Longest post I've ever made on net

[One-Zero]

Hello all - great site with plenty of useful info!

I recently 'retired' from the military after 24 years service (Sep 1st 2007). I REALLY wish I'd been in on this ER concept much sooner and am trying to make up for lost time and bad habits. Quite a few folks in my profession have ER'd, primarily in Thailand, Panama, Costa Rica, and Colombia...but for the most part -99%- they were single.

My ER plan is weighted heavily to paying the mortgage off the home in FL...yes I've read the pro's/cons already, but with my milpay I'll take that hit of not investing the additional $$. I still plan to save aggressively in spite of paying down the home...would be much easier if I were already living there. I've got a lot to learn and numbers to crunch before I'm anywhere close to many of your situations...We've currently identified "unlearning" some bad behaviors to be the primary obstacle to tackle at this point. Ordered the ERguide and downloaded it...still sifting through everything.
One thing cool we did right was get a house in Guatemala, paid off nice home/location...We know that we could live off just my milpay there if all our best laid plans go to crap.
Salud,
"1-0"
De Oppresso Liber

Thanks to other posters - I'll plagiarize format here...
Age, Location:
• 41 / wife 35 – Currently in NoVA just outside DC (an expensive place for ER prep!).

Income:
• Salary: $135,000+ / wife $85,000 plus my Military ‘Pension’: ~$24,000yr (just got my first check OCT 1st.)

Consumer debt:
• $0 – None on credit cards. Use a visa rewards card to pay monthly bills for points, and then pay it off.
Other debt:
• First Mortgage: $228,000 at 5.5% with 30 year fixed. Monthly payment is $2100 including escrow (covering home Ins & taxes). This is the house I plan to “retire” to…waterfront in FL. My parents are living in it while they have construction on their place done.
• Second Mortgage (Condo in Alexandria): 232,000 (80/20) at $186k 6% with 30 year fixed and ~45k 8.5% . Monthly payment is ~$1700 with a $206 condo fee (This is where I live – transitioned here out of MIL). Will unload this place when it makes sense – but wish I had just rented at this point to take advantage of LBYM and immediate freedom to cut away when the time comes.
• Equity Loan: $89k at 6%. Monthly $667. Though it's my loan – I took this loan out for my parents to do their construction, they pay the bill automatically and I get the interest write-off.

Savings: Since we’re feeling our way through this due to my transition – the plan is to increase numbers below significantly…primarily by refining LBYM.
• My 401k: $0!! I begin contributing 10% (~1200) of paycheck this month. Will do the math to max this out.
• Wife’s401k: ~20k. currently contribs 6%
• TSP: I have from military. $31kSitting in the L2040 fund – cannot make additional contrib. now that I’m out
• Traditional (nondeductible at this point) IRA: ~$4000+recent gains Fidelity 2030. I just got it started this year. Also put 4k in same type tradIRA but different fund, 2035, for wife. My Tax acct said income limits to open a ROTH are out next year and we’ll open those as well as convert these two I just established…the conversion hit will be small.
• Taxable TRowe 2030fund: $2600...just started it to have something outside an IRA beside my MMSA
• MMSA: $26K – start of the emergency fund
Insurance:
• TRICARE Prime for us both and my wife has free BC/BS thru her employer. Our employers pay premiums.
• Currently have 20 yr term life that expires at age 61.

 

[Nords]

Welcome to the board, 1-0. There are approximately 50 veterans here, some of whom retired early. Lots of military [-]sea stories[/-] experiences to learn from.

You need to look at a few more numbers:
- Your annual expenses... perhaps a rock-bottom survival amount, a "comfortable living" amount, and a "cruise the world" amount. It's probably best to look at this in terms of the expenses in excess of your monthly income (pension & rental income).
- One-time expenses in retirement-- paying off the mortgage (as you've mentioned), a new roof, replacement vehicles/appliances, a fantasy vacation, or whatever big hits you might impose on your ER portfolio.
- The size of your ER portfolio, assuming you pay off all/some/none of the mortgages.

Then start running the numbers through FIRECalc.

A couple other suggestions:
- Your military pension could be considered the equivalent of a portfolio of I bonds or TIPS-- among the highest-quality bonds available, inflation-adjusted, and only taxed at the federal level. You may want to change the rest of your asset allocation to shift more toward stocks, natural resources, and real estate.
- If your income is too high to contribute to a Roth IRA, make a non-deductible contribution to a conventional IRA. Later on you can convert the conventional IRA to a Roth and continue to enjoy tax-deferred compounding without minimum distributions.

