Soldier intro...

[Supermech21]

Hi, I'm new to these forums and relatively uneducated on proper financial decisions.... A little about me, I'm 26 and I have been in the Army for the past 8.5 years and plan on retiring at or near 38years old (2023). I understand that I will need another job and plan on working in DC for an agency.

I guess my min reasoning for this post is a "if you could do it all over again from your 20's, what would you do?" my stats are as followed:
House - owe 123000, preparing to refinance from 5.25 to 3.25 15 year loan
Vehicle - owe 33000, 2011 f150, I plan on keeping for 10plus years. Wife owns her 2006 focus.
Credit card - 0

Savings - roughly 12000 at the moment, mostly from a recent bonus.
Retirement - its hard to calculate how my pension will pay out 11 years from now but I have that, and we both probably have around 2000 in personal IRA's.... I know that's low but we have just recently been paying into them more aggressively ...
Stocks - ugh, my grandfather literally amassed a small fortune from ALSK over the last 6 years and the summer I decide to buy it tanks to just over 2.50, I have about 125 shares. I'd like to buy more stocks buti don't know enough and at this point I'm just pissing the money away. The idea of buying into blue chip stocks is more appealing than trying to strike it rich with more volatile stocks...




What would be your key moves for the next 5-10 years? I bring home around 52000 after taxes and my wife is around 30000 give or take...I'm more motivated in paying off the Ouse ASAP and buying another and renting this current one (5 year plan) and amassing a handful of investment properties to run in my 50's... Anywho any guidance or ideas would be great.

 

[seabourne]

Welcome! First start is talk to Nords here, and read his book:

Author of "The Military Guide to Financial Independence and Retirement" with the help of over 50 of this board's veterans & families.

Military Retirement & Financial Independence | Financial independence & early retirement for veterans every Monday, Wednesday, & Thursday, and search Facebook for "The Military Guide to Financial Independence and Retirement" fan page.

Other than that, read the forums, pay off the car before the house, and take a deep breath. You're heading the right way, you don't have to do it all at once,you're young, and you have a partner to work with. Thank you for the service, and I hope that you manage the early retirement that you're trying to plan for.

 

[HawkeyeNFO]

Navy guy here. I would recommend paying off the truck before the house. Why? Tax benefits, and after you refi, you'll have a lower payment also. The truck gives you no tax benefits, and when you go looking for your next house, that is debt you don't want. Hopefully rental income will cover mortgage payments and more after you get tenants in there. Other thing to do while you're in the Army is take advantage of tuition assistance, because it is free money. Do you partake in TSP? Have an IRA?

 

[SRyan]

Welcome.
If you like the idea of buying into blue chips and your knowledge is low on stocks, I would recommend buying into a large cap mutual fund and set it up with auto payments so that $$$ goes out of your bank without you having to physically transfer it.

A few good funds:
USAA
USAA S&P 500 Index Fund Member Shares (USSPX), Minimum opening balance: $3,000. Tracks the 500 companies listed on the S&P 500 (great diversification for US companies)
USAA International Fund (USIFX), minimum balance is $50.00 with auto investing set up. Good way to get exposure to international markets especially if you go with the USSPX fund too
USAA Growth Fund (USAAX), minimum balance is $50.00 with auto investing set up. Also nicely paired with the USIFX fund. Invests primarily in US companies with high growth potential
USAA Emerging Markets Fund (USEMX), minimum balance is $50.00 with auto investing set up. Also nicely paired with the USIFX and the USAAX fund. Invests in emerging markets (high risk/high reward or huge loss), think Brazil, Russia, India, China and some of the newer up and comers Nigeria, Turkey, Etc...
With the $50 min investment funds you could really diversify nicely with $350 per month: $210 into USAAX (60%), $88 into USIFX (25%) and $52 into USEMX (15%) This would be considered a pretty aggressive allocation
Or, you could go with one of their Target date funds too that automatically reallocate as you near your projected retirement date. All USAA Target date funds take $3K to open ($1K in an IRA)
Vanguard
Vanguard Wellington Fund Investor Shares (VWELX), Minimum opening balance: $3,000. Currently about 68% Stocks and 32% Bonds. If you open up on the Vanguard website, the fund is No Load/No Fee.

