Military retirement

[fisemper]

I know there are several other retired military on this site so I am asking for some advice on planning for that. I am about 30 months from starting my terminal leave ...and don't want to work after, unless I just get bored. My mil retirement should be ~55k before tax. Currently I save most of my paycheck and only live off 3K per month. I should hit the $1M just by saving alone by the time I retire. All this news of inflation has me worried for the first time that I might not be able to enjoy my retirement. What have other retired military done to prepare and what else should I do?


Thanks
SEMPER FI!

[Retire52]

Since a military retirement is adjusted annually for inflation, and so is social security when you eventually age in for the latter, I wouldn't worry as far as pensions are concerned. Your savings on the other hand can be negatively affected by inflation. If you kept your savings in a bank account earning well below the rate of inflation, for instance, you would lose out as your buying power erodes. However, if your savings are invested in stocks, the impact of inflation would be mitigated by the companies you own shares in as they make adjustments to inflation in the greater economy. I'm sure others will chime in with more sophisticated approaches to hedge against inflation, but this is how I deal with inflation concerns.

[schenbew]

fisemper,

As Retire 52 points out, you pension and SS (eventually) are COLA adjusted. Though you can make an argument that the CPI-W adjustment doesn't fully account for the real inflation in the economy, it's pretty darn close and a phenomenal benefit.

Your concern, not being able to enjoy retirement, is going to be based on a combination of your retirement income and spending. With 30 months to go before retirement, I strongly recommend that you figure out what your specific - not aggregate - retirement expenses will be. Make sure that $36k/yr includes everything that could come up.

Do the same with your expected pension income as well, plotting out what your monthly take home retired pay will be. No more OASD and Medicare tax, but Uncle Sam will continue to take a share for Federal income tax...your state may or may not tax retired pay: figure out NOW what your take home will be.

With a firm grasp on your income and spending #'s you can then evaluate where your comfort level is and whether you can safely retire.

Also be sure to check out this thread:
https://www.early-retirement.org/for...ire-69999.html

As a military retiree, you're a step ahead of the game with a reliable source of income and healthcare (Tricare) taken care of.

I've been military retired for 5+ yrs now and it's been great. I completely retired at the end of July once I was confident that my income, expenses and assets put DW and I in a place where we could comfortably sleep at night regardless of what the market does.

Good luck as you prepare for your retirement!

[rwdflynavy]

It sounds like you plan to live on just your retirement and let you investments continue to grow. As another poster said, you've got an inflation adjusted pension that most people would be pretty envious to have.

Depending on how beat up you got in your military service, you could also be looking at some money from the VA. It isn't too early to begin reviewing your medical record and document every ailment. The silliest thing can be a big percentage point toward your VA disability number. Now is not the time to "suck it up". Even if something isn't currently a problem, if it was previously document it. Document everything that has happened during your career and work with a VSO to file your claim. If you are under 50% you could get a tax free payment that decreases your pension by the same amount (so you come out a bit ahead) or if you hit 50% or higher, you would get that payment as a concurrent receipt. I was "lucky" enough to exceed 50% and get a nice chunk of tax free money each month in addition to my pension. Certainly not something to count on, but nice if it works out.

It sounds like you will be in good shape for retirement with your current plan. I left my investments with TSP due to the low fees, but most of the big investment firms recommended here are able to match or exceed TSP with their index funds, so it may be a wash at this point.

I retired 3 years ago at 28 years and I'm happy to answer any follow on questions.

[fisemper]

Thanks for the responses.

I somehow keep forgetting about the VA disability benefits. I might get some percentage for carpal tunnel in both hands and back issues. No where near 50% but any amount helps. I don't count SS in my plans, but I do try to use a small COLA estimate of 1.2%. I stay below the average so I don't get my hopes up when the next 0% year comes. Also no kids helps with planning. I save a lot of expenses on that alone!

I went back to the FIRECalc using my investment amount as it stands today, taking only 20K yearly (so 75K income in retirement) for 40 years and 50 years for comparison and the calc came back with zero failures. Even pulling 40K for 40 years was successful 66% of the time.

I never have done much with TSP. I was moved to Schwab after USAA sold out their brokerage business and I like them so far.

[HawkeyeNFO]

Congrats!
As far as where to invest your nest egg, I am a strong advocate for military retirees taking more risk (i.e., more equities in your portfolio). I know you aren't big into it, but for the TSP, that would mean C, S, and maybe some I fund. Keep in mind that most people use bonds to counter a down market, but you don't need to worry about that as much, because you have earned one of the best pension deals, and in your case it will already cover your expenses. I don't have any bonds, just equities and about 2 years worth of cash to counter a potential down market.

