Author Topic: Early Retirement advice for military family  (Read 4765 times)

Rose1203

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Early Retirement advice for military family
« on: May 12, 2014, 01:12:39 PM »
Hello!  This is my first post but I have been lurking here and reading about ER for a couple months now.  My question is about where to save for ER.  My husband is an active duty officer planning on staying in for 20+ so I am looking into plans that would allow him to ER after retiring from the military.   

I am trying to decide between increasing the contribution to my husband's tsp 401k or putting the money in a taxable account so we can access the money before 59 1/2. 

If we are able to cover most living expenses on my husband's pension and need to save a smaller 'stash to cover extra expenses, should I focus the savings into index funds instead of his tsp 401k?  We are maxing out a roth for both of us and plan to keep doing so unless we should make changes there too!

He has 9 years until he can retire from the military at age 42.   

*@Nords - I bought your book for our Kindle and am in the middle of reading it.  Thank you so much for writing your book for military families!  It is perfect and so helpful.  I will recommend it to all of our military friends!  I would definitely love your insight on my question.  Thank you!

Quark

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Re: Early Retirement advice for military family
« Reply #1 on: May 12, 2014, 02:00:07 PM »
There are ways to access retirement accounts before age 59.5 and the tax-free growth is very advantageous, so definitely max out the 401k.

Rose1203

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Re: Early Retirement advice for military family
« Reply #2 on: May 12, 2014, 04:53:40 PM »
Thank you!  I definitely have a ton to learn!  I found Nords article - http://the-military-guide.com/2011/04/25/tsp-withdrawal-options/ - but still need to do a ton of reading on 72(t) withdrawals.

Does anyone want to give me a "72(t) for Dummies" explanation?? :)  Time to research!

Rose1203

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Re: Early Retirement advice for military family
« Reply #3 on: May 12, 2014, 04:59:58 PM »
Wow!  Found another helpful article by Nords - http://the-military-guide.com/2014/03/20/early-withdrawals-from-your-tsp-and-ira-after-the-military/

So helpful! (posting for anyone searching for this answer)

AMustachianMurse

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Re: Early Retirement advice for military family
« Reply #4 on: May 12, 2014, 07:12:25 PM »
One of the super nice girls I work with who has a military husband told me a heartbreaking story about how she used to put a ton of money away in a 401k, then when 2008 happened she "lost 20 grand, and was like screw all that, and screw stocks, so i just took out the last 10grand and used it for moving expenses."  When she told me that on the inside I was like "noooooooooooooooo" and I wished that she had read these forums.  Unfortunately their aversion toward risk, and inability to stay the course caused untold damage to their retirement prospects. 

So, while I don't know any specifics about your position Rose.  I will just say...if/when the market tanks.  STAY THE COURSE.  if she just stuck with it her investments would already be back to where they were pre-crash and then some. 

j-lu

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Re: Early Retirement advice for military family
« Reply #5 on: May 17, 2014, 01:32:52 PM »
I am also a military spouse, but we are a bit further along than you.  DH most likely be retiring in 2016 when he hits 20 years.  Our strategy had been a mix of TSP, Roth and taxable account investing as we hope to be retired before age 59 1/2 as well.  However, as I have done more research on early withdrawals, we now are maxing out the TSP and cutting back on the taxable.  We will be going overseas to a tax-free zone for our last two years and we plan to max out the Roth TSP.  One thing to keep in mind is that barring any govt changes, your husband's pension will be a very stable part of your retirement portfolio.  So us military folks can afford to be a bit more aggressive with our other investments.  Keep up the good work!   

Nords

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Re: Early Retirement advice for military family
« Reply #6 on: May 23, 2014, 10:45:24 PM »
Hello!  This is my first post but I have been lurking here and reading about ER for a couple months now.  My question is about where to save for ER.  My husband is an active duty officer planning on staying in for 20+ so I am looking into plans that would allow him to ER after retiring from the military.   

I am trying to decide between increasing the contribution to my husband's tsp 401k or putting the money in a taxable account so we can access the money before 59 1/2. 

If we are able to cover most living expenses on my husband's pension and need to save a smaller 'stash to cover extra expenses, should I focus the savings into index funds instead of his tsp 401k?  We are maxing out a roth for both of us and plan to keep doing so unless we should make changes there too!

He has 9 years until he can retire from the military at age 42.   

*@Nords - I bought your book for our Kindle and am in the middle of reading it.  Thank you so much for writing your book for military families!  It is perfect and so helpful.  I will recommend it to all of our military friends!  I would definitely love your insight on my question.  Thank you!

Wow!  Found another helpful article by Nords - http://the-military-guide.com/2014/03/20/early-withdrawals-from-your-tsp-and-ira-after-the-military/

So helpful! (posting for anyone searching for this answer)
Welcome to the forums, Rose, and sorry I'm late to this thread-- I'm back home and catching up after two weeks in Houston at our daughter's graduation/commissioning.