Just because you set up auto investments and are dollar cost averaging does not mean you can completely ignore these either. For instance, if you watch the market and see a big dip, it may equate to a good opportunity to slam a little more cash into the funds (collect more shares at a cheaper price)
Also, you should have a little fun with your investing and use a small part of your portfolio to invest in those high risk small caps, if you have the time!

 

[MichaelB]

Hi supermech21 and welcome to the forum. Here's a thread you may find interesting http://www.early-retirement.org/forums/f28/advice-youd-give-your-25-year-old-self-60672.html

 

[Supermech21]

Thanks for the timely replys, I will definitely check out that book. It's hard to accurately plan for retirement in the military because there are so few retirement calculators that understand how our pension pays out and changes every year.

I was vague in my retirement explanation so I will clarify. I have two IRA's, a TSP through the army which I invest 125 in every month (balance of 1300) and a Roth IRA through USAA that I invest 50 every month (balance of 665 in USAWX). My wife has a IRA through her work and is around 2200, she pays a lot more in because I handle all the bills, but then again she doesn't have a pension like I have. Just to give some of the non military an idea it would be about 2300 every month after I retire from the military. I plan on dumping all or most in a mutual fund form years 40 - 60.

I will also focus on paying off the truck instead of the house.

As for my stock situations (124 shares of ALSK @ 2.49) should I sell and move on? I tried to ride it out and it rose to 3.60 something then tanked again. I know it's a huge hit since most of the shares were bought around $6-7... Ideas?

 

[militaryman]

One of your best investments is to pour yourself into trying to make rank as fast as possible --- Being one grade higher at retirement than you might be if you coast will impact your monthly retirement check to the positive for the rest of your life ----- Do what is necessary to set yourself apart from the rest and Thank you for your service!

 

[jclarksnakes]

One of your best investments is to pour yourself into trying to make rank as fast as possible --- Being one grade higher at retirement than you might be if you coast will impact your monthly retirement check to the positive for the rest of your life ----- Do what is necessary to set yourself apart from the rest and Thank you for your service!

+1

 

[Supermech21]

One of your best investments is to pour yourself into trying to make rank as fast as possible --- Being one grade higher at retirement than you might be if you coast will impact your monthly retirement check to the positive for the rest of your life ----- Do what is necessary to set yourself apart from the rest and Thank you for your service!

That's a good point. I changed my job a year ago so that promotions would be much easier. I'm an e6 now and should easily make e8 by the time I retire.

 

[obgyn65]

Welcome to the forum.

 

[martyb]

You're way way too low on the TSP. With your income(s) and the level of debt you listed, you should be maxing out your TSP contributions. By the way, welcome!

 

[freebird5825]

Welcome to the forum.
Thank you for your service.

 

[Supermech21]

You're way way too low on the TSP. With your income(s) and the level of debt you listed, you should be maxing out your TSP contributions. By the way, welcome!

Your right, I should be paying more into my tsp. As I said I handle all the bills and manage to pay a little extra into the mortgage, I'm not going to be able to max contributes for a little while, that would be over $1000 a month into my tsp.

 

[FinanceDude]

Thank you for your service to out great nation............

 

[martyb]

Your right, I should be paying more into my tsp. As I said I handle all the bills and manage to pay a little extra into the mortgage, I'm not going to be able to max contributes for a little while, that would be over $1000 a month into my tsp.