[schenbew]

Quote:

Originally Posted by fisemper Thanks for the responses. I somehow keep forgetting about the VA disability benefits. I might get some percentage for carpal tunnel in both hands and back issues. No where near 50% but any amount helps. I don't count SS in my plans, but I do try to use a small COLA estimate of 1.2%. I stay below the average so I don't get my hopes up when the next 0% year comes. Also no kids helps with planning. I save a lot of expenses on that alone!

For whatever it's worth, note that the 2022 CPI-W adjustment is going to be somewhere in the 5.5 to 6% range.

Also strongly agree with Hawkeye NFO's take on asset allocation. With a reliable pension, you can increase your stock and decrease your bond allocations. I also have about 2 yrs worth of cash spend on hand to protect against sequence of return risk (SORR). Do a search for Nords on the forum, who has very concisely and comprehensively commented on military retiree strategies.

[Timeisprecious]

Quote:

Originally Posted by schenbew fisemper, As Retire 52 points out, you pension and SS (eventually) are COLA adjusted. Though you can make an argument that the CPI-W adjustment doesn't fully account for the real inflation in the economy, it's pretty darn close and a phenomenal benefit. Your concern, not being able to enjoy retirement, is going to be based on a combination of your retirement income and spending. With 30 months to go before retirement, I strongly recommend that you figure out what your specific - not aggregate - retirement expenses will be. Make sure that $36k/yr includes everything that could come up. Do the same with your expected pension income as well, plotting out what your monthly take home retired pay will be. No more OASD and Medicare tax, but Uncle Sam will continue to take a share for Federal income tax...your state may or may not tax retired pay: figure out NOW what your take home will be. With a firm grasp on your income and spending #'s you can then evaluate where your comfort level is and whether you can safely retire. Also be sure to check out this thread: https://www.early-retirement.org/for...ire-69999.html As a military retiree, you're a step ahead of the game with a reliable source of income and healthcare (Tricare) taken care of. I've been military retired for 5+ yrs now and it's been great. I completely retired at the end of July once I was confident that my income, expenses and assets put DW and I in a place where we could comfortably sleep at night regardless of what the market does. Good luck as you prepare for your retirement!

+1. I've completed nearly two years of full retirement now and DW & I are having the time of our lives.

Here are a couple more tips:

- Make sure you're putting all you can into your Thrift Savings Plan (TSP). If you don't yet have a TSP, open one. For several years in the military I didn't think I needed a TSP - I had traditional and Roth IRAs and was putting my retirement savings into those. However, a TSP has at least two additional benefits you may not have considered: (1) You can contribute to your TSP even after maxing out the allowable contributions into any IRAs you have, and (2) a TSP account has FAR lower fees than most other tax sheltered or investment vehicles. I decided to open a TSP quite late in my military life but still managed to get an extra $30K into it before retirement.

- Don't set aside or blow off the VA form on which to note any service-related injuries or health problems you may have sustained - MAKE time to fill out that form and follow through with the appointments and procedures needed to document those injuries and problems. Since I served as a lab officer and had no blown-off extremities or anything similar, I didn't expect any compensation whatsoever for my problems. However, I was wrong. I now receive compensation for things such as a sleep disorder, problems with my hands after carpel tunnel surgery, etc. This compensation can be far more than you expected.

I hope these help. Enjoy the time you have left in the military - you'll miss it more than you expect after you're out. And - have a fantasic retirement!

[pacergal]

Not a military person, but try to connect with nords, who is a long time member here. He wrote a military guide for retirement. You can search er forum for it.
I learned much from it, even though not in the military!

[rwdflynavy]

Quote:

Originally Posted by HawkeyeNFO Congrats! As far as where to invest your nest egg, I am a strong advocate for military retirees taking more risk (i.e., more equities in your portfolio). I know you aren't big into it, but for the TSP, that would mean C, S, and maybe some I fund. Keep in mind that most people use bonds to counter a down market, but you don't need to worry about that as much, because you have earned one of the best pension deals, and in your case it will already cover your expenses. I don't have any bonds, just equities and about 2 years worth of cash to counter a potential down market.

I agree with HawkeyNFO, I have virtually nothing in bonds. My pension is plenty of bonds for me. 2 years of cash for extra expenses, everything else is in equity index funds.

[SnowballCamper]

We live below our pension income, and have significant TSP balances (high six figures combined). We consider the TSP funds as insurance for later in life problems since we're under 50.

