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Goal to retire at 50 - currently 38
Old 09-10-2020, 09:58 AM   #1
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Goal to retire at 50 - currently 38

Hi,

Wanted to get some thoughts. Currently, wife and I are 38 y/o with two girls (11 & 8); dual income; I'm an active duty 05 in the Army with about 5 1/2 to go until I hit 20 years at which point, the plan is to retire from the Army and go to work for MEGACORP for a few years. Wife works in sales from home with about the same level of income.

Current assets:
Retirement accounts: $550k (split between wife's 401k, my Army 401k, Roth IRAs, and rollover IRA)
Taxable accounts: $25k
Real Estate equity: $600-700k (split between primary, 2 rentals, and 1 beach home/rental)

I will get 50% of my base pay if I retire at 20 plus some VA disability probably (Total income of $4-6k in today's dollars).

We have mostly maxed our retirement contributions, but believe now would be the time to dial that back considerably and contribute more to our after tax accounts to increase those. We will still contribute about 8% to my 401k and my wife will still contribute 6% out of her paycheck, but with company match it will be 15% (they automatically contribute 3% plus match up to 6% D/D). When I do the calculations of even 6% rate of return, that $550K would be around $2 million when we are 60 y/o.

The reason is so that I can cover the gap from 50 y/o to 60 y/o as I don't believe my pension will cover everything.

Does anyone see anything wrong with this?

Thanks in advance.
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Old 09-10-2020, 10:22 AM   #2
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Money, it sounds like a good plan. Of course, with a couple caveats.

1. if you can retire at 50 really depends on your expenses.
2. Have you figured in college tuition for your girls?
3. I'd be super worried about only having $25k in my emergency fund
4. Is it possible for you to keep contributing the same amount to the 401k and save in the taxable accounts on top of it?
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Old 09-10-2020, 10:37 AM   #3
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Quote:
Originally Posted by brokrken View Post
Money, it sounds like a good plan. Of course, with a couple caveats.

1. if you can retire at 50 really depends on your expenses.
2. Have you figured in college tuition for your girls?
3. I'd be super worried about only having $25k in my emergency fund
4. Is it possible for you to keep contributing the same amount to the 401k and save in the taxable accounts on top of it?
1. Exactly. I plan to sell my current home and 1x rental which will net me a few hundred K in taxable, but it does depend on expenses.
2. Yes.
3. We have the income and live well enough below our means to cover things.
4. We could, but to me, we have PLENTY in retirement accounts. So the plan is to shring 401k contributions and take that, plus what we already contribute to build up our taxable accounts so that we have plenty by the time we are 50 so we can retire and be very comfortable from 50-60.

Thanks for your thoughts.
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Old 09-10-2020, 11:23 AM   #4
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Congrats Moneymaker. You are in a great position. For ref I am a retired O-4 and DW is a retired CWO-4. We do alright but would do things different if we were 5 years pre retirement. A (rare now) poster here (Doug Nordman)(NORDS) is retired sailor and has a great book out there for military retirees. I won't give the name but easy to look up. Try to nail down projected expenses. Add 10% to those projections. Many track dilligently for a few years prior to retirement to get a better understanding of actuals. VA-don't be a sick bay commando but get every nic. scratch and itch looked at and documented. Trust my, if it hurts even a tiny bit now it may become a problem later and the VA will pay. Most 20 yr folks I know are getting at least 50% from the VA. Many 80-90. A bridge career with a MEGA is not a bad idea but not required if you play the next 5 years right. If you are in a good assignment staying a year or 2 past 20 is an option. I got promoted at 19.5 so ended up doing 23 total. Best of luck sir. GIbill split 50% to both kids?
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Old 09-10-2020, 04:27 PM   #5
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The numbers look okay, but as you said it will come down to expenses. The biggest variable that is such a wild card is the kids. When you're 50 they will be 20 and 23 which based on people I know with kids still puts them in the "liability" column
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Old 09-10-2020, 05:37 PM   #6
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With a pension like that I wouldn't work a day past 20 years. Add in rental income and VA Disability and you should be living well even if the wife retires at the same time. I agree with focusing future savings on taxable accounts since you will be retiring so young. Get the full match but then go to taxable after that. Continue working if you want a lot of toys or get bored easy but you should not have to work a day after your 20 years.
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Old 09-12-2020, 05:55 PM   #7
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Quote:
Originally Posted by Bigdawg View Post
A (rare now) poster here (Doug Nordman)(NORDS) is retired sailor and has a great book out there for military retirees. I won't give the name but easy to look up. Try to nail down projected expenses. Add 10% to those projections.
I check in here every week or so for my name and the "military" keyword.

My daughter and I are fully loaded promoting book #2 but I'll circle back around to #1 in a few more months.

Yes, Moneymaker, you've given a lot of information on assets, and now it's time to focus on retirement budget projections. Do those in today's dollars by cutting out the work-related expenses and adding in your retirement expenses.

Everyone worries about bridging the gap between military retirement and age 59.5, but there are plenty of ways to tap retirement accounts before then. Most of them are penalty-free and a few are even free of income taxes.
https://the-military-guide.com/early...-the-military/
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Old 09-12-2020, 08:49 PM   #8
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We are in our 50s and are barely contributing to our pre tax retirement accounts anymore. We feel like we have enough so are putting in effort to save in post tax accounts. Still for retirement. Trying to save in different buckets.
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Old 09-13-2020, 05:59 AM   #9
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As you build your taxable portfolio think about tax efficient placement. For optimal taxes, you'll want international equities in taxable accounts as you get the foreign tax credit, which goes to win tax-deferred and tax-free accounts. You'll also want domestic equities in taxable accounts since qualified dividends and LTCG get preferential tax rates.

See boglehead page on tax efficient placement.
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Old 09-13-2020, 07:07 AM   #10
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You have a solid financial foundation. I’d make sure you are planning for higher education expenses for your daughters.

The main advantage you have by thinking about early retirement this young is the ability to plan and track expenses. How much you spend a month will determine when you can retire. If you track where your money is going you will have a better idea of what you need in retirement. Good luck!
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Old 09-18-2020, 12:08 PM   #11
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Moneymaker,

Overall it sounds like you all are in a great place financially with lots of good options. I’m a few years ahead of you timeline-wise but struggling with the same decision—what’s the right mix of retirement savings vs taxable savings in the last several years of one’s military career. Right now we’re doing both—maximizing the Roth TSP/IRA options available to us and then putting all additional savings into a taxable account. Our primary goal for the taxable account is to buy our expected retirement home with cash, but that’s likely not attainable for us prior to retirement unless we stop contributing to our retirement accounts...I just hate the idea of giving up several years of Roth retirement contributions. So far, we’ve decided to keep piling money into our retirement accounts and then plan to take out a small mortgage when we buy our house that we can pay off within a few years through Roth conversions from the traditional portion of our TSP after retirement. My situation and considerations are a little different than yours, though, because I do not intend to work after retirement.
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Old 09-20-2020, 03:47 AM   #12
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Being in the military will save you lots of money having VA benefits. It's like little to no co-pay.
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Old 09-20-2020, 06:20 PM   #13
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General rule.... Once you have savings/investments that will cover your annual spending for the next 30 yrs, that'll be a good time retire.
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Old 09-22-2020, 01:51 PM   #14
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If your wife is also going to retire about the same time, then you have to worry about health insurance for about 15 years. If she is going to work until you both are 65, then you are ok. At this point, I would not plan on ACA being there for that long. You may have VA coverage, but what about your wife and daughters?
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