Welcome to the forums, ArmySailor. Now I'm going to have the Klash earworm stuck in my brain for the rest of the day...
Excuse me for a second while I discuss some of the earlier feedback of the rest of the posters, perhaps a few of whom should know better.
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You guys in the "suck it up for six more years" crowd are welcome to shadow ArmySailor for a few months. (Deployments, hostile fire, and MREs are optional.) At the end of that time I think you'll have a better appreciation for why he's posting to
a financial independence forum about improving his quality of life. There's a good freakin' reason why only 17% of the military stick around long enough for an active-duty or Reserve pension!
He didn't save and invest all of this money to come here and be admonished to suck it up. We can get that sucky advice at Yahoo! Finance or Motley Fool by the ton. He's saved and invested in order to have choices, and now he's ready to choose. He's here to learn how to use his frugality and his investments to redesign his life!
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All right, now back to the subject at hand.
Life Situation: Currently in the military. I'm 36, and 6 years away from a full military retirement at age 42. Although I'm quite good at what I do, I hate my job. It is a meat grinder most every day. I work 2 out of 4 weekends a month, so I have long stretches of no days off. Deployments are behind me and are very unlikely at this juncture,. When I have time to reflect, my job is a soul crusher. Question: Should I muscle through 6 more years of work for full retirement - If I do this, I'll never have to work another day in my life, will have more money than I ever need, and have full medical benefits for the rest of my life. Or....
Been there.
It's possible that this tour will be followed by one that's full of happiness to go along with your challenge and fulfillment. On the other hand, even if the next tour is full of unicorns & rainbows, you're probably reluctant to risk it being the same as (or worse than) the current tour. Especially if you're getting a new CO/XO every 18-24 months.
The seniority numbers are also starting to tilt against you. There are fewer billets for your skills, and more "management" instead of "mission execution". The assignment officers want you to break out from the pack, so each tour requires a higher level of performance (from your team, too, not only from you) and a higher degree of sacrifice.
When the fun stops, you can't just grimly clench your jaw and gut it out to 20. You're risking your physical, mental, and emotional health. You're also probably getting to be tough to work with (to say nothing of "work for").
The answer is not to suck this up for another six years. The answer is to leave active duty for the Reserves or National Guard. When we did this in our family, our quality of life took a huge leap that was worth far more than the estimated $750K we gave up. 15 years later everything's worked out fine and we have more money than we need.
There are some actions you can take now (along with composing your resignation letter). No matter how much time you have left, apply for TAP now so that you can benefit from the transition info early enough to apply it. You probably don't care about another advanced degree, but decide what you want to do with your GI Bill. (Mariner's license to move sailboats & yachts from one port to another for their owners? Some other merchant or Coast Guard advanced certification for teaching mariners or appraising boats?) Start talking to the Reserve/Guard recruiters in your area (or the area where you want to live).
If I leave now, I will remain in the Army Reserves and work a few days a month and a little in the summer and make about 1K per month after taxes. So that 340 above +1K a month...will be what I have to work with.
My combined active service and reserve service will net me a pension at age 60 of about 3500 per month (in today's dollars, inflation adjusted) and some medical benefits. Combined with whatever my Roth IRA is at the time, I am confident that at age 60 I will be fully financially covered. Hard stop.
Here's a sample calculation. Let's assume that you retire tomorrow with exactly 14 years of service and accumulate six more good years in the Reserves (at 50 points per year) to retire at 20.
When you retire awaiting pay from the Reserves (instead of separating or discharge) you're assumed to be accruing longevity as though you were still on active duty. Your High Three pension (at age 60) will be based on the pay tables in effect when you turn age 60 and at the years of longevity when you're age 60. We don't know the pay tables in 2040 yet but we could use today's pay tables as a proxy, with your rank at O-4>38 for $7526.70/month.
(Side note: You'd actually have to calculate the High-Three average of that base pay, but we're already making a huge assumption that the 2040 pay tables will have the inflation-adjusted value of the 2016 pay tables. O-4>38 seems pretty silly when O-4 pay tops out at 18, but O-5s do a little better (>22) and O-6s do a lot better (>30). But again we don't know what's going to happen with the pay tables, so this approximation is close enough. Just keep up with the rules changes and the pay tables as the years go by.)