The hang up with VA benefits is that a rating below 50% just makes that portion of retirement pay non-taxable. There are other programs to get a below 50% rating paid in addition to retirement pay and you'll get a briefing on them as part of separation. OTOH it isn't very hard to get up to a 50% rating if you list all the stuff that ails the typical 20+ year veteran.

I especially like the simplicity of the TSP program. I have 25% to each of C,G,S, and I funds and rebalance whenever there is a big change in the market.

Keep in mind that anything you have in IRAs or TSP is hard to get before you're 59.5 y/o. If you're married, I think the Survivor Benefit Plan is a good deal (but some don't like it).

Welcome (almost) to the check of the month club.

[Koolau]

Speaking of Nords, here is a link to start with - to get his book, etc. Of course, he has thousands of posts here if you can figure out how to use the search function. This "dinosaur" has never figured it out, but maybe you can. Here's the Nords link:

https://the-military-guide.com/for-t...ors-biography/

[rwdflynavy]

Quote:

Originally Posted by Koolau Speaking of Nords, here is a link to start with - to get his book, etc. Of course, he has thousands of posts here if you can figure out how to use the search function. This "dinosaur" has never figured it out, but maybe you can. Here's the Nords link: https://the-military-guide.com/for-t...ors-biography/

Another vote for Nords and his books. Well worth the cost if you can't find them at the base library for free. He's forgotten more about the military retirement system and a hundred other mil topics than most of us will ever know.

[Nords]

Quote:

Originally Posted by rwdflynavy Another vote for Nords and his books. Well worth the cost if you can't find them at the base library for free. He's forgotten more about the military retirement system and a hundred other mil topics than most of us will ever know.

Thanks for the tags, everyone!

And, yeah. I wish I’d made the time to learn all of this stuff while I was in uniform.

As Rich says, please check your military base library or local public library for the books. These days you can borrow the eBook and audiobook editions as well as the print.

Well, you can borrow the audiobook version of Raising Your Money-Savvy Family but not (yet) the audiobook version of The Military Guide. I recorded the raw audio last month but now there’s a bunch of editing and publishing admin before it goes live.

Quote:

Originally Posted by fisemper All this news of inflation has me worried for the first time that I might not be able to enjoy my retirement. What have other retired military done to prepare and what else should I do? SEMPER FI!

FI, the root cause of your worries is paying attention to the news. The media is going to make inflation seem as scary as possible because that’s how they attract eyeballs and help their advertisers sell financial products.

Your personal inflation rate will be lower than the CPI. You know how to live lean if it’s absolutely necessary, but you won’t have to. I wouldn’t worry about inflation, and the best way to stop worrying is to stop paying attention to that news.

Quote:

Originally Posted by fisemper I don't count SS in my plans, but I do try to use a small COLA estimate of 1.2%. I stay below the average so I don't get my hopes up when the next 0% year comes. I went back to the FIRECalc using my investment amount as it stands today, taking only 20K yearly (so 75K income in retirement) for 40 years and 50 years for comparison and the calc came back with zero failures. Even pulling 40K for 40 years was successful 66% of the time.

As a comparison, in my last 19 years of COLAs my pension has risen over 40%. Three of those years had zero COLAs in them. You might want to raise your projections on your COLAs a little, but you’ve already amply demonstrated that you’re FI for life.

Your estimate of Social Security benefits is also overwhelmingly too conservative. The apocalyptic projection is that around the early 2030s, SS will be reduced to 75% of your current estimate due to legislative gridlock.

The reality is that nothing’s been done yet because nothing has to be done yet. The fixes are clearly identified and well-publicized, but few of our elected representatives want to go on record now when they can save their votes for a later election year.

Nobody in Congress will pay any attention to this issue until about two weeks before the SSA has to reduce the payments. Check back on this in 2032 or 2034.

[Bigdawg]

Quote:

