Author Topic: My heart was in it, but my circumstances were quite challenging  (Read 2822 times)

tpkeefe

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My heart was in it, but my circumstances were quite challenging
« on: September 24, 2015, 06:38:43 AM »
Hi, folks,

TL;DR: Early middle-aged guy who has been frugal for many years, but who has been limited in his earning power due to some blunders in his 20s, with different priorities than being financially independent, and because of the very negative changes that have taken place in the US economy since around 2001.  He wants to be financially independent as much as possible, but is very concerned with security, and is currently stuck with a good Federal job in high cost-of-living Washington, DC area.  A good problem to have, but it puts limits on what he wants to do.

Proto-Mustachian, long-time reader, and first-time poster.  I'm here to talk a bit about myself and ask for some solid advice on moving forward.

Facts about me:

1.  44 years old, single, no kids, live with my girlfriend in Washington, DC.

2.  I work for the Federal government and have been for just ove five years.  Job is pretty decent and comes with the usual benefits: steady work, some job security, excellent benefits, Thrift Savings Plan (which is the Fed's 401K analogue), and the annuity at the end of 25-30 years of working.  With the five years I have now, that will put me, in 25 years, at 69 for retirement.  If you count the six years I was on active duty in the Army, that adds my total Federal service at 11 years, so my retirement age will be 63 -- just shy a few years of getting full Social Security.

3.  As I'm former military and received and honorable discharge, I'm entitled to the full suite of VA benefits, to include the VA Home Loan and the GI Bill, of which I have three years left to use.

Other facts:

1.  My girlfriend works for the Arlington County government, and so has a steady job like I do.

2.  GF also owns a modest condo in a transitioning neighborhood of DC, and has done up in value in the six years that she's owned it.  As the cost of living in DC is high and the cost of housing is ridiculous, I'd say that she's doing well, in that we both live below our means and manage to put away quite a bit of money into our retirement accounts -- mine Federal, her the county.  I share the mortgage payments with her.  My share is $850 per month.

3.  Our jobs, unfortunately, root us here to DC.  In retrospect, if I had gotten my Fed job back in the 90s and then bought in a depressed area, watching the property values rise, then I'd be sitting pretty right now.  Sadly, this wasn't the case, as I spent the better part of my 20s "finding myself," recovering from some bad educational and economic decisions, recovering from three major economic calamities (early 90s recession, the 1997 Asian economic crisis, and teh 1999-2000 tech bust), and reinventing myself to get on the IT path, which I've been on for the past 15 years.  Because of this period, I feel that I'm ten years too late to the party.

4.  I've always been frugal because of my parents' example, because I forewent some economic opportunities to focus on other things in my life, and because of difficulties in finding a job that paid decently and that was steady.  I lived in my hometown for too long, and it was a dying industrial town.  Now that I live in DC, the opportunities are that much greater.

In some respects, I feel that I was given a new lease on economic life some years ago, but I can't shake the feeling of time wasted.  Because I couldn't see too far into the future, due to immaturity and lack of good information out there so that I could make better decisions, I ended up in a not-so-good place.  But, as I said, I've always embodied some core Mustachian principles, and want to continue the path to badassery by finding a good middle-way path between increased economic opportunity and "winning by not losing."  I'm already on this path by living below my means, even to the 50% mark.

Now, here are my problems, on which I'm requesting some info:

1.  My GF and I have talked about buying a bigger house or property in the next few years.  I want to buy something that has some green space and the potential of being self-sufficient.  Her father and stepmother have 60 acres of land in western North Carolina and are growing some of their own food, selling excess power back to the county, etc.  This kind of thing taps into my nascent homesteading, permaculture, and prepping mentality, because I've always seen the value of self-reliance, whenever necessary.

2.  As I said, the DC area is outrageous in terms of its housing, with many units over 70 years old, and prohibitively expensive to renovate.  It would be better to get something out in Maryland or Virginia, but the costs out there are quite expensive, too.  I prefer to be down south where the cost of living is lesser, and so this is why NC is a solid option, since my GF's family is down there.