 

[Gumby]

Welcome aboard 1-0.

If it were me, I'd aggressively go to work paying down that 8.5% second mortgage before loading up the money market account. While you haven't mentioned your actual expenses, just a swag says that, with your retirement pay and your current after tax savings, you could probably go six months if either you or your wife lost a job. (I presume your folks are covering the ongoing expenses in FL). For added confidence, you could get a HELOC to be drawn on in the event of emergency. Rates on those now are certainly lower than 8.5%

 

[73ss454]

Welcome O-Z, may I ask how you managed to retire with 24 years of service in the military at the age of 41?

 

[One-Zero]

Welcome O-Z, may I ask how you managed to retire with 24 years of service in the military at the age of 41?

Entered at age 17, retired at 41...last month.

 

[73ss454]

OK, I thought one had to be 18 to join. Shows what I know.

Good luck!

 

[Nords]

OK, I thought one had to be 18 to join. Shows what I know.

Eh, when I joined at age 17 my mommy had to sign my paperwork. She seemed pretty eager to get it done, though...

 

[OAG]

Lots went in at 17, I did and "retired" at 37 with 21 plus years of service. Some I know of even went in at 15 and 16 but had to get that "adjudicated" later and faced the very real possibility of being administratively discharged for "fraudulent entry" as the minimum age since at least 1958 was 17 with parent(s) or guardian permission. That was back in the 50's and very early 60's and I do not think it can happen now (much better records and those Entry National Agency Checks sort of preclude it).

OP: I also "retired" in the Northern VA area from the MILPERCEN there in the Hoffman in Alexandria. It was EXPENSIVE then (1974-1979 while on AD and then from 1979 to 1986 when we left). I was back to visit two years ago and was really amazed at the changes and the even more EXPENSIVE costs there. Old home we sold in 1886 for $125K was in the $700-750 range now. Guess it has changed a bit since that time but still costly. Good luck in the post AD era.

 

[One-Zero]

Eh, when I joined at age 17 my mommy had to sign my paperwork. She seemed pretty eager to get it done, though...

Hope to spend more of my time discussing issues directly relevant to ER...after viewing some posts in the "other topics" area it became painfully obvious many here have severely skewed world views - very little which is based on facts or experience...especially involving our military situation abroad.

73ss454: I'm not the youngest to have joined by a longshot. As Nord's stated - Mom/Dad had to sign the papers. But they weren't happy about it at all, and I told them I'd just do it myself at 18...feel bad for putting them in that situation - but they now dig living in my house in Fla and are proud of my service!!
I graduated HS a year early and had a scholarship for a pretty decent school. I assured them I would go to college and pointed out the options the military offered. I was good on my word, but a bit late, it took 2 decades of night school/weekends and challenging exams to finish up w/my MBA in 2004...My job was not at all conducive to pursuing civilian education. Much like this ER thing, I believe persistence is key.

RW - you're right, NAC has changed the landscape...no 15yr old hard chargers slipping by these days. Though it may be a better alternative than the lives some of them are trying to get away from - at least the military will encourage and provide a means for them to finish HS and beyond, while learning a trade and getting a check...quite a few would be scumbags have turned themselves around by joining.
cheers,
1-0

 

[73ss454]

Pretty amazing, one can join the service and carry a gun, shoot people, get shot or worse get killed all at 17. Yet you wouldn't be able to vote or drink alcohol, I gotta be missing something.

 

[brewer12345]

Pretty amazing, one can join the service and carry a gun, shoot people, get shot or worse get killed all at 17. Yet you wouldn't be able to vote or drink alcohol, I gotta be missing something.

The military's endless appetite for cannon fodder and the nation's puritanical bent?

 

[One-Zero]

The military's endless appetite for cannon fodder and the nation's puritanical bent?

Ref the above - this is why I made my initial comments ref hoping to stay on topic with ER. I was not cannon-fodder by any stretch of the definition...the generalizations posed on this subject and other hot-button issues are based on the same attitudes that feed racism, sexism, and many other predjudices - based on ignorance.

Please, I just signed on and intro'd myself for the ER forum
I like the concept and wish to learn more about it without sifting through mindless drivel. There are enough forums out there taking that on...

I'll caveat my comments as I know sometimes intent can be misconstrued on the net so I'll try not to be quick w/negative responses. So far only 2 posts have addressed the ER situation since I put my initial intro here - I appreciate their comments and intend to use the 'search' feature a bit more before asking any questions...
regards,
1-0

 

[Nords]

Yet you wouldn't be able to vote or drink alcohol, I gotta be missing something.

