Army Officer 4 1/2 years out from retirement - maybe...

[moneymaker]

Hi all,

I've been on this forum a few times over the years and gotten great advice. Just a little update from my foxhole.

Had quite a few changes in the last 18 months that I wanted to share.

I pinned on LTC/05 last June of 2020 and am currently sitting at just over 15 1/2 active and 17 1/2 total time in service. The current plan is to do the next 4 1/2 and retire from the Army at which time I'll get 50% of my base pay for my pension plus healthcare and maybe some VA disability.

We have begun to consolidate our investments such as selling off some real estate in this extremely hot market in anticipation of settling down somewhere after the Army. We now currently own 2 homes. Our primary in Michigan (currently rented) and a place at the beach in North Carolina that we rent out during the summers.

We've continued to add to our investments and are *hoping* that between our investments and my pension, my wife and I can both fully retire at 44. We just turned 40.

Investments:
Retirement accounts: approx $715k (split between TSP, wife 401k, Roth IRAs and rollover IRA
Taxable accounts: approx. $125k
Real Estate equity: approx. $350k for primary home
approx. $400k for beach house

We feel pretty comfortable and have about 4 years to continue to save and invest as much as we can. Currently ramping up after tax investments to continue to build up our taxable accounts and invest about $4k/month in taxable accounts and $1500/month in retirement accounts.

Anyway, I thank you all for the advice over the years - joined in 2013. We feel pretty good about where we are financially.
THANK YOU!

 

[schenbew]

moneymaker,

Congrats on your upcoming military retirement. I retired in 2016, settled in the NC Triangle area (any chance you were at Ft Bragg...I'll bet that's where the NC beach house idea came from?), and took another job for several years because I didn't know I was financially secure and could retire. Completely retired as of 30 July 2021, and been extremely satisfied and happy.

A couple of thoughts for you to consider as you execute your retirement plan.

First, looks like your investment balances are solid, and will grow nicely over the next 4+ yrs. You are wisely beefing up your after tax balances, since you wont be able to touch your retirement accounts for about 15 yrs after retirement.

However, no mention of your expenses. I would argue that having a solid handle on your retirement expenses is just as, or more important, than your portfolio. If you already have it, great - continue to refine it. If you are licking your thumb, holding it in the wind and estimating your yearly spend, not good enough. Get busy now tracking and developing a budget. Lots of threads here on different approaches on how to budget.

Finally, something I didn't realize until after my military retirement was the importance of planning out your income streams in the future. I retired a rank above yours with 30yrs -- the good news is I get a very healthy monthly pension, the bad news is it puts me (and DW or I, should one pass before the other...) in the 22% tax bracket forever. This essentially negates any advantage of doing Roth conversions to avoid future tax for DW and I since our current and future tax brackets remains the same.

So, start thinking soon about WHEN to take different your income streams - after tax, SS, tax deferred, etc. - to minimize your future tax burden. Then use this info to inform which accounts to add to in the next few years.


In my case, it makes sense to aggressively draw-down our 401k/TSP BEFORE SS starts...if I wait until the mandatory RMD age, our tax bracket jumps at least one level. I strongly recommend using and becoming familiar with the Bogleheads Retiree Portfolio Model (RPM) spreadsheet. It's free, powerful, and offers great insights. It is not, however, for the spreadsheet challenged...it took me several months of fiddling with it to understand how it worked, digesting the outputs, and then experimenting with different scenarios.

Finally, do not underestimate the importance of going through the VA registration process. Right now the VA does a phenomenal job of providing ALL of my healthcare, despite a relatively low disability rating. I would even consider making sure VA healthcare is near where you plan on retiring if feasible.

Good luck, and keep us posted on how you make out in the future.

schenbew

 

[moneymaker]

Schenbew:

Thank you so much for the information you provided. Definitely gave me some additional things to think about. I hadn't thought it through as much with regards to the income streams and when to take withdrawals, so thanks!

Also, a big YES for the beach house and bragg. We just moved from Fayetteville to Utah While at Bragg, we bought a 4 BR 3 BA single family beach front home on Topsail Beach, NC. Always was a dream of ours having gone to college in Charleston, SC and spending lots of time at Isle of Palms and Folly beach. We love the house and that is part of the retirement plan

And you're right, I didn't figure in our expenses, but I do have a pretty good idea and I'll lay that out here:

Ages: 40

Homes: Currently renting here in Utah. But, our house in Michigan (valued at approx. $715-$750; mortgage balance is $380k) generates $400/month in positive cash flow (yes after management fees). Our beach house in Topsail generates about $60k year in rental income which equates to about $1k/month in positive cash flow.

Debt: No credit card or personal loans or student loans. Car: owe about $69k on a Tesla....I know I know I know....but we live well below our means and it's the wife's car. Funny enough, it has appreciated in value since we bought it new...yes, I said that...appreciated in value. Crazy huh. Own a 2018 Jeep Rubicon outright.

Our currently monthly expenses are about $8k/month. This should be a little less in 4 years as we just bought those new cars just over a year ago, and we don't trade/sell cars but every 10+years or when it doesn't make sense to keep them anymore.

Our plan is to go back and live in our house in Michigan and rent our beach house out during the late spring through the early fall which will more than cover all expenses for the beach house plus generate another $1k/month. Once our girls finish high school, we will spend 8 months at the beach house and 4 months in Michigan - this will allow us to capitalize on the huge summer rental season for the beach house and enjoy the nice Michigan summer

Thanks again!