. That will take about 7 years to pay back, thus the 2 tier pay I list of about $30k at 60 followed by about $45k at 67. Have I missed something?

That all looks right. Final Pay is a lot easier than High Three for Reserve retirement, but the Final Pay dinosaurs are getting pretty scarce these days!

I've lost track of the VSI payback system, and the rules may change once or twice more before you actually have to give it back. But hey, hopefully you've made the most of that money over the years... almost like an interest-free loan.

I haven't dug into the details of the Reserve Component SBP premiums for minor children, but you absolutely want to have the SBP for the next decade when you're retired awaiting your pension. (Of course that's your spouse's choice, not yours.) I put up this post on RC SBP:
The Reserve Component Survivor Benefit Plan | Military Retirement & Financial Independence
and JDarnell contributed a most excellent batch of USAF presentations on SBP here:
More SBP details | Military Retirement & Financial Independence

The premium calculations for kids seem to get pretty arcane.

As I understand RC SBP, by the time you're "paid up" at 30 years of premiums you'll be 90 years old. That's a less-sweet deal than the typical age 40-something retiring from active duty. If your spouse is anticipating her own pension money when you're age 62 (after paying your minimum two years of SBP premiums for the coverage you had during ages 50-62) then you might want to consider dropping SBP after that.

I know some veterans' spouses decline SBP in favor of buying term life insurance for the years up until the retiree turns age 70 and can start taking max Social Security benefits, with max survivor benefits for their spouse. Others spouses decide that 6.5% is a fair price to pay for sleep-at-night comfort.

When spouse and I retired (me from active duty, her from the Reserves) we declined each others' SBP. We felt that either one of us would do fine without the other's annuity, and we'd rather have that extra 6%-12% to spend together now.

FYI, since I started at the Boat School in 1979, I'm using the pre 1980 pay assumptions.

Yes you are Final Pay, but you might want to check that DFAS didn't screw up your DIEMS (Date of Initial Entry into Military Service) because you were commissioned after 6 Sep 80. The 1990s conversion to DJMS messed up all USNA in YGs 81-84. Supposedly it's been corrected but in 2001 it took me nearly six months to get that done.

Do we know each other? I'm '82 from 12th Co and spouse is '83 from 8th. She was a METOC on active duty and at PACOM as a Reservist, although she finished up with two years in the Hawaii NEPLO billet.

I joined AUSN right before I mobilized to Iraq; I've since let my membership lapse. I guess I didn't see the value in continuing; I will be renewing my MOAA, as I am quite happy with their legislative work. Do you see value in continuing with AUSN?

MOAA might be just as good. (I let my MOAA membership lapse!) The AUSN articles are where we learned about the max longevity for retirement and the RC SBP details. They also do a January tax article that goes into excruciating detail about the Reserve deductions, but that's not going to apply to you for much longer. When spouse went Reserve in 2001 it seemed easier to do the life membership than the annual. But if you're not doing much with it over the next 10 years then MOAA will probably alert you to the issues just as well.

AUSN & MOAA are all over making Reserve mobilizations eligible for early retirement all the way back to 9/11. You might want to keep an eye out for that corrective legislation over the next decade. I can't call it one way or the other.

I never took advantage of the TSP since I had access to employer 401ks. I do now see the value in their razor thin expenses. The 401k choices I have for index funds is still under 0.1, so it's not too bad. Since I'm currently in the IRR, it does not look like I'm eligible for TSP.

That's an astoundingly low expense ratio for a 401(k). Impressive. For you, going from 10 basis points to 2.5 basis points is not as big a deal as going from 100 to 2.5. It might not be worth the hassle of finagling your way into the TSP, and then transferring your non-deductible conventional IRA contributions (if you have any of those), and then hoping that the Roth TSP rules let you move even more into the TSP. You'll have a pension at age 60, too, so you probably don't need to care about the TSP's annuity feature.

 

[Rowdy]

Nords; good stuff, thanks. I sent you an email concerning our Boat School connection.

Where can I find my DIEMS date? I've looked at mypay, BOL, DD214, etc. The only place I can find a reference to the 79' date, is on my ASOSH points capture which includes the date from I-day to graduation.

Thanks.

Rowdy

 

[Nords]

I got your message; I think my response went straight to your e-mail.

Where can I find my DIEMS date? I've looked at mypay, BOL, DD214, etc. The only place I can find a reference to the 79' date, is on my ASOSH points capture which includes the date from I-day to graduation.

If it's not in BOL then you probably have to talk to PSD. You might be able to just ask them whether they think you're Final Pay or High Three. If it's counting points since 1979 then that's a good sign.

Spouse didn't get retirement point credit for her USNA sentence. That's not part of your total points or the pension calculation, right?

When FIREUp2020 sees this thread she'll be able to chime in to tell us exactly what record & block number the DIEMS is in.

IIRC I didn't find out about the problem until it showed up on my draft DD-214 and they started giving me the "wrong" pension numbers.

FWIW this was supposed to have been fixed, but it's a lot easier to check/fix before you're in gray area.

 

[Rowdy]

Nords; thanks for the response. That's correct, I got zero points for the Boat School time, but the first line of my point capture shows the dates from "I-day" in 79' to graduation. On this line item, it shows a "WHY" code of "service not creditable".

I've heard that people have sent in copies of orders from their midshipmen cruises and received credit. I intend to put in a FOIA request to The National Archives to find the info if it isn't in my records anywhere.

Rowdy

 

[Nords]

I've heard that people have sent in copies of orders from their midshipmen cruises and received credit. I intend to put in a FOIA request to The National Archives to find the info if it isn't in my records anywhere.
Rowdy

Wow. But at 50 cents per point per month in the pension check, I guess it makes fiscal sense.

I wonder if my conduct record is still in the archives...

 

[Midpack]

Welcome aboard Rowdy. As others have said, without your spending projections, I don't know how to give any meaningful reply. FIRECALC would be an excellent place to start as others have suggested.