Tell me about it...I put $865 every two weeks into my TSP ($22,500/yr), and after that my take-home pay is only $1059 (2 wks), wife's is only $558 per 2 wks, and we pay for two separate apartments, 2 utilities, 2 cable bills, insurance for 2 late model vehicles, gas for me to drive 125 miles twice a week to be with my wife, etc. etc. It's a kind of tough squeeze sometimes, but honestly, if my pay was as high as yours, I'd max my TSP AND be maxing a Roth IRA for both wife and myself. It's all a matter of discipline....and I'd be lying if I said I had always had as much....it took me awhile to learn that nothing is more important than paying myself first. You'll get there, but the sooner you do, the easier it will be later. My gross pay by the way is only $63000 per year, wife's is just $23000. She currently sends 25% of her pay to her 401k as well. We pay a combined rent of $1275 per month, and still have one small (0% interest) car payment. Just close your eyes and do it! Best of luck.

 

[Nords]

Thanks for the timely replys, I will definitely check out that book. It's hard to accurately plan for retirement in the military because there are so few retirement calculators that understand how our pension pays out and changes every year.

Welcome to the board, Supermech.

You could start with USAA's detailed retirement calculator, which is very simplified but very user-friendly. It'll recommend mutual funds for your asset allocation, which is a good idea, but you'll want to invest in passive index funds instead of their active (higher-fee) funds.

Fidelity also has a fairly detailed retirement calculator. But after you feel like you've learned everything you can from those two, you'll probably end up spending the majority of your time with FIRECalc and FinancialEngines.com.

Many retirement calculators have a button for "inflation-adjusted pension". Other retirees assume that the COLA will offset some other expense that will inflate with time.

As for my stock situations (124 shares of ALSK @ 2.49) should I sell and move on? I tried to ride it out and it rose to 3.60 something then tanked again. I know it's a huge hit since most of the shares were bought around $6-7... Ideas?

Consider this your tuition bill at the School of Investing Experience. In November or December, when you have an estimate of the year's capital-gains distributions from your taxable accounts, you can sell a little of ALSK to generate capital losses to offset the capital gains.

Or you could just sell the whole thing now to generate a capital loss that you can carry forward each tax year until it's used up.

Don't buy any more individual stocks until you've at least read books like "The Bogleheads Guide to Investing" or "All About Asset Allocation" or "Four Pillars".

You'll enrich yourself far more by maxing out your TSP contributions, getting your college degree (if you haven't already), and getting yourself promoted.

 

[Parr0thead98]

Supermech: welcome! You've come to the right place--here and Nord's blog at www.the-military-guide-com

Can you get rid of the truck/$33K loan? W/ $12K saved, you could buy a used truck for the next few years until you save up some more $$ to buy-up. I know, the truck is an emotional attachment, but think of the lower insurance and no car payments...which could be immediately applied to your TSP which is pre-tax.

I have an E7 who works for me that he and his family are still living off his E4 salary and they bank all his pay raises even today. He does not plan on having to work when he retires from the military. His wife works making about $40K and they save a large chunk of her salary, too. He's frequently a guest speaker at our base financial planning seminars.

Just some things to think about. Believe me, this site and some of the members posting on this thread have helped me to make the leap in my own military retirement outlook!

 

[Supermech21]

Tell me about it...I put $865 every two weeks into my TSP ($22,500/yr), and after that my take-home pay is only $1059 (2 wks), wife's is only $558 per 2 wks, and we pay for two separate apartments, 2 utilities, 2 cable bills, insurance for 2 late model vehicles, gas for me to drive 125 miles twice a week to be with my wife, etc. etc. It's a kind of tough squeeze sometimes, but honestly, if my pay was as high as yours, I'd max my TSP AND be maxing a Roth IRA for both wife and myself. It's all a matter of discipline....and I'd be lying if I said I had always had as much....it took me awhile to learn that nothing is more important than paying myself first. You'll get there, but the sooner you do, the easier it will be later. My gross pay by the way is only $63000 per year, wife's is just $23000. She currently sends 25% of her pay to her 401k as well. We pay a combined rent of $1275 per month, and still have one small (0% interest) car payment. Just close your eyes and do it! Best of luck.

