Young military officer cautiously planning ahead

[timwalsh300]

My name is Tim. I am 23 years old and currently serving in the military as an O-1, making O-2 later this month. I'm also engaged to be married early next year and my fiancee is 21 years old. I think we're too young to be really excited about the prospect of early retirement right now, but I feel fortunate that we might be able to have that option someday. I like to keep my options open.

A little about us... We both have a B.A. from a good university. My fiancee probably has just as much earning potential as I do, but I'm not sure how much of it can be realized while I'm on active duty. We both took a college course in personal financial planning and we talk frequently about money. We are similar in the way we handle money: savers by nature and risk-averse.

I hope that will suffice for now as an introduction. Rather than draw this thread out, I'll post some specific questions elsewhere. I look forward to some good discussion.

Tim

[Gumby]

Welcome aboard Tim. Even though you might not be excited about early retirement at present (and understandably so), the fact that you are thinking ahead and recognize that it eventually will be an important issue puts you leagues ahead of others who may be in your situation.

In my view, the two most important things you can do now are

1.) Live below your means -- it is only by leaving yourself a financial cushion that you will be able to meet the exigencies that will almost certainly come your way, as well as have anything available for saving and investment.

2.) Develop a regular savings plan. If the military pay system resembles what I left 23 years ago, allotments make this a relatively painless process. The TSP did not exist when I was in, so I will leave that to others for advice.


While you are doing the above and building up your emergency fund, you should

3) Learn much as you can about investing. This thread from the Early Retirement FAQ's subforum will help -- http://www.early-retirement.org/foru...ist-46732.html


Some other random thoughts that may prove useful:

If you haven't got USAA auto insurance, check them out here https://www.usaa.com/inet/ent_logon/Logon

You will not find cheaper insurance and the service is excellent. As an investment manager/mutual fund company -- not so much

And on that subject, if you ever come across an "investment" outfit known as First Command, run away as fast as you can.

You should also start an account at Navy Federal Credit Union (NFCU). Yes, Army personnel may be members. https://www.navyfcu.org/




You are starting in on a honorable profession, and I wish you and your bride-to-be the very best.

Gumby

[timwalsh300]

Thanks for the reply, and for your service as well. I have already taken a number of the steps you mention.

I've been saving about 40% of my after-tax income since entering active duty, and my fiancee has been able to save nearly all of hers since graduating and taking a job. As a result we are currently sitting on $65k in cash (something I intend to discuss here soon...) with a net worth around $85k.

I'm not using a TSP right now because I'm still not sure how much money I want to lock up until I'm in my 60's. Something else I need to discuss here.

Thanks for the links to the articles. I am already doing my banking and insurance through USAA. I will look into NFCU as well to see what they offer.

Tim

[JustNtime]

Welcome Tim - thks for your service!
Consider Roth IRAs -- You'll be able to pull out your contributions before your 60 (if you have to) and your earnings accumulate tax free. With TSP, I believe you can roll over to a traditional IRA when you get out of the service. Then with 72t SEPPs, you could still tap into the funds if you needed to.
There's also Pentagon FCU that has some good deals on CDs and loans sometimes... Once you're a member of these CUs -- your extended family can also qualify for memberships. I got my mother a 7yr CD ending in 2014 at 6.25% for her IRA a couple years ago. Very good terms too because of her age... If rates go up, she can simply transfer to the higher rate and start a new term. Withdrawals whenever required/desired w/o penalties. Rates are lower now but she's locked in until 2014. Their rewards credit card is also one of the best.
While not as good as they once were I-Bonds may be of interest for their risk adverse nature -- for some of your cash. Current fixed rate is only .3%+inflation rate (3.36% now) updated every 6months. Limit $5k e-treasury + $5k paper per calendar year per person. NO state or local tax and you can wait to pay fed tax until you cash in or even avoid it in some cases.
There are also numerous funds people can suggest to you to diversify and get some potential higher returns. Recently, I've been using VALBX for some of my cash since money market rates are so low. Value line gov't securites, so far so good. Won't make me rich, but seems quite risk adverse and gets me a better return than the brokerage sweep account.