Welcome to the forums, Mgnhrvth.
- Spouse starts new job in JAN 2016 ($78,000 pre-tax)
- New blended military retirement system: applicability/pro's v. cons
- Spouse pending deployment to CZTE area (deployed 6 months of 2016; O3E @ $5,998/month + tax-free CZTE pay)
If you haven't already seen it, here's the thread on the blended retirement system:
http://forum.mrmoneymustache.com/investor-alley/should-you-choose-the-u-s-military's-'blended-retirement-system'/msg909610/and here's the post:
http://the-military-guide.com/2015/12/17/should-you-choose-the-military-blended-retirement-system/Without knowing anything about your spouse's civilian job, I'd try to max the Roth TSP at $18K and then put another $35K in the traditional TSP to make the $53K limit. And of course you're going to try to max your own Roth TSP at $18K, and you're both going to try to max your Roth IRAs. In that priority order. And, yeah, I know it's a total of $82K. You'd have to balance that against quality of life and the expense of a replacement vehicle and paying off the USAA loan and your cash savings, and you might decide to contribute less than that total.
That $53K contribution limit is only handled by the TSP when the deployed spouse is actually in the combat zone. You can't exceed $18K until you go into the combat zone, and once you're over $18K then you'll be cut off upon leaving the combat zone. Ideally in 2016 before the deployment you'd contribute a bit less than $18K in the Roth TSP (below the limit) and then do the additional $35K+ in the traditional TSP before finishing the deployment.
If you're going to put a higher priority on the replacement vehicle and the USAA loan then you might consider diverting $10K of that $82K into the Savings Deposit Program for the 10% APY. But depending on the length of the deployment (and when it starts) that might be more hassle than it's worth.
If the employer will match a new employee then I'd look into making a Roth 401(k) contribution up to the employer's match. Here's another post about those limits:
http://the-military-guide.com/2015/07/16/contribution-limits-of-the-thrift-savings-plan-401k-ira/It gets messy, but it's a good problem to have.
You probably already know that a combat zone deployment makes a Reservist eligible to start their pension three months earlier for every 90 days in the CZ. The 2015 National Defense Authorization Act removed the "per fiscal year" phrase from the 2008 NDAA legislation authorizing the earlier pension start date:
http://the-military-guide.com/2015/02/12/six-wins-2015-military-benefits/You'd want to make sure that the six-month deployment is indeed more than 2x90 days in the combat zone. Otherwise it'd just be one 90-day combat zone deployment toward three months of an early retirement.
- I will promote to O4 in Sept with 8+ years of service ($6,314/month)
Congratulations on the higher paycheck! Throw yourself a little party but try to avoid expanding your lifestyle-- instead invest as much of it as possible. You'll definitely be ready to maximize your Roth TSP, 401(k), and Roth IRA contributions.
I think you'll see a higher housing allowance as well, but I'm not sure how that's treated when your spouse is mobilized. Whatever you two get told by your chains of command, I'd ask them to show you exactly where it says that in the references. You might end up on BAH without dependents while your spouse is deployed, as long as they're getting BAH without dependents. Or if they're not getting BAH because of some deployment quirk, then you'd hypothetically be entitled to BAH with dependents... but they're getting tax-free pay in a combat zone. I'd have trouble looking up the rules for this too.
Traditional TSP: $70,000 (large amounts contributed during deployments; currently contributing 1% of pay)
Investments: $12,000 (Vanguard)
I realize that you're planning to boost your TSP contributions, and that's the right tactic. Contribute to the accounts with the lowest expense ratio (TSP) and with employer matches (401(k)) before putting anything in Roth IRAs or taxable accounts.
Don't worry now about tapping your TSP or your Roth IRAs before age 59.5. There are plenty of penalty-free ways to do so and they're relatively straightforward. For now, focus on maximum contributions.
Mortgage: $360,000 @ 3% (currently a break-even rental in Oahu; bought in JAN 2013)
We're starting a real estate bubble again, so this is a great time to either consider putting it on the market next spring or else checking the neighborhood market to see whether you can hike your rent.
Save for new-used car ($TBD - Prius)
We've bought our two Priuses off Craigslist at decent prices. Now that gas is cheap, a Prius will be out of favor and relatively cheap too.
You may already know about the PriusChat.com forum.
Current Situation: I am Active Duty O3 with 8 years, spouse is a Reservist with 11 years combined Active/Reserve duty - no children yet but would like to start a family in 2016. We are both in our early 30's.
Your post is written in gender-neutral terms (people struggle to write in that style; I'm impressed!) and I can't tell whether you (on active duty) or your spouse (the Reservist) will be pregnant when you start your family in 2016. If it's your Reserve spouse then it's worth looking into the maternity benefits from both Tricare and the civilian employer. You'd hate to have a pregnant Reservist demobilize (with a "pre-existing condition") and then find out that Tricare stops covering labor & delivery.
But then again a Reservist might not even want to think about getting pregnant until after demobilizing. Personally I'd put a higher priority on pregnancy timing than on the insurance benefits.
Starting a family is one of those situations that could dramatically change your priorities. I'd stay on active duty (or in the drilling Reserves) as long as you're feeling challenged and fulfilled. But if the fun stops when you become parents, then you should feel free to leave active duty or go IRR. Both of you appear to have tremendous human capital and you shouldn't feel tied to an unbroken stream of paychecks.
My only caveat for dual-military couples would be that you'd both want to try to achieve 20 good years (whatever combination of active, drilling Reserve, IRR) toward at least both of your Reserve pensions. That would guarantee two inflation-adjusted annuities starting around your 60s, and all you'd have to do is cover the years until then with your investments. You guys will win the game as long as you each get some sort of pension-- any more beyond that (more Reserve points or your active-duty pension) would be running up the score.
I mention that caveat because the #1 regret of my readers in their 40s and 50s is "I wish I'd stuck it out for the 20 good years and the pension at 60." But it's possible that you'll find enough fulfillment (and money) in dual civilian careers to not even leap through hoops for a Reserve pension.
If you're planning to start a family soon, maybe that should be beefed up a bit.
I assume you'll be out of work for a bit and having a family is expensive.
Keep in mind that they'll have military paychecks regardless of who's pregnant. If the active-duty servicemember is the mother then she'll have paid maternity leave (and the services are considering the same for paternity leave). The active-duty parent will also have the child enrolled in the defense system as their family member, so they'll be entitled to a higher housing allowance.
Finances are not the best reason to start (or delay) a family, but having a family is not as expensive as the media would have us think.
http://the-military-guide.com/2014/02/27/financial-independence-and-the-cost-of-raising-a-family/MMM and a bunch of other posters on this forum have a large database to support that.