3.  Our jobs root us here to the DC area, and the bulk of Fed jobs are here in DC -- which means that, were I to stay here until retirement, I'd be in my late 60s, and I'm not sure that I want to work affter that.  I'm also skeptical that my pension would be worth that much or that Social Security would be there when my GF and I retire.  It's quite possible, though probably not likely now.  Therefore, I'm looking into going over to the private sector for a higher-paying job with many comparable benefits.  What I give up in security and some benefits, I make up in more flexibility, a wider and more robust network, and more pay -- more of which I can sock away for investment.

4.  Though I've always been frugal and Mustachian, I suck at investing.  Not that I haven't tried, but the conventional vehicles I've tried have performed dismally.  Currently, I have between $30,000-40,000 in the TSP, conservatively invested.  I also have nearly $100,000 in savings, which isn't pulling interest.  Lastly, I"m to get about $100,000 from my mother as a result of her insurance settlement from an accident one year ago.  I think this is great, but it's not that I couldn't continue working.  The pension from the Fed job is hard to give up, but there are real trade-offs.  I don't need to live fancy in DC, but there are many benefits to living here that one wouldn't get anywhere else.

Where I really suck is in picking investments.  Because I was unsure of the market and the forces that are working against savers here in the country, I kept my money out of the stock market and other investment vehicles for the past five years.  I feel that I've lost time, but I'm also very thorough and won't go off half-cocked into something without having a holistic approach

5.  I'm also sucky at side hustles.  I've spent the better part of two years learning all I can about many things that both excite me and give me ideas for generating more income.  Not that I need it to survive, but having more of it, I feel, would add to my main goal in life: more freedom.

I could use some of my GI Bill money to get skilled up in something that would produce revenue in the future.  Hard to come up with something, though, as I've done more than one ROI on different paths, to include geographic information systems (GIS), data analytics, and project management.

All thoughts are appreciated.


« Last Edit: September 24, 2015, 12:10:15 PM by tpkeefe »

Dulcimina

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Re: My heart was in it, but my circumstances were quite challenging
« Reply #1 on: September 24, 2015, 10:42:30 AM »
There is going to be a tradeoff between time and money no matter what.  I don't get the sense that you haven't decided if you are truly comfortable choosing time over money.

What helps me is figuring out how much or how little I'm giving up and will my stash be enough to compensate.  If you retire at 50, you are giving up FEHB, but will still qualify for a small annuity at 62. If you wait until 57, your MRA, you can keep FEHB and a take an immediate, reduced pension or you can postpone those benefits and reinstate them at 62. If you wait until 60 (=more than 20 years service), you'll be eligible for the supplement if it's still around and unreduced benefits. At 62, you can get unreduced benefits and the multiplier increases from 0.01 to 0.011.

Put some numbers in, and see if you are OK with them. In the scenario above with a high-3 salary of $100k, and 17 years of creditable service , you would receive a deferred annuity of $17k at 62.  Work an additional 12 years (29 years total) until 62 and it should be around $32k. Would you be able to bridge the gap with savings?

I'm making the assumption that you are able to include active duty years.  Can you find out for sure?
« Last Edit: September 24, 2015, 10:44:08 AM by Dulcimina »

tpkeefe

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Re: My heart was in it, but my circumstances were quite challenging
« Reply #2 on: September 24, 2015, 12:08:44 PM »
There is going to be a tradeoff between time and money no matter what.  I don't get the sense that you haven't decided if you are truly comfortable choosing time over money.

What helps me is figuring out how much or how little I'm giving up and will my stash be enough to compensate.  If you retire at 50, you are giving up FEHB, but will still qualify for a small annuity at 62. If you wait until 57, your MRA, you can keep FEHB and a take an immediate, reduced pension or you can postpone those benefits and reinstate them at 62. If you wait until 60 (=more than 20 years service), you'll be eligible for the supplement if it's still around and unreduced benefits. At 62, you can get unreduced benefits and the multiplier increases from 0.01 to 0.011.

Put some numbers in, and see if you are OK with them. In the scenario above with a high-3 salary of $100k, and 17 years of creditable service , you would receive a deferred annuity of $17k at 62.  Work an additional 12 years (29 years total) until 62 and it should be around $32k. Would you be able to bridge the gap with savings?

I'm making the assumption that you are able to include active duty years.  Can you find out for sure?