I did plenty of at least one of those before I turned 18.

A friend of ours, recently turned 18, is joining the Marines. He's homeschooled and they're happily taking him without his GED, which they'll arrange for him to acquire after he finishes recruit training.

He's 5'2" and 120 pounds, a gymnast & martial artist with a bodyfat of about 0.3% and lightning reflexes. He's going infantry and he wants to be a machine gunner. I asked him if he's checked the pack weight of that job and he says that the Marines want the smaller guys who fit in the Humvee turrets more easily.

If he'd been ready to hop on the bus in early September they would've stuffed an additional $10K in his seabag.

His light burns pretty brightly. He wants to do four years and get out with his GI Bill, just like his older brother, but he's gonna need to have an answer ready when they ask him to go to college on their dime...

 

[73ss454]

So, you lied about your voting age?

 

[Nords]

So, you lied about your voting age?

Yeah, several hundred times... considering the way events turned out it's a very good thing that I was incarcerated at a military institution.

At least now I can sleep at night knowing that I'll never be tempted to run for an elected office.

 

[samclem]

1-0,
Nothing especially significant to add.
-- You don't sound particularly in love with NoVA/DC area--do you need to live there for job reasons, or could you scoot to somewhere more affordable?
-- Even with the big mortgages, your incomes should enable you to sock away some serious change if you get solidly into the LBYM habit. That will be easiest if you guys are comfortable/near comfortable with keeping the luxuries at approx the level you had when you were on AD.
-- Taxes: Are obviously a major consideration for you now. It will be worth it to get an accountant with a very sharp pencil. Things that maybe didn't make much sense for you before (e.g. muni funds/muni bonds, etc) might be worth exploring. At the very least, it wouldn't be a bad idea to get a copy of TurboTax or TaxCut and simulate going through the whole interview process as though it were 15 April 2008. That may give you some ideas on where you can put some money away out of the clutches of the IRS, and could also help you fine-tune your witholding from the present paycheck(s).


Good luck!

 

[Wags]

Hope to spend more of my time discussing issues directly relevant to ER...after viewing some posts in the "other topics" area it became painfully obvious many here have severely skewed world views - very little which is based on facts or experience...especially involving our military situation abroad.

------------------------------- ########################## ------------------------

Yes, it is quite obivious that not of us stay on the ER topics and that from time to time most of us just might go into other areas that have nothing to do with the particular thread. But guess what that is life and that's what makes this forum so interesting.

As for your statement that "it became painfully obvious many here have severely skewed world views - very little which is based on facts or experience....especially involving our military situation aboard" Tnanks for your insight but the reality is that we all have opinions and views and as such we all have a right to express them. If you do not wish to hear them or read them then DO NOT READ THEM.

As for our opinions or skewed world views - very little which is based on facts or experience.....especially involving our military situation aboard. Some of us have served in the military, some of us have experienced war, some of us have lived overseas and some of us have lost loved ones in the wars so what we have to say whether it comes from the news, internet, newspapers, peronsal experience etc.., etc... is important. Being an ex-military person does not make one a SUBJECT MATTER EXPERT on War.

If it was not for the investigative reporting of news organizations the world would not have known about the terrible living conditions of OUR TROOPS at Walter Reed, the secret prisons in foreign countries, the torture that our government has sanctioned, the billions of $$$$ that are being wasted in Iraq, the cooked and false intel that got us into the Iraq War, the illegal wire tapping by our government, this adminstration's blatant disregard for the Constitution, OUR TROOPS not being properly trained and not having the proper equipment (MRAPS, body armor, chemical suits/masks, etc.., etc..)when going to WAR, OUR VETERANS having to SUE the governement/VA to get the proper medical care, ratings and compensation, etc..., etc....., etc....

GOD BLESS

WAGS
A LIFETIME MEMBER OF THE DAV

 

[brewer12345]

So far only 2 posts have addressed the ER situation since I put my initial intro here - I appreciate their comments and intend to use the 'search' feature a bit more before asking any questions...
regards,
1-0

Heh, I think you'll find hat we regularly wander off topic at the slightest provocation. Don't take it personally.

As for your situation, I hate to tell you this, but it looks a lot like your net worth is mostly tied up in non income-producing real estate and you are carrying a healthy amount of debt. So if you want to end up in FL, I think you have a lot of saving to do. I would start with a guess at what your living expenses will be in retiemen, and then start to work back from that to see how large a portfolio you will need to supplement your military pension.

