Military officer, planning for FI & possible ER by 2024

[FI by 2024]

Hi everybody! I've come across this website a few times over the years but I've been lurking extensively for a week now and figured I'd jump in. I've been planning to retire early since...well...before I can remember, but I've gotten really serious about it just this past year. If you'd asked me a year ago what my plan was, I'd have told you I was going to work until I was 51, then open a non-profit. Now (due to some health and other disasters in my family) I've decided I want to be able to retire by 41, which is when I'll be retirement eligible from the Air Force. This is, of course, assuming I don't get cut in the continuing Reduction in Force boards that keep happening. I don't think this will happen, but you never know. Even if I do, I think I'm marketable and I have no problem delivering pizzas until I find another career. I definitely want to be FI by 41, so even if I continue working after that I will know it's a choice and not a requirement. I still want to open a non-profit, but I want to find a reliable staff that can keep it running while I travel the world a fair portion of the year.

My stats:
Age: 31
Desired retirement age: 41 for FI, retirement anytime thereafter

Net Worth: ~$448k (so close to $450k!)
Assets:

• TSP: $68k
• Roth IRA: $53k
• Non-tax advantaged MF: $12k
• Individual stocks: $5k
• Current residence: $258k
• Rental property: $258k (first time they've matched!)
• plus checking & savings accounts

Liabilities:

• Current residence mortgage: $181k
• Rental mortgage: $139k

Asset allocation: investment accounts are 90% stocks, but I am comfortable with that for now and I'm paying off my rental early as my "conservative" investment

Income: $95k (it's nice when your salary is a matter of public record, no need to hide anything) + $16k in rental income
Living expenses: <$4k/mo, which means a Lt Col @ 20 yrs retirement would cover most/all of it. Note this includes $1k/mo in a house that will be paid off by 2023.
Savings/Investments:

• RA accounts: $15k/yr
• Non-tax advantaged accounts: $10k/yr
• House downpayments (I want 4-5 rentals eventually): $5k/yr
• Mortgage prepayment: $8k/yr

The rest of my income goes to taxes, medium term savings (next car, etc), and separate savings for each of my houses (repairs & renovations).

Spouse: not yet
Kids: nope
Location: not really applicable since it changes every few years!

The ultimate goal is for my military pension to cover my normal expenses, rental income to cover any extra luxuries, and the investment accounts to be there in case of emergency or eventually to leave to my family and charity. Since moving up my FIRE date by 10 years, I've been shifting my investments from mostly retirement accounts to non-retirement accounts, and will continue to do so every year. I have no idea where I want to live in retirement, but the thought of having a few condos in multiple places that I can rent out when I'm not there is very appealing. And maybe a travel trailer!

That's all I can think of (it's a lot!), what else do you want to know? What's next on this giant forum?

 

[nash031]

Welcome! 36-yo officer here, married no kids. You're doing very well - with that real estate, better than I was at 31! I am gunning for FI by retirement age (2020 for me), not sure what I'll do after that as things will change in the next six years.

You should investigate all of the ways to bridge between 42 and 59.5. That's what I've been looking into. You don't necessarily need to sacrifice your tax advantaged accounts to get through that 17 year period. Keep wearing out that TSP benefit, and look into the G fund for that 10% bond portion. Those are a few of the lessons I've learned in the last six months here and on Bogleheads.

Also, Nord's book is pretty good (Military Guide to Early Retirement).

Anyway, welcome!

 

[AnIntentionalRoad]

Welcome and thanks for your service!

Sounds like you are doing very well and should be in good shape. The trick for people who plan for a future FIRE by living a frugal lifestyle is to continue to LBYM esp if marriage or children happen.

 

[WM]

Welcome! DH is career USMC, getting out in 2015 at 20 or 2017 at 22 depending on what his next job options are. You sound like you're in good shape, congrats on getting yourself off to such a good start, you're ahead of where we were.

I would suggest continuing to read through the threads here and ask questions as they occur to you. We have answers for everything!

 

[FI by 2024]

nash031: Hi, thanks! I've been looking into 72T distributions, I just don't feel comfortable enough that I really understand it yet. It seems like it's too simple of a solution. Being able to take distributions from a tax-advantaged account before 59.5? I must be missing something. Also I didn't mean to imply that I'll be sacrificing TSP, I'll just be focusing more on non-advantaged funds than I was. I will continue contributing a minimum of 10% to TSP.

AnIntentionalRoad: Hello! Yes, the marriage/children possibilities have me worried since obviously FIRE-driven folks are in the minority. I saw that there are some threads dedicated to that so I'm reading those and crossing my fingers I can find someone good

WM: congrats on nearly being there! And good luck on the next assignment, hopefully he is offered something that meets your desires. I'm sure you wouldn't mind an extra 5% on the pension in retirement.

 

[timwalsh300]

OP, when I tally your stated assets minus liabilities, I come up with $334k, not $448k... unless you have $100k+ in checking/savings(?). Either way, good job with saving. The real key, as you pointed out, is that your high savings rate means that your anticipated pension would mostly cover your expenses. And you have a nice buffer even if you do get RIFed or benefits get reduced. One thing I would consider, as you accrue a lot of equity in rental properties, is a careful analysis of whether the return you are getting justifies the effort/risk of managing those vs. a stock/bond portfolio.

The trick for people who plan for a future FIRE by living a frugal lifestyle is to continue to LBYM esp if marriage or children happen.

Well said. I've always thought this (particularly choice of spouse) is one of just a few things that can really make or break ER.

Tim

 

[FI by 2024]

timwalsh300: Hi, thanks for the thoughts! Yes, that's not too far off. The difference in investments and net worth came from resale value of my car plus my checking & savings accounts. It sounds like a lot, but there are two reasons. One, I keep four separate emergency funds - one for myself, one for each house, and one to help out family. Two...yeah, I just have too much in savings accounts. I've been DCAing it into investments slowly, but still have some work to do. Also, my year-end net worth ended up being $425K, not $448K - I forgot about an SID/LID loan (I pay it indirectly as part of my mortgage payment so I never see the statements) and I forgot to subtract taxes/fees from my house equity. I know a lot of people don't do that, but I try to get as realistic a picture as possible.

I track both my cap rate and annual ROI for my houses, and the numbers look good because both were short sales under market value. Cap rate on house #1 is 9.3% and ROI after subtracting a 1.5% maintenance cost is 13.9%. House #2 is 10.2% cap and 15.6% ROI (if I were renting it out, which I'm not currently). I'll continue trying to hit at/about these numbers on future purchases.

 

[Nords]

Welcome to the board, FI.

nash031: Hi, thanks! I've been looking into 72T distributions, I just don't feel comfortable enough that I really understand it yet. It seems like it's too simple of a solution. Being able to take distributions from a tax-advantaged account before 59.5? I must be missing something. Also I didn't mean to imply that I'll be sacrificing TSP, I'll just be focusing more on non-advantaged funds than I was. I will continue contributing a minimum of 10% to TSP.

72(t) is a lot more complicated than other ways of taking a distribution from a tax-advantaged account:
1. Roth IRA contributions can be withdrawn at any time without penalty.
2. Five tax years after a conversion of a Roth TSP or a conventional IRA to a Roth IRA, the amount of the conversion can be withdrawn withdrawn without penalty.
3. A TSP account can be rolled over to a conventional IRA and then converted to a Roth IRA in order to treat it like #2.

Michael Kitces has a good summary of the process:
Understanding The Two 5-Year Rules For Roth IRA Contributions And Conversions | Kitces.com

I get the question a lot on the blog, too:
Handling your cashflow after the military