Originally Posted by Nords Thanks for the tags, everyone! And, yeah. I wish I’d made the time to learn all of this stuff while I was in uniform. As Rich says, please check your military base library or local public library for the books. These days you can borrow the eBook and audiobook editions as well as the print. Well, you can borrow the audiobook version of Raising Your Money-Savvy Family but not (yet) the audiobook version of The Military Guide. I recorded the raw audio last month but now there’s a bunch of editing and publishing admin before it goes live. FI, the root cause of your worries is paying attention to the news. The media is going to make inflation seem as scary as possible because that’s how they attract eyeballs and help their advertisers sell financial products. Your personal inflation rate will be lower than the CPI. You know how to live lean if it’s absolutely necessary, but you won’t have to. I wouldn’t worry about inflation, and the best way to stop worrying is to stop paying attention to that news. As a comparison, in my last 19 years of COLAs my pension has risen over 40%. Three of those years had zero COLAs in them. You might want to raise your projections on your COLAs a little, but you’ve already amply demonstrated that you’re FI for life. Your estimate of Social Security benefits is also overwhelmingly too conservative. The apocalyptic projection is that around the early 2030s, SS will be reduced to 75% of your current estimate due to legislative gridlock. The reality is that nothing’s been done yet because nothing has to be done yet. The fixes are clearly identified and well-publicized, but few of our elected representatives want to go on record now when they can save their votes for a later election year. Nobody in Congress will pay any attention to this issue until about two weeks before the SSA has to reduce the payments. Check back on this in 2032 or 2034.

Wholly Smokes! A Nords sighting. Was thinking about you yesterday morning at 0345 as I dropped the kids off at Dulles for their flight to Hawaii. The reports of your early demise were premature. JK, no actually reports or rumors of your early demise. We know you are busy out there trying to help our military members and retirees. Thanks for what you do Nords. Always appreciate your words of wisdom.

[ivinsfan]

Quote:

Originally Posted by fisemper Thanks for the responses. I somehow keep forgetting about the VA disability benefits. I might get some percentage for carpal tunnel in both hands and back issues. No where near 50% but any amount helps. I don't count SS in my plans, but I do try to use a small COLA estimate of 1.2%. I stay below the average so I don't get my hopes up when the next 0% year comes. Also no kids helps with planning. I save a lot of expenses on that alone! I went back to the FIRECalc using my investment amount as it stands today, taking only 20K yearly (so 75K income in retirement) for 40 years and 50 years for comparison and the calc came back with zero failures. Even pulling 40K for 40 years was successful 66% of the time. I never have done much with TSP. I was moved to Schwab after USAA sold out their brokerage business and I like them so far.

A couple people act like the only advantage is that it turn part of your retirement pay not taxable, but there's more to it then that.


Any rating all will eliminate a bunch of fees on a VA mortgage. It also will likely get you into the VA health system with low cost and very low cost meds.



They have a special math for rating so a 50 is harder to come then you might imagine. How's your hearing a lot of times that's good for a quick 10%.. That probably depends on your MO. DH ran a quad in Nam..so that was pretty much a rubber stamp.

[Koolau]

Quote:

Originally Posted by Bigdawg Wholly Smokes! A Nords sighting. Was thinking about you yesterday morning at 0345 as I dropped the kids off at Dulles for their flight to Hawaii. The reports of your early demise were premature. JK, no actually reports or rumors of your early demise. We know you are busy out there trying to help our military members and retirees. Thanks for what you do Nords. Always appreciate your words of wisdom.

Always good to hear from Nords. Speaking of "sighting", as I travel about the Island I always keep a look out for Nords. He is one of the few members here I have a reasonably good mental picture of. YMMV

[ivinsfan]

Quote:

Originally Posted by Koolau Always good to hear from Nords. Speaking of "sighting", as I travel about the Island I always keep a look out for Nords. He is one of the few members here I have a reasonably good mental picture of. YMMV

OK well as long as you don't stop the wrong long haired hippie looking surfer wearing flip flops you are good.

[Koolau]

Quote:

Originally Posted by ivinsfan OK well as long as you don't stop the wrong long haired hippie looking surfer wearing flip flops you are good.

Good point! We do have more than our share. But I'm betting Nords still has his good military posture. That'll make him stick out.

[Nords]

Quote:

Originally Posted by Bigdawg We know you are busy out there trying to help our military members and retirees. Thanks for what you do Nords. Always appreciate your words of wisdom.

You’re welcome! Paying it forward.

Quote:

Originally Posted by Koolau Always good to hear from Nords. Speaking of "sighting", as I travel about the Island I always keep a look out for Nords. He is one of the few members here I have a reasonably good mental picture of. YMMV

Quote:

Originally Posted by ivinsfan OK well as long as you don't stop the wrong long haired hippie looking surfer wearing flip flops you are good.

Quote:

Originally Posted by Koolau Good point! We do have more than our share.:laugh: But I'm betting Nords still has his good military posture. That'll make him stick out.

That’s about right— and I’ll be back on Oahu next Wednesday. (Slow Travel Day #61.) Surf permitting, I’ll paddle out on Thursday or Friday. Possibly Thursday *and* Friday.