 

[chinaco]

Welcome 1-0... Another veteran here.

 

[One-Zero]

..... a lot like your net worth is mostly tied up in non income-producing real estate and you are carrying a healthy amount of debt. ....start with a guess at what your living expenses will be in retirement, and then start to work back from that to see how large a portfolio you will need to supplement your military pension.

I concur - I'm currently sifting through much of the info here to see how others have tackled a similar situation. As for the living expenses in retirement - that one is throwing me for a loop as well. I've enjoyed reading Bill/Akaisha 's ER guide and others experiences relating to those expenses that relate to quality of life as we all know it won't be much of a plan if all we can cover is food and utilities.

One area of particular interest to me - being inclined to stash in mutual funds instead of individual stocks - are recommendations regarding fund families. I see alot of ref to vanguard on this site, I've already made a start with Fidelity & Trowe...in Target Funds. Am I being too conservative in this area?? Nords made mention of treating my mil pension as "bonds", which I've read in other articles, and to go heavy with stocks with remaining investments. It makes sense to me, but I know when starting out the right moves can sometimes be counterintuitive...

thanks for the input
1-0

 

[samclem]

. . . One area of particular interest to me - being inclined to stash in mutual funds instead of individual stocks - are recommendations regarding fund families. I see alot of ref to vanguard on this site, I've already made a start with Fidelity & Trowe...in Target Funds. Am I being too conservative in this area??
1-0

Vanguard tends to offer a greater variety of funds with very low expense ratios, but Fidelity has joined the fray with some of their offerings (e.g. some of the Spartan funds have ERs lower than their Vanguard counterparts). Regardless, you've mentioned the three "most frugal" of the large MF companies, and you won't go wrong with them (at least as far as expenses go). IMO, expenses matter a lot over the long term.
Target funds: Your target funds, spread among target dates ranging from 2030 to 2040, probably all have bond/cash components ranging from 10-15%. In your situation that is probably not enough to worry about. If you agree that your military "pension" can provide the stability that bonds would normally provide in a retirement portfolio (that's my philosophy), then you might want to remember to shift into later target years to keep the bond allocation small or shift these funds into equity MFs. IMO, you can leave these things as they are for a few years while you get more fundamental stuff worked out.
Also, do some hard thinking about whether you and your wife can really stand the volatility that comes with having a high equity allocation. If you are likely to flee to bonds when stocks drop 30%, then you'd be better off with a different mix.

 

[2soon2tell]

Welcome to the board 1-0.

There is a lot of good ER info here as well as insights into many other topics like that grocery rag states "Enquiring minds want to know".

Like several others I am a vet and like Wags a lifetime member of the DAV.

2soon2tell

 

[One-Zero]

...You need to look at a few more numbers:
- Your annual expenses... perhaps a rock-bottom survival amount, a "comfortable living" amount, and a "cruise the world" amount. It's probably best to look at this in terms of the expenses in excess of your monthly income (pension & rental income).
- One-time expenses in retirement-- paying off the mortgage (as you've mentioned), a new roof, replacement vehicles/appliances, a fantasy vacation, or whatever big hits you might impose on your ER portfolio.
- The size of your ER portfolio, assuming you pay off all/some/none of the mortgages.
Then start running the numbers through FIRECalc.
A couple other suggestions:
- Your military pension could be considered the equivalent of a portfolio of I bonds or TIPS-- among the highest-quality bonds available, inflation-adjusted, and only taxed at the federal level. You may want to change the rest of your asset allocation to shift more toward stocks, natural resources, and real estate.
- If your income is too high to contribute to a Roth IRA, make a non-deductible contribution to a conventional IRA. Later on you can convert the conventional IRA to a Roth and continue to enjoy tax-deferred compounding without minimum distributions.

Thanks Nords: if you check by this thread again I have a ?? ref the above comments.
>>When you say my pension should be treated as bonds, are you saying when I do inputs into a financial engine to enter my pension ($24k+ after taxes) so input $600k? Or is that a standalone figure to put to the side, separate from doing calcs with the other savings going to 401k, IRA, etc?
>>With our desired outcome, paying off the house in FL is a must before FI/RE...Dolphins and manatees at my dock nearly every morning and fruit trees in the yard, it's going to be a great home base - and though East coast, the surf is doable, good enough for Kelly Slater!

