Jumping in with both feet

[mxer54]

Hello, this is my first post although I'm on MMM daily. Would like to hear any opinions that are out there concerning investing over the next two years.  Situation is as follows:

We are a family on a single income of about 90k per year.  We are 100% debt free currently.  We have about 20k of available credit on cc's, no car payments, we rent.  I retire from the military in two years, I want to invest approximately 20k of cash between now and then.  I'm looking for suggestions of where to put this extra money.   

Just wondering what the best bang for my buck (low to med risk) would be.  Thanks!

[Honest Abe]

Welcome!

Why will you be needing the money in 2016? If it's for a house then you'll probably want to go with a high-yield savings account.

Otherwise of say contribute as much as you can to your tsp while it's still available to you while staying on course for your down payment.

[mxer54]

Honest Abe, thanks for the post!  I don't necessarily need the money in 2016…I just want to get my money growing for me so that I can use it for our future. 

Do you think that TSP is worth using over other types of investments that are out there?  I could put it all in there, I just never really considered my TSP to be much more than a small investment that I'd place money in over the years. 

[i_am_the_slime]

The TSP is widely considered to be one of the best tax deferred investment plans around.  So, yes, I'd put in as much as you can.

[Honest Abe]

Do you plan on collecting a pension from the military and if so, when?

[mxer54]

Funny, I never really considered it to be that great. Thanks for the advice!

Yes I do plan on collecting a pension starting in Jan of 2016.

[Honest Abe]

I'm guessing your in your 40's or early 50's... Pension will be in the neighborhood of $60k/yr adjusted for inflation. You're paying a higher tax rate now than you will be in retirement, so definitely put what you can in the TSP while you're at the higher rate.

If you're thinking about moving to a low cost of living area and perhaps buying property in two years you may want to consider buying sooner than later and renting it until you're ready to move. $20k will be a nice down payment in some parts of the country, but interest rates will likely be higher in 2 years. This will make your monthly payment higher than it would be if you just used the $20k to buy soon. Just an idea.

Thank you for your service!

[mxer54]

I'm guessing your in your 40's or early 50's... Pension will be in the neighborhood of $60k/yr adjusted for inflation. You're paying a higher tax rate now than you will be in retirement, so definitely put what you can in the TSP while you're at the higher rate.

If you're thinking about moving to a low cost of living area and perhaps buying property in two years you may want to consider buying sooner than later and renting it until you're ready to move. $20k will be a nice down payment in some parts of the country, but interest rates will likely be higher in 2 years. This will make your monthly payment higher than it would be if you just used the $20k to buy soon. Just an idea.

Thank you for your service!

Well....close!  I'm 39, I'll be 41 at retirement...retirement is definitely not 60k a year from the US service unless you're a general.  More like 44k in my case.  But I'll have healthcare for myself and my family...

Our plan is to purchase a house between now and then and make that a long term rental.  Something in the 100k range (you can get pretty cheap property and we have family around the Tampa area so we are considering there for the rental). We will only buy our "live in" house when we can afford one comfortably...until then we rent (unless its much cheaper to buy in that area) but right now I can't move away from the local area because of work, we dont want to live here after retirement.

So basic plan is to buy one property to rent out (VA loan so PMI isnt an issue), collect any residual income from that.  Go to college after retirement and collect the 1500-2000 approx (depending on area) a month from the GI BILL, use pension as well as income from a small English Bulldog breeding hobby my wife has...(usually about one litter per year resulting in an average of 15k net per litter.  Should get me around 60k without the rental income.

So the point of my post is I've now reduced all my expenses to as low as I will accept...I have a monthly savings rate of just over 25% (thanks to a child support payment for the children that I have full custody of, thanks California!), I want to save all I can from here out and I'd like to place that money somewhere that it can work for me. 

And there is no need to thank me!  I've enjoyed every year!  Thanks though, I appreciate it.