How to begin?

[seahawkfan]

I recently came across Mr Money Mustache and my head is spinning at the possibilities. I know I need to put in a lot of study time and number crunching but I am in a slightly unique position.

I am 48 and already retired. I am mainly looking way long term so I can leave my kids something worthwhile. Being able to afford a nice vacation once in a while is a nice thought also.

100% of my income comes from VA disability. Until very recently, my disability payment was so low I had to donate plasma just to eat and pay for gas. It recently got massively increased, and because of that I can't really work. Not that the VA is actively trying to stop me from working, I simply can not work 40+ hours a week. 20 hours would be very difficult. So, I am very used to living frugally and I still do. I don't donate plasma anymore and I did increase my food budget by about $100 so I still have a lot of money left over at the end of each month.

It sucks, I have an MS in Computer Science and can't make much use of it other than occasionally working on hobby projects.

I bring in about $3260 a month, tax free.

I own my car outright and it is very reliable so little money goes to it. I drive rarely(I put less than 80,000 miles on it in the past 11 years). Since my car is a 2005 Hyundai, I only pay for liability and I put the difference between that and full coverage in a bank account to cover car repair, which hasn't happened yet, and to replace it when it dies or gets totaled. I don't even have to pay to register my car anymore.

I am not married and my kids are adults so it is just me.

I carry no credit card debt(or any other debt) month to month, I do put nearly everything on whichever card is currently paying the most in cash back and use that money to buy supplements that help my health along. I pay off the card the day the charge posts.

I am currently renting, but will be looking to buy soon. With a VA loan, I don't need a ton of money up front and in my state I get my property taxes refunded so I can get into a house that is roughly the size of my townhouse for about the same costs, give or take $50 a month.

My monthly expenses are ~$1500 and I have about $13,000 just sitting in my checking account. I would like to maintain about $20k for my rainy day account, even though I will never lose that $3260 a month. I know if I buy a home, that will be very helpful for all the assorted costs of home ownership.

I have zero medical expenses, except supplements, which are basically free anyway. There is no legitimate medical or dental scenario where I would ever have out of pocket costs.

My biggest entertainment expense is the internet($36 a month for 40 down/5 up) and netflix. I call century link once a year and talk to their retention team to get the cheapest deals. I have a TV tuner for OTA broadcasting and just watch TV on my computer. I don't even own a real TV. I eat out once a month at best and it is nowhere expensive, maybe $30 if I take one of my daughters or grandkids.

So I am in a pretty good place already, I think.

My main question is:  After I buy a house, I will be looking at index funds. One concern is taxes on gains that I roll back into the fund. Is this a significant issue for me? Since I am not working, are there decent funds with tax advantages? I have lots of research still to do.

I will also be looking at other investments. I don't have the people skills or energy to do things like rentals or contracting work in my field. I occasionally make money selling old stuff on Amazon. It is amazing how much outdated tech books and old computer parts sell for, usually more than I paid for it originally! I might try to start a business in it once I can figure out what categories to sell in. I could still donate plasma, but it is a drag and sometimes makes me feel a little off. I did bring in about $3k a year doing it twice a week every week.

Is anyone else in a similar situation? Is there something important that I didn't bring up here that I need to consider?

Thank you

[MDM]

I bring in about $3260 a month, tax free.
...
My main question is:  After I buy a house, I will be looking at index funds. One concern is taxes on gains that I roll back into the fund. Is this a significant issue for me? Since I am not working, are there decent funds with tax advantages? I have lots of research still to do.

It seems your taxable income is currently very low.  If so, you won't pay any taxes on qualified dividends and long term capital gains, up to the point your total taxable income reaches the 25% bracket.  You might take last year's tax return, add some amount of long term capital gains and see what happens to the result.

See also https://www.bogleheads.org/wiki/Getting_started.

[seahawkfan]

Thanks, that looks like a good starting place. There is such a massive amount of information it is difficult to find where to start and whats good or bad information.

Yeah, my taxable income is currently $0.00 and unless my health improves it will stay well under $10,000. I guess I don't need to worry about capital gains at all since once I hit that bracket, I am likely back in my field and can massively accelerate my investments and even a modest amount of taxes won't have me sweating. For making plans with mortgage, spending and investing my floor and ceiling is my disability income. Its not a lot but my frugality by itself makes it seem much more than it is.

In a way, I look at my disability income as financial independence to some extent. Once I can build some equity in a home, I will feel much more secure. Just stashing $1700 a month in my bank account seems like a waste and the usual suspects of short term investments pay so little interest it doesn't seem worth the time to bother. I really don't want to be dependent on the feds, for the first time I can see how I can, in time, make my disability income a much less significant part of my total income.

[marty998]

I am 48 and already retired. I am mainly looking way long term so I can leave my kids something worthwhile. Being able to afford a nice vacation once in a while is a nice thought also.

If these are your goals, then all you've got to do is design your finances to accommodate this. Try to keep it as simple as possible - there are a million paths to follow, but you don't need to take them all.

[Playing with Fire UK]

It sounds like you are set.

Have you looked into part-time project based work? You might be able to find something that uses more of your computer science than Amazon selling or plasma.

[Captain Cactus]

Hi Seahawkfan,

I am an Army veteran myself, 60% disability pension through the VA.  This comes to about $1250/month.  I certainly consider my pension to be a part, but not all, of my FI plan. 

