Case study: With VA disability compensation, do I need a nest egg?

[FIRE for Effect]



Life Situation: Married, filing jointly; two children (14, 10), one puppy. Spouse (37) and I (38) are both disabled veterans receiving VA disability compensation for injuries and medical conditions incurred during our military service; spouse receives Individual Unemployability (IU) and thus cannot work.

Because of spouse’s VA IU, we pay $0/yr. in property taxes on home we own in DC’s Maryland suburbs. We just refinanced our home with a $0 down, $453,000 VA IRRRL, 30-year fixed at 3.37%; it is worth $480,000-505,000. House is 1,400 sq-ft., 3 bed, 2 bath; we have already replaced electrical panel, furnace/heater, A/C, water heater, windows, new roof, self-remodeled our kitchen, built a shed, and moved to slightly more expensive renewable energy.

I am a federal career employee, GS-13, 11 years of combined federal service bought into FERS. As a latercomer (38) to Mustachianism, we have never been able to save. We have just one more credit card payment to get to zero.

I would like to stop working sometime between 47 and 52. Getting to “20” with nine more years—when I’m 47—is tolerable, but with nearly $5,000/month VA compensation, do I need to? Should I just pay off the mortgage and call it a career? And, since we have no savings or investments, should I focus on that, or on the mortgage?

(When you see the numbers below, consider that we've only had this much for two years; six years ago, it was $51,000 gross, combined.)


Gross Salary/Wages: $112,393 taxable salary income; $57,335.52 non-taxable disability compensation: $169,728.52 total



Individual amounts of each Pre-tax deductions (26 paychecks per year): 14% each paycheck to TSP (80% C Fund/20% S Fund), will be maxing out at 17% in January ‘20; $2600 FSA; planning to open Roth IRA in January; FSA+Med+VSP+Dental: $428.44 per check; TSP: $731 per check (17%)


Adjusted Gross Income: $59,800 + $19,000 (TSP @17%) + $57,336 (VA comp): $136,136 annually, approx. $9,378/month + two extra paychecks per year, @$2,300/each (the two instances per year with three paychecks in a month)



Taxes: $850 monthly; Breakdown: federal $169; state $215 (hello, Maryland); OASDI $241; FERS $134; FEGLI $17; Medicare $56; union $18



Current monthly expenses: $5573.20
Mortgage P&I: $2,026
Mortgage T&I: $101
Car: $605
Fuel: $200
Metro Parking: $83.20 my fare is subsidized, but parking is not
Groceries: $800
Electricity: $50-$150 depending on season (higher in summer; windows open morning to night—until the neighbor comes home from work and starts smoking and the smoke drifts into our house)
Gas: $25-$150 depending on season (higher in winter)
Water: $80
Internet: $78
Mobile: $115
CC: $0 in December 2019 (woohoo!)
Windows: $625
Puppy: $75
Misc. (Tidal [sorry, Pandora audio quality sucks], School Program: Girls on the Run; Dance, year-round youth Baseball, Costco Membership, car insurance ($848 every six months), car registration ($278/yr); prescriptions. Total averaged for one month: $635


Assets:
TSP: $98,000
2005 Subaru: $10,000
1992 Honda: $5,000
Film cameras + darkroom: $5,500
Audiophilia: $8,000 (audio electronics hobby, Craigslist buying and fixing and reselling and enjoying vintage audiophile gear; self-funded, never allowed to use paycheck)



Liabilities:
2017 Subaru Outback: $38,000 at 0%, $24,500 remaining; will be paid off in May ‘20
Windows: $33,000 at 0%, $23,000 remaining; will be paid off in Dec. ‘20
Bernina sewing machine: $3900 at 0%, $2700 remaining; will be paid off in Dec. ‘19



Thoughts and Questions and Goals:
-   Since finding MMM/ERE/JLC/YMoYL, we’ve poured over our spending, cut most of the shit out, and have put $3,000-4,5000 per month into knocking out our debt; we are planning to do the same to the liabilities above, including the Outback. It’s the only new car we’ve ever purchased. Read the next bullet before face punches.
-   We’re considering buying a used VW eGolf, paid via trade-in value + cash. The 89-mile range of the first generation battery + very affordable used cost ($11,000-13,500) + little to no maintenance makes sense for 100% of spouse’s driving; she would also drive me to metro and pick me up, saving $83/month. I manage a year-round travel baseball team and a Little League team, my son plays travel baseball, and my daughter has dance class. Sorry, we’re keeping two cars and driving them daily. I’m a goddamned 2x combat veteran of the 101st Airborne, so spare me the face punches telling me I need to toughen up. Not planning to discuss our personal disabilities in this space.
-   Waiting on the “Radwood effect” before considering selling ’92 Honda.
-   House needs: one bathroom renovation; laundry room/basement needs drywalling; exterior paint; new deck, though we want it screened in