You are my hero. You are very disciplined and I'm going to make a effort to put a little more in. Props to you my friend!

 

[martyb]

lol...not a hero, just a guy who woke up in my late 40's to realize I was getting close to the light at the end of the tunnel, and I kind of panic'd about not being even nearly ready. Up to that point, I'd known for years I "could" retired at age 55 and just let it go at that. I never did any serious number crunching...only had a general idea. When I actually sat down & did the math, it was like a bucket of cold water in my face. Having said all that, I do not have to retire at 55. I can work till I drop if I want to. Since I changed agencies in '08, I have a physically easier job, although it's much more stressful. However, my mindset for the last 30 yrs has been to retire at 55. I still can't believe I wasn't more aware earlier on. My head was in the sand, knowing that I would have 2 defined benefit pensions (civil service and AF Reserves) and so I thought I was "safe" and could spend the rest. The reality turns out that while I will have the civil service pension, if I retire on schedule next year at 55, that pension, after taxes, insurance, survivor's benefits, etc. will only net around $2300 per month. My military retirement won't kick in until 2018 at age 60, and if I'm lucky, might be close to $1000 per month net. I'd be comfortable with the combined amounts, but that won't happen until I'm 60, so 5 yrs to bridge until then. Wife will "maybe" have $100k in her 401k in 3 yrs when she's 55. Our plan is for her to retire at that time, so we can travel some together, and just generally relax. As stated, we will most likely want to buy a house. I like to fish, but sold my boat a couple yrs ago so will be buying another one. My kids used to all be in one location, now they're spread between NC & Louisiana, so we'll be visiting. My goal is to have the resources to pull an additional $1000 per month from savings to supplement our income until my military retirement kicks in, and from that point, cut back on the savings withdrawals, at least some. Once wife's SS begins at 62, (I'll be 65) we probably won't use much if any savings money. That's my big plan, of course plans are always changing. Bottom line is I have no choice but to max out my TSP if I want to be able to do the things in retirement I've always looked forward to. That includes having a home with no mortgage, time and resources to travel some within the country, spend time with kids & friends, fish...etc. Nothing flashy or real expensive, but still requires disposable income.

 

[Supermech21]

I'm finally refinancing my home, here's the Stats:

Current loan
Interest rate - 5.25
Principle payment - 705
Impound pay - 151
Total monthly - 856
Total interest paid -
Old 28 year old loan amount - 123891


Refinanced 30 year
Interest rate - 3.875
Principle Payment - 595.40
Impound pay - 170
Total monthly - 763.10
Total interest paid -
New 30 year loan amount - 125916

I will have about 90 extra dollars in my pocket each month. What would be the best way to use that money?

A) apply to principle of home to lessen the total interest hit
B) apply to principle of truck payment
C) put in TSP, military Ira

Thanks guys

 

[HawkeyeNFO]

What's the interest rate on your vehicle? Depending on that answer, I'd either put the money towards retirement, or if the rate is high, just pay the truck off.

 

[Old Microbiologist]

