Author Topic: Late start - what next?  (Read 1142 times)

Veritasvosliberabit

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Late start - what next?
« on: June 19, 2018, 10:46:04 AM »
LIFE SITUATION

*IRS filing single (Wisconsin)
*37 years old
*Never married, no kids
*Gross salary: $115,000

INVESTMENTS

*TSP contributions: 18,500 per year
*TSP breakdown: 6.4% G, 3.3% F, 30.4% C, 33% S, 26.8% I
*TSP total: 98,086

*Roth IRA contributions: 5,500 per year
*Roth IRA total: 8,820 (Vanguard)

TAXES

*FICA INC: 8936.88/year
*FICA: 6417.60/year
*STATE: 4510.80/year
*Net income: 95,000

EXPENSES

*Mortgage/taxes: 1,050
*Car note: 420
*Utilities: 140
*Water: 31
*Internet/TV: 60
*Cell: 45
*Insurance: 90
*Gas: 100
*Groceries: 225
*Dining out: 250
*Shopping: 150
Total: 2,661

PENSION

*Currently 8 years into a military pension.  Projected income starting in 12 years is between 6,000-8,000 per month.
*Social Security: yes, but mentally only planning on 75% of what I'm supposed to actually get.
*Healthcare: no healthcare costs now; minimal costs in retirement.

ASSETS

*CDs: 2,000 in Penfed CDs
*Money Market: 6,717 (Vanguard)
*Checking account: 25,592
*Savings account: 8,156

LIABILITIES

*2016 Subaru Legacy. 1.9%, $15,400 remaining. 420/month.
*Mortgage: year 8 of a 30 year, 3.0% fixed rate. 1050/month. Principle remaining: 129,000.


NOTES: I finished my MBA in 2014, and had been paying ~25,000 per year out of pocket to pay that off by 2017.  I'm in a serious relationship and we are looking at moving in together (renting for at least a year); in that case, I would rent my place out.  I've been thinking of getting into real estate anyway and was hoping this would be a good introduction.  She makes a bit less than me (95k/year) and has a less generous defined benefit pension. I think we are also both on the same page with having kids in the future (we both want two).

Obviously I'm a bit behind on retirement savings, but barring a large increase in my standard of living my monthly pension amount should cover my future expenses.  After finishing off my student loans I have money accumulating; should I just start funneling that into a money market account?  Any other suggestions for obvious things I'm missing?

mxt0133

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Re: Late start - what next?
« Reply #1 on: June 19, 2018, 11:08:34 AM »
What happens if you don't make it to 20 years of service with regard to your pension do you get part of it?  I heard that in the military it's either up or out and there are only so few positions the higher you go up, so making it to 20 years is not a slam dunk.

You are in great financial shape especially with only a car note that you could easily pay off.  You might not be able to retire in your 30's but if you get married and significantly increase your savings you could be FIRE with your military pension in 12 years.  Assuming you don't significantly inflate your lifestyle.

What is the thinking behind putting all of your after tax money in a money market account where it will not grow like your TSP accounts, which I assume you have in investments other than money market accounts?




Veritasvosliberabit

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Re: Late start - what next?
« Reply #2 on: June 20, 2018, 02:37:47 PM »
What happens if you don't make it to 20 years of service with regard to your pension do you get part of it?  I heard that in the military it's either up or out and there are only so few positions the higher you go up, so making it to 20 years is not a slam dunk.

You are in great financial shape especially with only a car note that you could easily pay off.  You might not be able to retire in your 30's but if you get married and significantly increase your savings you could be FIRE with your military pension in 12 years.  Assuming you don't significantly inflate your lifestyle.

What is the thinking behind putting all of your after tax money in a money market account where it will not grow like your TSP accounts, which I assume you have in investments other than money market accounts?

Unfortunately the pension is all-or-nothing.  Generally for officers the odds are pretty good that we will get it; usually it's moral transgressions (DUI, domestic issues, etc) that stop careers.  I'm pretty conservative on the rank that I would potentially be at retirement.

As far as I know, I can only put 18,500 per year in the TSP, so that's what I've been doing.  You have to choose either traditional or roth when you allocate money to the TSP.  I would definitely contribute more if I could.

Watchmaker

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Re: Late start - what next?
« Reply #3 on: June 20, 2018, 02:49:38 PM »
As far as I know, I can only put 18,500 per year in the TSP, so that's what I've been doing.  You have to choose either traditional or roth when you allocate money to the TSP.  I would definitely contribute more if I could.

I believe what they were asking wasn't about the money you have in your TSP, rather it was about the money you have in a money market account. The question was why don't you have that money invested in stocks/bonds/etc.

Nords

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Re: Late start - what next?
« Reply #4 on: June 23, 2018, 01:37:00 PM »
What happens if you don't make it to 20 years of service with regard to your pension do you get part of it?  I heard that in the military it's either up or out and there are only so few positions the higher you go up, so making it to 20 years is not a slam dunk.
Unfortunately the pension is all-or-nothing.  Generally for officers the odds are pretty good that we will get it; usually it's moral transgressions (DUI, domestic issues, etc) that stop careers.  I'm pretty conservative on the rank that I would potentially be at retirement.
Actually, Veritas, the Blended Retirement System gives you a "something" alternative.

If you have less than 12 years of service then you'll make at least as much lifetime income via the BRS as you would from the High Three pension system.  And if you end up not serving for 20 (including a bunch of reasons not within your control) then at least you'll have the DoD BRS matching TSP contributions in your account.

When you sign up for the BRS Continuation Pay bonus contract (anywhere between 8-12 years of service, and for a four-year obligation that's usually concurrent with other obligations) then you'll have more lifetime income from the BRS.  If you're in an in-demand field then that CP multiple could mean a lot more.

You've probably already seen the basic BRS brief.  Here's a roundup from eight other bloggers going into much greater detail:
https://www.katehorrell.com/learn-about-the-militarys-new-blended-retirement-system/