Originally Posted by trixs
Goal: Retire at 40 years old!! Would be nice...
Job/Income: Military and about 40k after tax
Savings: 15k-20k a year
Currently I have about 70k saved but it is all in taxable accounts. I have no contributed to an IRA because I want to start withdrawals at 40 or 41.* I understand there is an exception where you can withdrawl the same amount every year.* However, this does not fit into my current withdrawal plan of just using the dividends/intesrest with a 3% max.
Does this pass the logic test to anyone else?* *
Welcome to the board, Trixs. I'm retired Navy and we have several other military posters here like GD-ER (also retired but doesn't post very often), TomCat98, Deserat, FlowGirl, & Otako. (I'm sure that I've forgotten a few.)
Hopefully you're already contributing to the Thrift Savings Plan
. Beginning in 2006 your contributions are no longer limited to 10% but instead can go to the IRS max of at least $14K. There's no match-- yet-- but expenses are only 0.10%. The military may eventually provide for the additional sheltering of bonus & incentive pay. The TSP may even beat Vanguard's fees.
After you fund the TSP, if you meet the income limits then a Roth is probably a better deal than a conventional IRA. Your pension will put you in at least the 15% federal tax bracket at retirement and you may be in an even higher tax bracket from other income or pensions, but Roth IRAs don't require minimum withdrawals and won't result in taxing your Social Security. Roth IRAs don't have to use a 72(t) plan if you're withdrawing only the original contribution amounts.
After you fully fund the TSP & IRA accounts then you'd look at taxable investments.
JPatrick is referring to the obscure "Savings Deposit Program"
which pays a guaranteed 10% (before taxes) on up to $10K. However to be eligible for that program you essentially have to be serving in a combat zone. There are some weasel words in the qualification so if you're on a deployed ship or anywhere near supporting a combat zone then talk to your pay office or DFAS. However there are far better (and safer!) ways to earn an extra $1000/year.