I'm glad the book is helping!  You've found the TSP threads that will answer your questions.  When your spouse is a year or two from military retirement then you could take another look at your budget and decide whether you still need to pile up cash in a money market or taxable accounts.  I think you'll find that (1) your retirement expenses drop as you reassess your activities and your travel plans and have time to search for bargains, and (2) you guys will find extra cash coming in from investments (dividends) and any bridge careers or side hustles.  You may still want to have a chunk saved in a taxable account for large lump expenses (a new roof, a replacement vehicle, a fantasy vacation) and you'll probably choose to keep at least two years of spending money in a money market account or CDs.

I'd also like to suggest to your spouse that he take it one tour at a time.  If he's having fun then he should stay in until the fun stops, but nine years is an awfully long commitment just for the sake of a pension.  He's at the point in his career where mine "fell apart" after I screened in excess for XO.  If I had left active duty for the Reserves at 11 years then life would have been much better, I would have still been eligible for a Reserve pension, and our finances would have been about the same. 

captainawesome

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Re: Early Retirement advice for military family
« Reply #7 on: May 24, 2014, 06:34:20 AM »
Hello!  This is my first post but I have been lurking here and reading about ER for a couple months now.  My question is about where to save for ER.  My husband is an active duty officer planning on staying in for 20+ so I am looking into plans that would allow him to ER after retiring from the military.   

I am trying to decide between increasing the contribution to my husband's tsp 401k or putting the money in a taxable account so we can access the money before 59 1/2. 

If we are able to cover most living expenses on my husband's pension and need to save a smaller 'stash to cover extra expenses, should I focus the savings into index funds instead of his tsp 401k?  We are maxing out a roth for both of us and plan to keep doing so unless we should make changes there too!

He has 9 years until he can retire from the military at age 42.   

*@Nords - I bought your book for our Kindle and am in the middle of reading it.  Thank you so much for writing your book for military families!  It is perfect and so helpful.  I will recommend it to all of our military friends!  I would definitely love your insight on my question.  Thank you!

Wow!  Found another helpful article by Nords - http://the-military-guide.com/2014/03/20/early-withdrawals-from-your-tsp-and-ira-after-the-military/

So helpful! (posting for anyone searching for this answer)

I'd also like to suggest to your spouse that he take it one tour at a time.  If he's having fun then he should stay in until the fun stops, but nine years is an awfully long commitment just for the sake of a pension.  He's at the point in his career where mine "fell apart" after I screened in excess for XO.  If I had left active duty for the Reserves at 11 years then life would have been much better, I would have still been eligible for a Reserve pension, and our finances would have been about the same.

If only getting into the reserves were that easy these days. With cuts across the board, going from AD to the reserves has been increasingly more difficult, and it doesn't look like it's getting any better.  maybe in a few years it will be different, but as I approach that 10 year mark, the siren song of "just staying in" is becoming more and more enticing, despite lower job satisfaction. 

Nords

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Re: Early Retirement advice for military family
« Reply #8 on: May 24, 2014, 04:01:35 PM »
If only getting into the reserves were that easy these days. With cuts across the board, going from AD to the reserves has been increasingly more difficult, and it doesn't look like it's getting any better.  maybe in a few years it will be different, but as I approach that 10 year mark, the siren song of "just staying in" is becoming more and more enticing, despite lower job satisfaction.
Kvetch all you want, but let's consider the alternatives.

If you're having fun on active duty then that's what you should keep doing.  Ideally you'd go to 20 without ever losing the smile on your face.  It's quite possible that by the time you reach 20 you would rather go for 30 or even 40, and just keep taking it one obligation at a time.

Another choice would be making a leap into the unknown territory of finding a Reserve unit and perhaps competing for a billet.  There are a lot of drawbacks to joining the Reserves and the National Guard, and some of the factors are outside of the servicemember's control.

Another choice would be resigning from active duty for the Reserves/Guard only to find that it's even worse than active duty, or that nobody wants you in their unit.  At that point you'd have to make your own way in the civilian world, because you probably wouldn't be able to beg your way back on to active duty during a drawdown.  However you can fall back on your military skills and eventually find your way. 

A fourth choice would be to stay on active duty for a decade after the fun stops.  You could clench your jaw, grit your teeth, and grimly get through the rest of career until you're eligible for a pension.  Assuming, of course, that your attitude does not permanently impact your physical, mental, and social health.  I'm sure your troops would regard you as a fun guy to serve with, too-- to say nothing of your family. 

In my opinion, if you're miserable on active duty then the Reserves are a much better alternative than any of your other "choices".  It might not be easy to join the Reserves, but it beats enduring the status quo.

Like I said, "fun" = "stay on active duty".  But keep an eye on your options and stay flexible.  I speak from considerable personal experience, later validated by my spouse, and you don't have to repeat my mistakes for the purposes of peer-review credibility.

Rose1203

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Re: Early Retirement advice for military family
« Reply #9 on: May 24, 2014, 10:07:09 PM »
@Nords - thank you so much for your reply!  Congratulations to your daughter, btw!  My husband definitely considers joining the Reserves as an option.  It will be interesting to see what the future holds!