I was much the same at your age. I had re-enlisted during Viet Nam and at 9 years of service I was already an E-7 (1979) but as I had only recently been promoted to E-7 (last promoted, first eliminated) I was in an over-strength MOS (post Viet Nam was a very bad time in the Army) and faced mandatory reclassification to drill sergeant or recruiter. As I was facing my second re-enlistment within 90 days (back then once you re-enlisted you were considered "career"), I decided to ETS instead and attended ROTC as a dual membership in the Calif National Guard. That was a bold move and cost me my 1st marriage. I was commissioned into aviation after the 2 years of ROTC BUT I had to finish a Master's degree to fulfill my 2 year ROTC obligation which was in Microbiology. I opted to stay in the Guard instead of return to active duty BUT in 1984 there was a critical shortage of microbiologists so was recalled to active duty and promoted to 1st LT and given 18 months time in grade. So much for being a pilot and I was already SF qualified in my second enlistment so ended up starting another career in the Medical Services Corps. Eventually, I was sent to long term civilian training (LTCT) to get a PhD which I got at Cornell University (3 nice years of duty) and ended up retiring as a Major at 28 years of active duty. Despite perfect OERs, Command time, SF qualified, Aviator qualified, and 4 combat deployment there is unfortunately, and in particular within the MSC, a glass ceiling for prior enlisted. I had the opposite problem trying to retire and it took me 2 more years to actually get permission to retire. On the other hand I retired with a far better retirement than I would have as enlisted (and there was no way in sight for any higher promotions in those very dry years until Reagan) and a skill set which I turned to my advantage by becoming a GS-15 after retirement into my very same job. I did several things right in my early enlisted years. In 1973 Nixon gave us a huge raise (woo hoo I was actually earning $250 a month instead of $135!) but, I invested $25 a month of my new raise into an investment account and forgot about it as it was on an allotment. That grew until I cashed it out in 1999 to pay for a house. Also, in my officer life I remarried another officer and we purchased a house at every assignment. At one point we had 9 houses all earning income from renters. One other piece of advice, take every opportunity to get education! I had completed 3 years of college during my enlisted years and a ton of correspondence courses. The Army paid for all of that. I used my GI Bill to get a Commercial/Instrument Pilots license intending to become a professional pilot but economic woes in the industry during the early 80's made it impossible to get a job. I later got a second Master's degree while in Germany and then did the Command and General Staff College followed by my PhD at Cornell. None of that cost me a dime. I paid for the BS and 1st Master's degree myself. You can't get too much education! I also learned programming and network administration (multiple automation officers jobs as ancillary duties) but all of that is marketable. What I do regret was not going to Medical School. I was selected but had to resign my RA commission and take a reserve commission as a 2LT. If I flunked out it meant going back to E-5. That seemed like too high a risk for me at the time but in hindsight I regret wimping out on it and going for the PhD instead which kept me at my current rank and no risk at all. Some other relatively simple rules that I learned later in life and what enabled us to completely retire early. Don't owe anyone anything. Pay cash for everything! You can use credit cards but pay them off monthly. No mortgages either. If you do that you will be free of all obligations and the money will begin accumulating quickly.

 

[jclarksnakes]

Pay close attention to what borshelrh wrote. Life in the post Viet Nam army was not much fun. Money was tight and training was monotonous and oftentimes just plain silly. Promotions were tight and good people got axed. You may face a very similar situation in the army of the next 10 to 15 years. Think outside the "I am a senior NCO and senior NCOs are the best people on earth" box (BTW, senior NCOs actually are the best people on earth) and get more education and be ready and willing to make big changes in your career and life. Get the right education and make the right career choices and LBYM and you can achieve financial independence and retire early, perhaps VERY early.

 

[Supermech21]

Not toot my own horn but I'm in the one and only growing career field in the Army, and we're only going to get bigger. 4 man teams will replace 100 man companies in my line of work, promotions are just about guaranteed and I'll have my TS in the next year. Point taken on college and my bachelors is next on the agenda...

So I think I'll put the extra loot towards paying off my truck and small bit more in my TSP.

I have often had the same dream of building real estate wealth by buying a house at each stop along the way, problem is I may not move from Bragg again because of my job, if that happens then I will just buy a bigger house here when we pay it off and rent this one.

Lots of good info, thanks guys. In the process of refinancing the truck from a 3.99 to 1.99...

 

[SRyan]

promotions are just about guaranteed

That’s a dangerous thought process; especially in today’s military. We are out of Iraq and we are drawing down heavily in Afghanistan. When I enlisted, my rating was the “hot” career path; guys making E8 and E9 in 16 years, huge reenlistment bonuses, etc… By the time I went up for E7, we were at a paltry 10% advancement rate; keep in mind, this was 2005 in the middle of two wars and today their reenlistment bonus is 0. I just witnessed a round of cuts where guys with 22+ years were being told to go home.