1.   After paying off the Outback and the windows, what do we do with the money that was going to debt: invest, or mortgage?
  a.   We’ve calculated that, after paying off the Outback and windows, we can pay off the house in 8.5 years
  b.   Getting the eGolf will mean we can invest/pay down mortgage several months sooner
  c.   With VA disability compensation of $4,778 per month (increases aligned with COLA), likely for life, do we even need to invest?
       - A reduced rate in the future is possible but unlikely. Worst-case scenario is a reduced rate (2019 value) as low as $1800-2,700/month FOR LIFE
2.   I’m already fully vested in FERS, but with nine more years of employment to hit 20 years, I could stop working at 47.5 and then draw FERS at 60. The amount based on nine more years at current markers would be about $2,100/month.
3.   I can draw TSP at 62, I think. Currently at $98,000 (80/20 in C/S) + nine more years of maxed contributions and potential growth, then 14.5 years of no contribution growth before withdrawing
4.   I don’t know anything about Social Security, but I’ve been paying into it for 20 years.
5.   If I were to stop working, spouse could get all care through VA healthcare; I’m eligible to use CHAMPVA; spouse has pre-existing conditions and family medical history
6.   So, if I stop working at 47.5: pay off mortgage to reduce monthly expenses, or focus on investing, but live with mortgage?

Goals:

1.   Move back home (California) after stopping working; want to be in or near the Sierra Nevadas, mortgage-free with cash from selling current house in Maryland
2.   Morning coffee every day, together
3.   Hike and photograph in the mountains every day, together
4.   Read/craft/write every afternoon
5.   Evenings with vinyl + scotch/craft beer
6.   Freedom and ability to travel to and hike national parks several times per year

[Laura33]

First, I know it sounds trite, but thank you for what you have given for all of the rest of us. 

Second, huge congrats for turning your spending around and increasing your income so dramatically.  Those are major accomplishments and will serve you very, very well.

Third, the disability payments and pension definitely give you a very, very solid base.  I am glad you have looked at the possibility of benefits being cut, because you never know.  But have you looked at what happens with the benefits/FERS when one of you passes?  It looks to me like you could float pretty easily on both disability payments, but what happens to your budget if it's only one of you?  The statistics say that it's likely one of you will go before the other, and so before you make any major life changes, you want to be sure the survivor is protected.

However, I am also a huge fan of having a safety net.  Part of it is irrational; I mean, if the government crashes and chaos reigns everywhere, I've got bigger problems than whether my SS check comes, right?  But part of it is a rational response to life experience that has taught me you never know.  For example, you have an older home, and you've gotten it in pretty good shape, but what if it needs a new roof, or the basement floods?  You need a pile of accessible cash to be able to cover those sorts of events out of pocket (which, btw, always seem to come in multiples at the same time - it's never just the roof, it's the roof and the washing machine and the dishwasher, ugh).  I just had a $15K CC bill because my MIL, my cat, and my grandmother all decided to spiral down and die within 5 days, so we had many last-minute airline tickets, vet bills, etc.  None of that was required, of course, but in the middle of a giant emotional shitstorm, it was sure nice just to be able to buy the plane tickets without having to worry about whether I could afford to go see them one last time.  You already know all the stuff you want to do to fix up the house, so you should be saving for that.  You should also be saving for a replacement car when the '92 finally goes.

That said, you don't need huge quantities, because you already have a very solid guaranteed income stream.  So my recommendation is to just stay on the track you are on, until you decide you're done:

-- Continue maxing out your TSP for as long as you work.  At your income level, the tax breaks will leave more money in your pocket to dedicate to your other goals.

-- Don't worry about pre-paying the car or the mortgage.  Those interest rates are free or mostly-free money.  Focus on your other financial priorities first (see next bullet), and then if you still have cash left over, then you can throw it at the mortgage.  Sure, you could pay off the car loan, but the only reason to do that would be if the payment was putting a crimp in your monthly budget -- and it's clearly not, so let that sucker ride as long as you can.  It will be much more effective to focus on your overall costs of ownership, i.e., used e-car vs. new Subaru -- that sounds like a good idea to me.  But if you can get a 0% loan for the used car, I'd do that and keep the cash invested, at least for as long as you keep your job.  ;-)  Once you fully retire, it makes sense to have everything paid off, so you have the security of knowing your monthly expenses are fully covered by your disability payments.

-- Start saving in an accessible account for the things you know are coming down the pike in the next few years -- home repairs, replacement vehicle, moving costs, "what-if" fund, etc.  I would put the "definitely within the next year or two" costs into something like a money market; anything that is optional or further out in time can go in something like VTSAX, because if the market is down, you have time to let it recorver.

