What would you do?

[FinancialIndependenceTime]

Hello everyone, long time reader recent poster. Here is my situation:

I will be at 20 years in the military soon(within 6 months). I have two basic choices right now. 1) Retire from the military and move on the real world(I have so many possibilities in mind it is driving my wife crazy) or 2) Make the decision to stay in until 24-26 years to increase the retirement benefits I will receive by 10% or 15%.

I know you all have questions so I will do my best to anticipate them in advance. I used to LOVE my job, not it is not even fun anymore. We are doing much more with even less these days(I had 16 personnel working for me last year and now I am down to 6 with constricted budget). Here is the important one...I would be deployed multiple times for the next 3 years(away from home 6-10 months at a time).

We are currently saving between 40% - 45% of our take home pay each month, mostly in maxxed out 401k, 403b, Roth IRAs. We also have a rental with negative cashflow to the tune of $750 a month ($250 property management fee), $500 property taxes). This sucks and we hate it. We were forced to move by the military and at the time we were almost even on the mortgage. With current comps in the neighborhood we could sell and get $40-50k cash out after all fees are accounted for(We believe if we wait another year or two we can get 100k cash out).

We eventually want to move to one of the wonderful states that are tax free or at least does not tax a military pension. My wife is a BSN RN with 15 years of experience so we know that she can get a job anywhere we go. I want to get into some real estate, fix em up and rent them out(be my own property manager too). I also plan on using the Post 911 GI Bill which will pay for tuition, books and give me a tax free stipend every month(the amount depends on location, to give you an idea if we stayed in San Diego it would be $2150 a month tax free).

Thank you for taking the time to read my post and giving me some feedback.
It is much appreciated,

F.I.T

[curler]

Hi FIT,
It sounds like you have a pretty clear picture of what you want your future to look like.  But what is missing from your post is a discussion of what your assets are.  Retiring with 20 years of service gives you a 50% pension, I believe.  (I am assuming that REDUX isn't in play here).  Given that you are only spending about half of your income, it sounds like you could survive just fine on your pension.
But you need to factor in how long it will take for any business to get profitable, and how long it will take for your wife to find a job (Is she currently working now?)
So I think you need to focus on how ready you are, mentally and financially, for retiring.

Lastly, it isn't clear, is there some sort of cut-off in terms of pension amount at the 24-26 year amount, or could you choose to stay for 2-3 more years and get 5%-8% higher retirement for doing that?
 

[FinancialIndependenceTime]

Hi FIT,
It sounds like you have a pretty clear picture of what you want your future to look like.  But what is missing from your post is a discussion of what your assets are.  Retiring with 20 years of service gives you a 50% pension, I believe.  (I am assuming that REDUX isn't in play here).  Given that you are only spending about half of your income, it sounds like you could survive just fine on your pension.
But you need to factor in how long it will take for any business to get profitable, and how long it will take for your wife to find a job (Is she currently working now?)
So I think you need to focus on how ready you are, mentally and financially, for retiring.

Lastly, it isn't clear, is there some sort of cut-off in terms of pension amount at the 24-26 year amount, or could you choose to stay for 2-3 more years and get 5%-8% higher retirement for doing that?

Hello Curler, you are correct with 20 years it is 50% of your basic pay which is much less than your total pay. Each additional year beyond 20y is an additional 2.5% added to the pension(No REDUX here, that is not worth it ever). The only cut-off is making to the 20y mark. After that is just a bonus each year.

My wife is has been working since we moved here to Hawaii. She has experience in several specialities in her field. Once she told a few old co-workers and friends that we might be moving back to San Diego she was contacted and offered positions once we get there.

I know I can and will do the best in any job the military throws at me if I decide to stay. I just don't LOVE doing it anymore, but then again as I get older I find the changes going in a different direction that I want to be going in. I find myself thinking a lot these days,"If only Iknew then what I know now" or "As my parents used to say". It seems like the younger generation has vastly different set of values, morales and beliefs.

[Landslave]

  Retire. You can make as much money in a contractor position in San Diego with no financial or personal risk and no deployments. 2.5% of base pay retirement pay per year is not adequate additional compensation to stay in. You can survive on wife pay and retirement. So, your new mission, sir, is to secure your early retirement for yourself and your wife. Get out of the military and work hard at maximizing contract/self employment/investments toward that end. If the rental house you own really will double in value in a year, hang on to it! 100% return with no origination cost is nothing to pass up!
  Also, make sure not to screw up these last few months. Don't even hint that you are going to retire until you put in your papers.
  If you are a good handy man, getting rental properties with the cash you earn the first 6 months out of the service plus the $100K you get for the rental house when it is sold is a good option. Sweat equity pays very very well if you are skilled, and it is taxed as a capital gains, not self employment. But, it is a job....you owe it to your wife and yourself to get up in the morning and stay on-task like a monster putting 50 hours per week for yourself.
   Oh, and one other thing....I would choose a cheaper place to do real estate and to live than San Diego, unless weather trumps everything else. Florida, Washington state, and Texas have no state income tax....a beautiful thing. But I would figure out where in the country is getting best returns on rental property investments and consider that place so that the property management /flip/investment business is most likely to succeed without margin pressures on it. it would be hard to fail in some markets. But watch the rental vacancy rate, which is an issue some places.
  Good luck and thank you for protecting all of us!
 

