TL/DR: Should I get out of the military and self-fund ER, or stay in for the benefits and more comfortably FIRE at 42 with a pension?
Short answer: stay on active duty as long as you're feeling challenged & fulfilled. When the fun stops, consider the Reserves or National Guard.
Again, for the sake of those readers stumbling across this thread via search, the issue is that you're getting more senior and closer to the pointy end of the career pyramid. Good billets might be hard to find, and the assignment officers might play hardball for "career enhancement", "breaking out of the pack" and the dreaded "hardship tour". Once you get to 14 years of service (or so), they think you'll do anything to stay on active duty until 20. Yet your priorities might have changed (especially if you've started a family) and you may not need the active-duty pension.
Grimly clenching your jaw and gutting it out to 20 will risk your physical, emotional, and even mental health. (Your family will think you're a lot of fun too.) Meanwhile you have skills which are valuable outside the military, and you could greatly improve your quality of life with part-time military as well as part-time work.
You can probably reach FI (on your high savings rate) before 20, so if you go Reserve/Guard before then you'll be able to continue drilling until you reach 20 good years. Your pension would start at age 60, not 42, but your investment portfolio would only have to cover the gap between leaving active duty and starting your Reserve pension. You'd also have Tricare Reserve Select & Tricare Reserve Retired health insurance-- not as cheap as Tricare Prime but still cheaper than most.
Umbrella Insurance 0 (Should I have this?)
Yes, you should buy umbrella liability insurance when your gross worth exceeds the limits of your liability insurance on your home & autos. Gross worth, not net worth, because the judge & jury only care about the plaintiff's injuries and not your mortgage or your other debts.
1. Main thing on my mind right now is career advice. My skill set is becoming increasingly lucrative in the civilian realm, but I still have five years of commitment to the military. I like my job currently, but I’m worried that as I promote I won’t like it as much in the future. Also, the civilian life I anticipate would resemble ER much more than the life I currently live. In December I have to decide to either A) decide now to leaving the military in five years to get 4.5 years of a 5% match on TSP contributions with the new BRS or B) give up the matching contributions for those years and stay seven years past my commitment and get the full military pension ($3800/mo in today’s dollars, with cheap medical coverage for life and space-a travel). I guess a third option is to pick Option A and then stay in until retirement eligible with the reduced pension, but I’m pretty sure that would be a financial mistake that could have been averted by making a better decision now. Going with Option A, I’d have to go through a semi-rigorous application/interview/transition process and would take a pay cut for a few years but then probably see my pay go well above what I make now after five years in that job. Option B seems like a lot to commit to (living in city’s I’m not excited about, possibly being relegated to a desk job, and overall reduced personal freedoms), but I’d keep great benefits while I’m in, realistically have better potential to save, and end up with the unmatched stability of retiring with military retirement benefits.
How about the third option? It'd leave you in the most flexible position. You'd receive matching Thrift Savings Plan contributions (you're already maximizing your TSP contributions) which would likely compound enough by age 60 (especially in the C, S, and I funds) to make up for the lower BRS pension.
It avoids the transition pain of Option A and you're not locked into Option B's years of active duty.
You could run the DoD BRS calculator at
http://militarypay.defense.gov/Calculators/BRS/to put some numbers in a spreadsheet. If you think your skills will make you eligible for the continuation pay bonus, then read paragraph 8 of the Implementation Document at
http://militarypay.defense.gov/Portals/3/Documents/BlendedRetirementDocuments/FINAL_BRSImplementationGuidance.pdf?ver=2017-02-27-084532-740and see if you can estimate the compounding of that bonus amount. You'd be able to receive continuation pay concurrent (not consecutive) with other bonus/re-enlistment programs as long as the other program allows it.
Roth IRA 916.66 (maxes both of ours)
Roth TSP 1500 (maxes mine)[/i]
2. For the tax guru’s, should I be in Roth or Traditional plans? We max IRA’s and my TSP (401k) and might try to max one for my wife if she worked. Also, this year we are attempting the staggered deduction strategy and deferring all possible deductible expenses to next year FWIW.
Military pay is generally lightly taxed because of all the untaxed allowances. I think that as long as you're taxed in the 15% income-tax bracket or lower, then it makes sense to pay the taxes now and contribute to a Roth TSP, your Roth IRAs, and a Roth 401(k). For many servicemembers, the Earned Income Tax Credit and Childcare Tax Credit also reduce the final tax bill to a very small amount. Again, you'd pay the taxes now and use Roths.
If you think that you're going to reach FI and have very little earned income for the next 10 years then you could try a Roth conversion ladder. However you're already starting from a low military tax bracket (plus tax credits) and trying to convert in the 0%-10% income-tax brackets (perhaps without tax credits). I'm not sure that the hoop-jumping effort would be worth the savings, but you might be able to give that a good spreadsheet scrub.
3. My $300k taxable and $70k of Roth are with Betterment in 90/10, but I think I’m to the point where I understand and could manage a lazy portfolio to avoid their (rising?) fees. Collectively I think there’s about $70k of capital gains in the last two years. Anything to consider before switching to 100% stock in hopes of getting back to vanguard funds and then transferring over to VG? We have TLH rolled over from last year, and I’m planning to talk to my accountant about how to minimize the tax burden of this move.
Capital gains are the key to moving to funds with lower expense ratios. (We have this problem in my house too.) You could switch over to 100% equities in the TSP right now, and you could also do it tax-free in your IRAs.
One option would be to have Vanguard do the transfer of assets "in kind" from your taxable Betterment account. Vanguard will probably hold the Betterment shares for free and would also sell them for free. Then (in your Vanguard account) you could slowly sell them for cheaper Vanguard funds while you're in the 15% income-tax bracket, which means that your capital gains are taxed at 0%.
House—Zillow says $125k but let’s call it $100k. Bought for $76k and put $15k into it.
Liabilities: We owe $54k on a 15 year/3.375% mortgage. Instead of paying cash we put 20% down but then opted for biweekly payments on a 15 year loan to accelerate payment, so we haven’t fully committed to either school of thought on that.
4. For you landlords out there should I consider renting my house or selling it next year when I move? I am hesitant to do the long-distance landlord thing but would like to try it at some point to make sure it’s not for me, and this cheap and durable house seems decent for a trial period. I think I could expect rent of $900-1000 from a military tenant.
"I think" is the start of a business plan, but you'd want to analyze your market's rents and figure out your capitalization rate. I'd pay the minimum required on the mortgage while you have tenants in the place, because you're going to want a sizable emergency fund for maintenance, repairs, and vacancies.
Keep in mind that the IRS assumes you're depreciating the structure (not the land) and will expect you to pay 25% depreciation recapture when you sell the place.
It's a relatively cheap experiment to determine whether you want the hassle of long-distance landlording, but you should be ready to sell.