In general, time for me is more important for money, for the following reasons:

1.  Time allows me to relax, to recharge, to learn, and to ready myself to act in case I need to.  In the past, I had more free time than I did money, and I didn't always use the free time well.  What I did use well, I learned quite a lot -- some of which laid down the groundwork for trying to incorporate Mustachianism.

2.  Yes, I can include active-duty years, but I'd have to pay for those years.  I haven't done so because I'm at this crossroads.

3.  I'm aware of the calculations, and, yes, I think I can bridge the gap with savings.  Trick is to live well below my means and save everything that I can.

Catbert

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Re: My heart was in it, but my circumstances were quite challenging
« Reply #3 on: September 24, 2015, 12:48:40 PM »
A few random thoughts from a retired Federal HR manager:

Are you sure you couldn't find a Federal job in the South?  Some jobs are very tied to the DC area (e.g. statistical analyst for the FEC) but many aren't.  Realize that whatever grade level you are in DC you'll be looking mostly at lower grade level in the field.

I wouldn't worry too much about  a major overhaul of FERS affecting you.  When they last revamped the retirement system (CSRS to FERS) everyone who was employed at the time of FERS implementation was able to stay in the old system.  Don't pay attention to rumors of even proposed legislation.  As an example, for 30 years there have been rumors that early out provisions would change but so far - nada.

What do you mean by conservatively invested in TSP?  I hope that doesn't mean you have it in G or F fund.  I personally would put all of it in the C, S, and I funds (S&P 500, small cap, international).  If you're really conservative put a lifecycle fund.


tpkeefe

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Re: My heart was in it, but my circumstances were quite challenging
« Reply #4 on: September 24, 2015, 01:01:42 PM »
A few random thoughts from a retired Federal HR manager:

Are you sure you couldn't find a Federal job in the South?  Some jobs are very tied to the DC area (e.g. statistical analyst for the FEC) but many aren't.  Realize that whatever grade level you are in DC you'll be looking mostly at lower grade level in the field.

I wouldn't worry too much about  a major overhaul of FERS affecting you.  When they last revamped the retirement system (CSRS to FERS) everyone who was employed at the time of FERS implementation was able to stay in the old system.  Don't pay attention to rumors of even proposed legislation.  As an example, for 30 years there have been rumors that early out provisions would change but so far - nada.

What do you mean by conservatively invested in TSP?  I hope that doesn't mean you have it in G or F fund.  I personally would put all of it in the C, S, and I funds (S&P 500, small cap, international).  If you're really conservative put a lifecycle fund.

1.  Yes, I can find a Fed job in the South, and have seen openings.  Trouble is the locations.  For example, most NC jobs are coming out of Fayetteville and Jacksonville, near the coast and with the military bases there.  Then there's the VA, which is a different animal.

2.  Yes, "conservative" means in the G Fund.  That's my fault because, as I said, I'm relatively sucky in investments, and I preferred to watch what was going on with the stock market over time since there have been wild fluctuations.  I have the means to change up the funds allocation and will do so immediately.  With the extra money I'll be getting, I can put that in there as well.

honeybbq

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Re: My heart was in it, but my circumstances were quite challenging
« Reply #5 on: September 24, 2015, 01:12:12 PM »
Hi, folks,


2.  As I said, the DC area is outrageous in terms of its housing, with many units over 70 years old, and prohibitively expensive to renovate.  It would be better to get something out in Maryland or Virginia, but the costs out there are quite expensive, too.  I prefer to be down south where the cost of living is lesser, and so this is why NC is a solid option, since my GF's family is down there.


Where I really suck is in picking investments.  Because I was unsure of the market and the forces that are working against savers here in the country, I kept my money out of the stock market and other investment vehicles for the past five years.  I feel that I've lost time, but I'm also very thorough and won't go off half-cocked into something without having a holistic approach


1. There's nothing wrong with an older home. I've had 100 year old homes and 10 year old homes and the age does not predict the reliability. Some older homes have excellent bones and craftsmanship that is rare now. Yes, you may need to upgrade plumbing, wiring, and be careful of lead based paint, but none of these items deserves completely writing off a house alone.

2. 3 fund method - no "picking" involved. Check out the bogleheads wiki.