[FinancialIndependenceTime]

Aloha Landslave, thank you for your input.

Honestly, I have been waiting and longing to retire since about my 15 year. Most of the people that I have seen retire seem to all go through this stressful and emotional problems. Losing the security blanket of pay, benefits, and status(for some) is plain scary at times. The only reason I would choose to stay in would be for that 2.5% a year bonus in retirement pay. I ran the numbers again last night and it would be $500 a month extra for life. $60,000 for 10 years, $120,000 for 20 years, $180,000 for 30 years, $240,000 for 40 years. Don't get me wrong $500 a month is a LOT in passive income, but I know I can make up for that easily by working and investing.

We both agree in getting out of California as soon as we can. As I stated previously we will be targeting a tax free state or at least one that will not tax the military pension. I built an addition to out rental house 3 years ago. I did it as a Owner/Builder, so I was my own General Contractor. The two thing that I sub-contracted out were insulation(the company did it cheaper than I could buy the materials from a discount warehouse) and sheetrock(same thing here). I am throughly familiar with almost all aspects of residential construction and the permitting processes associated. I have always been of the mindset that sweat equity is a valuable commodity. I would ideally find distressed properties to fix up and either flip or rent out. I might have to do a few more flips at first, but then I would move onto keeping rental income. I want to have the passive income from all of the sweat equity. Hopefully within 5 years or so I can be my own property manager for my own properties and possibly open up to outside customers as well(I understand that each state has their own system of property management requirements).

[Nords]

I will be at 20 years in the military soon(within 6 months). I have two basic choices right now. 1) Retire from the military and move on the real world(I have so many possibilities in mind it is driving my wife crazy) or 2) Make the decision to stay in until 24-26 years to increase the retirement benefits I will receive by 10% or 15%.

I know you all have questions so I will do my best to anticipate them in advance. I used to LOVE my job, not it is not even fun anymore. We are doing much more with even less these days(I had 16 personnel working for me last year and now I am down to 6 with constricted budget). Here is the important one...I would be deployed multiple times for the next 3 years(away from home 6-10 months at a time).

Welcome to MMM, FIT.

You're showing early signs of burnout, and you have skills.  You have no reason to stay on active duty a minute past 20.  If you haven't already, then you and your spouse need to get to retirement TAP ASAP.  Maybe file your retirement request tomorrow so that the assignment officer leaves you alone for a while.  I don't know what service you're in but if you get to your Navy PRD before you've negotiated orders or filed for retirement, then they're allowed to send you anywhere they want for two years.

My spouse and I have been in your shoes, and being able to retire to regain control over your life is a huge relief.

Before I go further, let me be a devil's advocate and dig into the money part a little:  the deployments mean that you'd have a chance to put over $50K/year tax-exempt pay in your TSP, as well as the 10% APY of the Savings Deposit Program.  This next tour could give you a huge financial boost beyond just the few hundred extra pension per month for the rest of your life (and your spouse's survivor benefits).

But you'd be deployed.  And your family would be miserable.  And, frankly, nobody within two levels of your chain of command on either side of you would be very happy at seeing your smiling face either.  You'd be grimly clenching your jaw and getting through this experience, which would put a tremendous chronic stress on your blood pressure and the rest of your general health.  You could ask you kids how they'd feel about missing you for those deployments just so that you could earn more savings to pay for their college, and I bet they'd rather have you around instead of having more money.  (I suspect that the 17 year old is worried about how you'd feel if you were deployed to pay for his college and he flubbed a chemistry test.  No pressure!)  You could mention to them that ROTC is totally free of any obligations for the first year, too...

Once your spouse takes a job with no looming transfer date, she'll be able to make long-term career plans for her own promotions and higher pay. 

It's just money.  As you say, you can always get a job.  You and your kids can find other ways to pay for college.  Military.com lists states that offer scholarships to military veterans, and some of those state benefits include families as well.  Here's the link:  http://www.military.com/benefits/veteran-state-benefits/state-veterans-benefits-directory.html?comp=7000022779939&rank=1

If you haven't already seen it, there's a copy of "The Military Guide to Financial Independence and Retirement" in the Hickam library and another one at the AMR/Fort Shafter libraries.  There are also a couple copies in the state library system.  Borrow them, or buy the Kindle version from Amazon.  The first chapter is free at http://www.impactpublications.com/militaryguidetofinancialindependenceandretirement.aspx and the first six months of the blog excerpts most of the book (except for the reader stories and the checklists).  You can go to The-Military-Guide.com and click on the "Start with this link!" box (http://the-military-guide.com/start-here/).

I'm up the road in Mililani.  Give me a PM or an e-mail if you want to get together around Pearl Harbor for a cup of coffee to talk over the details. 

Maybe you should check the TAP website, too, and get their schedule... unless you can get 30 days of leave in the next few months, then TAP is the best way to find a little quiet time to think through it all.