On another note - while skimming the threads I saw you were wondering where all the retired MIL ERs were. I can assure you there are quite a few and many are my former team-mates, even though it would still be an incredibly small number in ratio to all MIL retirees. Some have popped out of the woodwork lately to take on contract work and give their savings a shot in the arm and I've had a chance to see how they're doing. As nearly all the guys spoke several languages and were used to operating in other cultures they tend to live abroad - Primarily Panama, Colombia, Ecuador, Peru, and Paraguay - I'd be down there with them or on a sailboat by now if we had not found a suitable basecamp in the USA. They live quite well and a big part of it is escaping the need for 'stuff', yet they can afford maids, gardeners etc. If we decide to live in our place in Guate for part of each year I'll be able to stretch my $$ considerably as well.
Starting late sucks...

have a good one,
1-0

 

[Nords]

When you say my pension should be treated as bonds, are you saying when I do inputs into a financial engine to enter my pension ($24k+ after taxes) so input $600k?

Separate issues.

When you're looking at your asset allocation, consider your ER portfolio to include bonds that throw off enough COLA-adjusted income to equal your pension check. So a May-Oct 07 I bond is paying a composite rate of 3.74% free of state/local taxes, and it'd take you $24K/0.0374 = $642K in your ER portfolio to throw off that cashflow. If you have another ~$88K in your ER portfolio then you're already at least 88% bonds. Most financial advisors, let alone other members of this board, would consider this logic to be way too risky... but they don't see a lot of gilt-edge COLA pensions either.

When you're doing pension calculations, it depends on the sophistication of the calculator. I'm referring to FinancialEngines.com. Some pension calculators will handle a COLA pension and others won't. If a calculator doesn't handle a COLA pension then you'll have to (1) fiddle with the inflation rate or (2) total up your expenses and then subtract out your pension, assuming that your pension keeps your expenses from rising as fast as inflation. A kludgy third alternative: since most pension calculators handle Social Security's COLA increase, you could add your pension to your SS benefits to make sure it gets boosted by the CPI. But that may require a lot of fiddling with SS starting dates. I don't remember whether FE handles a COLA pension.

>>With our desired outcome, paying off the house in FL is a must before FI/RE...Dolphins and manatees at my dock nearly every morning and fruit trees in the yard, it's going to be a great home base - and though East coast, the surf is doable, good enough for Kelly Slater!

I've been wondering how much time he spends there lately. I've read that it was the skateboarding that really made the difference in his surfing, but maybe that's put out by the skateboarding companies. Not that I'm suggesting you want to try that in your 40s.

On another note - while skimming the threads I saw you were wondering where all the retired MIL ERs were. I can assure you there are quite a few and many are my former team-mates, even though it would still be an incredibly small number in ratio to all MIL retirees.

Yep, we're finding them, but it's taking a long time for that 10-15% to come out of the woodwork. You know it's hard to share knowledge when you can't even find the ERs!

As nearly all the guys spoke several languages and were used to operating in other cultures they tend to live abroad - Primarily Panama, Colombia, Ecuador, Peru, and Paraguay - I'd be down there with them or on a sailboat by now if we had not found a suitable basecamp in the USA. They live quite well and a big part of it is escaping the need for 'stuff', yet they can afford maids, gardeners etc.

From the jargon you're using, and guessing at your MOS, I suspect you won't have any trouble achieving whatever goal you set your mind on. And it looks like you have a deep bench to consult with on your own ER projects.

If we decide to live in our place in Guate for part of each year I'll be able to stretch my $$ considerably as well.

You might want to look at Arif's profile and read some of his posts. He's doing fine with rental real estate in the southeast U.S. and living in Panama. He should be able to help answer questions on the subject.

Starting late sucks...

Well, considering the alternatives...

 

[brewer12345]

One area of particular interest to me - being inclined to stash in mutual funds instead of individual stocks - are recommendations regarding fund families. I see alot of ref to vanguard on this site, I've already made a start with Fidelity & Trowe...in Target Funds. Am I being too conservative in this area?? Nords made mention of treating my mil pension as "bonds", which I've read in other articles, and to go heavy with stocks with remaining investments. It makes sense to me, but I know when starting out the right moves can sometimes be counterintuitive...

thanks for the input
1-0

I don't think you can go wrong with Fido or T Rowe target funds. Just make sure you don't choose too conservative a mix. Something like a 2045 fund would probably be suitable, considering your pension. Ubless you have the willingness and ability to do lots of research, I would steer you away from individual stocks.