For your situation, looks like your pension more than covers your monthly expenses.  This makes you FI!  Congrats!  No matter how the market does, you can count on your monthly pension.  You earned it.

Now that you are FI, you have many options for leaving behind a legacy.  You could simply stash the difference into an index fund like VTSAX.  It'll grow and you'll be able to leave it behind.  Other (random, stream-of-consciousness) ideas could be: a low-risk side hustle, like silk-screening t-shirts or shucking oysters for weddings and corporate events.  When your grandchildren are old enough they could work with you and you are essentially investing in the relationship, teaming entrepreneurial values, etc... while maybe supplementing the income somewhat.  Depending on where you live, maybe invest in land that has some kind of production value that would at least pay for the taxes while it appreciates the next 25+ years...and leave behind land as a part of your legacy (either to family, or donate to town/conservation group, etc...).  Save up $1000/month ($12,000/year) and buy an acre here and there.

Each person is different, but I say proceed with confidence knowing that your basics are covered forever and explore the things in life you always wanted to explore.

[seahawkfan]

It sounds like you are set.

Have you looked into part-time project based work? You might be able to find something that uses more of your computer science than Amazon selling or plasma.

I have and there are some possibilities in my area. The issue right now is that I can't focus long enough to work on my fairly simple personal Rails project for more than 3 or so hours a week. I am working on getting my focus back so I can do things like that. That is much more lucrative and fulfilling then my Amazon or worse plasma.

[seahawkfan]

Hi Seahawkfan,

I am an Army veteran myself, 60% disability pension through the VA.  This comes to about $1250/month.  I certainly consider my pension to be a part, but not all, of my FI plan. 

For your situation, looks like your pension more than covers your monthly expenses.  This makes you FI!  Congrats!  No matter how the market does, you can count on your monthly pension.  You earned it.

Now that you are FI, you have many options for leaving behind a legacy.  You could simply stash the difference into an index fund like VTSAX.  It'll grow and you'll be able to leave it behind.  Other (random, stream-of-consciousness) ideas could be: a low-risk side hustle, like silk-screening t-shirts or shucking oysters for weddings and corporate events.  When your grandchildren are old enough they could work with you and you are essentially investing in the relationship, teaming entrepreneurial values, etc... while maybe supplementing the income somewhat.  Depending on where you live, maybe invest in land that has some kind of production value that would at least pay for the taxes while it appreciates the next 25+ years...and leave behind land as a part of your legacy (either to family, or donate to town/conservation group, etc...).  Save up $1000/month ($12,000/year) and buy an acre here and there.

Each person is different, but I say proceed with confidence knowing that your basics are covered forever and explore the things in life you always wanted to explore.

I am an Army vet also(13B).

I was living solely on 70% payments. It sucked but I learned a lot on how to live relatively comfortably and eat healthy. I should have applied for 100% years ago.

Those are very good ideas, I will look into them and similar things. Some days, getting out of the house is a challenge but this site is very motivating so hopefully I can use that to move forward.

[Mother Fussbudget]

Your situation looks good to me as well.  Since you're not supporting any dependents, it looks like you're set insurance-wise. 

I'll assume you have a will (last-will-and-testament) in place?  If not, checkout the Quicken "Willmaker" book and software disk from your local library, and create a will - it takes less than an hour.  Sign & have witnesses sign with a notary, and you're good to go. 

[arebelspy]

I am 48 and already retired. I am mainly looking way long term so I can leave my kids something worthwhile.
...
I bring in about $3260 a month, tax free.
...
My monthly expenses are ~$1500 and I have about $13,000 just sitting in my checking account.

Okay, great!  The nice thing is that your income is stable, and inflation adjusted.  So you're set, assuming there's no reevaluation or whatever, and it's good for life.

Now onto your goal of leaving your kids something.

Though work is difficult for you, your best tool is your frugality.   

If I do a simple calculation on current value: 13k, adding $21,120 annually (3260/mo income - 1500/mo spending x 12 mo/yr), at 7% real for 30 years (assuming you live to the make average age of approximately 78 from your current 48, i.e. that your disability won't affect your lifespan--obviously a big assumption), that leaves a nest egg of $2,093,971.12 real dollars (i.e. today's dollars).

Your situation is pretty straightforward.  You can't work, but you spend way less than you have coming in.  So just save and invest that.  For decades.  And let compounding work.  Your kids will have over 2 million dollars.

Simple, straightforward, take your surplus and send to vanguard every month, month after month, and end with a nice portfolio.  Also leaves you in a great situation in case you need more medical care in old age.  Win-win.  :)

[BTDretire]

I would look over the buy vs rent situation closely.
 You say no property taxes, that's good, but you have insurance
and the big one maintenance and repairs.
I'm not sure how much of that you can take care of, but if you need
to hire contractors that could add a lot to your expenses.
You could easily spend $350 or more on lawn care alone.
It's not an easy calculation, you can be sure the rent will go up
over the years, so that helps on the purchase side. Helping the rent side,
insurance and maintenance will go up on a home.
 If you buy right and the area supports home prices, by the time your kids
inherit your assets, you will have equity in your home from inflation and paying
down the mortgage.
But again, look it over before you decide.