On the day you leave active duty you have 5114 points. Over the next six years of drills and ATs you accumulate ~75 points/year. You get six good years (and your Notice of Eligibility) and you retire at 20 with 5564 points. Your pension at age 60 (in today's dollars) would be:
5564 / 360 * 2.5% x $7526.70 = $2908/month.
You could make some reasonable adjustments to that number. For example, it's quite possible that you'll pick up O-5 during the next six years, or you'll decide to do a some active duty for 30-179 days. Maybe you'll mobilize for at least 90 days in an area that qualifies you to start your pension three months earlier than age 60.
I agree with your conclusion: your pension and healthcare at age 60 will cover your expenses for the rest of your life. The only challenge is bridging the gap.
**ALL i have to do is "bridge" from now, (age 37 next year), to age 59, with the above assets - not counting the roth. Can it be done? Should it be done?
You should count the Roth IRA, because (as you point out) you can withdraw Roth IRA contributions at any time for any reason without paying any taxes or penalties. You'll lose the compounding benefit of the contributions, but it's a great way to fund the first few years of your semi-retirement.
I'm sorry that there's not a TSP balance listed among your assets. You'd be paying less than Vanguard's expenses in the TSP, and a small fraction of USAA's expense ratios. I'm bringing this up now because there's a chance that during your Reserve career you'll decide to put some of your income into the TSP (for the low expense ratio) and draw down the taxable accounts which have the higher expense ratios.
The reason you want to use the TSP is the low expense ratios, and you can also tap the funds before age 59.5. This post goes into the gory details of tapping TSPs and Roth IRAs. Note that Reserve mobilization also gives you the "Qualified Reservist Distribution" exception which allows you to tap your Roth IRA.
http://the-military-guide.com/2014/03/20/early-withdrawals-from-your-tsp-and-ira-after-the-military/I'm a sailor, and am 100% down with living on a boat for the next decade or so and traveling the coasts of the US and Caribbean. That 80K will cover the boat and maybe 1.5 years worth of living expenses and repairs to kick off my bridging strategy. So I probably wont have to draw on my brokerage until...say age 38 or 39. I live very cheaply. I don't own much stuff at all. (in fact, almost all can fit on a boat!)
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Another twist - my parents and extended family are very close and I love them dearly, though they are aging. I can store stuff at their house and even live there for awhile if I need to or want to.
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Lastly, I'm educated and experienced, and have my masters degree in business. With the bridging strategy / early retirement comes time and space to kinda see what else is out there. I am open to working again, though it will be A) on my terms and B) be an awesome suppliment to the 340K and 1K army income a month.
This is the main reason that you can draft your resignation letter tonight. You may not have a 90% success ratio on a retirement calculator, but you have plenty of human capital ahead of you-- and you have enough of it now to have the freedom to choose your semi-retirement.
The thinking (and motivation and discipline and frugality) that got you to this point will serve you well over the next 24 years. I doubt that you'll ever be bored, but you'll certainly explore many interesting (legal) opportunities for income. You could even start a "Caribbean Sailboat Living" blog and (during the following two years) develop an income stream of at least $1000/month. Teaching people to sail (or drive a trawler), test-driving gear for manufacturers in exchange for a blog post, writing an eBook, freelancing articles for magazines and websites... it's all compatible with a peripatetic lifestyle. You can probably read a couple dozen sailing blogs and forums on the subject already, and that means they're desperate for content. There's always room for one more writer.
Make your sailing home base near a four-star command. (Oahu/PACOM, Tampa/CINCCENT, Norfolk... you get the idea.) Choose a Reserve unit which supports a four-star staff, and then use your drill weekends & ATs to network for other gigs: 30-179 days of ADSW, a few months as a contractor, or even a federal civil-service career. Or, during the Caribbean hurricane season, just take hot-fill 179-day orders to some command center in a desert.
Over the next couple of decades, "Plan B" will always be available: put the boat in a shed, rent an apartment near a 9-5 job, commute by bicycle, maybe even get some roommates, and save up enough income to retire for a few more years. But I don't think you're going to need that.