Welcome, Scooter! In no particular priority order, here's some considerations:
Current expenses:
Home mortgage(including tax and insurance): 1504 @ 3.5%
Rental mortgage(including tax and insurance): 1271 @3.25%
Vehicle: 11,300 @ 4%
When's the last time you checked your insurance rates? For example, USAA gives us the island's best vehicle insurance but their homeowner's insurance is hugely expensive. We use Armed Forces Insurance for our home & rental property (and umbrella liability) but they don't insure vehicles in Hawaii-- so we insure our vehicles with USAA.
It may take you several hours to bargain with the insurance companies, but you may save a few hundred bucks a year. If you're not with USAA already, then start with their customer-service reps who can quickly analyze a quote from just about any other company. Next up you could try AFI.
I usually get about 10K back at the end of the year in taxes as well.
Hypothetically you're losing about 4%/year that you could be paying on that vehicle loan, or as much as $400/year. So you could go several ways with the size of your refund:
1. Adjust your W-4 in MyPay and (here's the hard part) make sure you pay down the debt with everything that you save by this maneuver. Of course if you go over the top on deductions then you might have to pay a little more on your next tax return.
2. Use the refund to buy I bonds. But when you're getting a military pension (the equivalent of I bond income) then I would not do this.
3. Leave the withholding alone for another three years and adjust it after you retire. This attitude would be relevant if your excess withholding is due to promotions, re-enlistment bonuses, or tax-free pay in a combat zone.
4. If the excess withholding is working for you as a forced savings strategy, then keep doing it-- and adjust it after you retire.
1. I am curious to hear thoughts on what I should do with cash on hand, (21K) consumer debt, (16K) car, (11k) and our rental property which is underwater to sell, but about a net zero monthly after depreciation and other tax advantages and should build equity in the future.
Do you need the checking-account cash for anything right now, like a Roth IRA contribution? Because you could hammer out the vehicle loan tomorrow.
First try to max out your Roth TSP and your Roth IRAs for the year (before their contribution deadlines pass). Then you could pay off the loans with the extra cash from your promotion.
Of course you're probably already planning to pay off the $16K credit-card debt in 11.5 months-- or transfer the balance to another 0% offer. So maybe you want to fence off some of your checking account cash for that due date as well.
I'd keep the mortgages-- those are nice interest rates.
2. I will be receiving about $900(net) raise per month very soon. What should I be doing with that money?
Blow $100 or so on the first month for something fun with the spouse & kids.
Set aside an extra $50-$100/month in the entertainment budget for babysitters or a family local vacation-- small jolts of hedonistic pleasure.
Bank the rest! Max out the Roth TSP and the Roth IRAs and then save more in a taxable account.
http://the-military-guide.com/2011/03/16/saving-base-pay-and-promotion-raises/Side note: is that $900/month due to a promotion? If so, you may care to make sure that you serve long enough in your higher rank to have that rank on your retirement certificate. It won't make a difference on your High-Three pension, but some retirees feel that it's worth staying longer to lock in that retirement rank. In many cases, though, the service will waiver a three-year time-in-grade down to two years... just because it's a drawdown.
3. I have looked at a few calculators and I'm thinking that if my spending stays pretty similar to current levels, I should be able to retire when I hit 375K along with my pension. Am I way the hell off here?
$3555 pension - $4509 expenses - $100 (more entertainment) = -$1054/month = $12,650/year
Divide that by the 4% SWR (or multiply by 25) = $316,200. Close enough.
In 12 years of retirement, our non-mortgage spending has largely remained flat. (We've knocked 40% off our mortgage payments by serial refinancing.) More importantly, my pension income has risen 27% from the COLA. If you sleep more comfortably at night with $375K in savings, or $317K in savings, then that's what you should do. But if you think that you can cut your spending in retirement then keep an eye on those numbers to see if you could retire with less.
You'll want to think about dental insurance and orthodontia. If you have good hygiene then you can pay your own way, but if you're prone to root canals then you'll want the insurance. Dental insurance might also be a wash with orthodontia-- we negotiated a huge cash discount with our daughter's orthodontist.
You don't mention whether that $3555 is before or after SBP. Your spouse (it's her choice, not yours!) is probably going to want 6.5% of your pension for full coverage on her, and maybe child coverage as well. You may also want to consider a cheap term life/disability policy to cover you for 10-15 years of bridge career or until the kids are firmly launched from the nest.
4. My family and I have moved so many times that we will most likely retire in lieu of moving again. I would think that with my pension I should be able to generate a similar or slightly better income post military, but I am open to recommendations to stay in if it makes overwhelming financial sense for some reason.
I hear that.
Regardless of your choice, your retirement transition benefits may include a free household goods move to the distance of your home of record. (I'm not sure if this is current.) If you rate that move, then you may be able to request an extension to 12-18 months after your retirement. It's an option if you later decide to move "just one more time".
I am on board with college for the kiddos. They each get one year of school paid for via GI Bill. They will need to work and earn for the rest.
Here's a thought: if you use the GI Bill on an advanced degree/certification for yourself or your spouse, then your (or your spouse's) higher earnings during your bridge career could generate far more money for your kid's college fund than the GI Bill ever would have. Consider this post by Kate Horrell-- she's a Navy spouse and good people:
http://paycheck-chronicles.military.com/2012/01/20/dont-transfer-your-gi-bill-to-your-kids/I chose to go Roth this year due to making it into the lowest tax bracket last year. A lot of my paycheck is tax exempt due to military status. So, there is no advantage to paying taxes on profits in the future when I can only go up. At least that's the theory I am working with... am I wrong?
Agreed. You're probably in the lowest tax bracket that you'll ever be in, especially since you're considering a bridge career. Between the bridge career and your pension, you'll jump right up into the 15%-25% income tax bracket.
When you ER from the bridge career, you'll also have a 401(k) to roll over to an IRA and convert to a Roth. So it's better to have the Roth TSP and the Roth IRA now (while you're on active duty) rather than having to start a Roth conversion ladder after you retire.
Though I wouldn't mind fighting the battle of hedonic adaptation. I think I could handle it.
Good problems to have!
If you know that you're retiring in three years then start learning now. Consider a MOAA seminar like "Marketing Yourself For A Second Career". Contact Lee Cohen at Lucas Group and see what their Enlisted Technical branch has to offer. (I've been in Lee's database for over 25 years-- he hasn't given up on me yet.) If you're a USAA member then log into their site and work through their "Military Separation Checklist". Heck, if you're near San Antonio or one of their service centers then contact USAA about a job-- they're the only place that has impressed me about a bridge career.
Contact a local veteran's service organization about a VA disability screening-- like the DAV or even a MOAA chapter. You want their advice on how to get ready now for a VA screening when you retire, because you're going to be awfully busy after you retire.
You may be able to find a copy of "The Military Guide to Financial Independence & Retirement" at your local public or military base library-- or read the first six months of posts from the archives at:
http://the-military-guide.com/post-titles-by-month/Those posts are excerpts from the book, minus the compelling personal stories and detailed checklists.