-- Big-picture:  if you retire in your 40s, what is your plan for accessing the TSP as needed?  Many retirement accounts have restrictions on when/how you can access the money.  Make sure you understand those constraints, and then invest enough in your regular, non-tax-deferred account to cover anything that might happen before you can get enough cash from the TSP.

tl;dr:  You're in great shape.  Keep that laser-focus on cutting expenses, keep your budget within your disability payments, and throw extra cash at your TSP and a non-tax-deferred investment account, and you will be golden.

[nereo]

Paging @Nords aka Doug Nordman

He literally wrote the book on early retirement for military personnel and is a wealth of information in that arena.

Here’s a link to his website:
https://the-military-guide.com/
If you haven’t already, there’s a lot of very specific information there.

[Nords]

Paging @Nords aka Doug Nordman

Thanks, Nereo!

FFE, help out your fellow military vets here and hold your fire while people post their responses about your spending.  I’m going to append a comment about “face punching” to the end of this response.

Spouse (37) and I (38) are both disabled veterans receiving VA disability compensation for injuries and medical conditions incurred during our military service; spouse receives Individual Unemployability (IU) and thus cannot work.

Because of spouse’s VA IU, we pay $0/yr. in property taxes on home we own in DC’s Maryland suburbs. We just refinanced our home with a $0 down, $453,000 VA IRRRL, 30-year fixed at 3.37%; it is worth $480,000-505,000. House is 1,400 sq-ft., 3 bed, 2 bath; we have already replaced electrical panel, furnace/heater, A/C, water heater, windows, new roof, self-remodeled our kitchen, built a shed, and moved to slightly more expensive renewable energy.

I understand all of this and I’m frequently asked about it by others.  I’m receiving VA disability compensation myself (as are others on this forum) and I know several vets with IU.

Getting to “20” with nine more years—when I’m 47—is tolerable, but with nearly $5,000/month VA compensation, do I need to?

The simplistic answer to your root question is “Yes, you can stop working now, as long as you hold your expenses below your VA disability compensation.”

I have several military readers who’ve retired on very little savings.  They live within their federal income (and its inflation-fighting cost-of-living adjustment). 

If they want to spend more on a certain aspect of their expenses then they find part-time work or barter or make do with other cutbacks.

As already mentioned, one big issue is that your VA disability compensation stops upon death.  If one of you passes away suddenly, will the other be financially stable until Social Security?  Would either of you survivors be eligible for Dependents Indemnity Compensation?

Should I just pay off the mortgage and call it a career? And, since we have no savings or investments, should I focus on that, or on the mortgage?

Paying off the mortgage is a perpetual debate with no right or wrong answers.  For example, if you and your spouse are uncomfortable with keeping a mortgage when neither of you has a paycheck, then you should pay off the mortgage.  It’ll help you sleep better at night and it’ll improve domestic harmony. 

However if you can afford mortgage payments with your current VA disability compensation, then that compensation gives you the advantage of a reliable inflation-fighting income stream to pay a fixed liability (eroded by inflation) which expires in just 30 years.  You could have more control to pay it off at your 30-year pace.  That’s math & logic which is unrelated to sleeping well at night.

Because of spouse’s VA IU, we pay $0/yr. in property taxes on home we own in DC’s Maryland suburbs.
Electricity: $50-$150 depending on season (higher in summer; windows open morning to night—until the neighbor comes home from work and starts smoking and the smoke drifts into our house)

-   We’re considering buying a used VW eGolf, paid via trade-in value + cash. The 89-mile range of the first generation battery + very affordable used cost ($11,000-13,500) + little to no maintenance makes sense for 100% of spouse’s driving; she would also drive me to metro and pick me up, saving $83/month.

My spouse and I bought two used Nissan LEAFs earlier this year, with similar logic.

We also have roughly 90-mile ranges on their batteries, which is perfect for two retirees on Oahu (a 30x40-mile island).  For example, my older 2015 Leaf gives me two trips to the beach before I need to recharge it.  My spouse’s 2017 model gets a couple of drives into town (and back home) before she recharges.  Our “worst case” of needing to drive further than our battery range would be an occasional Uber or rental car.

We also have a rooftop photovoltaic array that provides all of our home’s electricity needs.  We’re expanding the array a little (used PV panels from Facebook Marketplace) to accommodate the battery charges of our cars, and reduce our fuel expenses to zero.   

One of my shipmates lives in Maryland (near Andrews AFB) and recently installed a PV array on his home.  If you’re living in your home for another 10 years then it might be worth your time (and expense) to install a net-metered PV system.  It’s an up-front cost with a long-term payback, but you’ll accelerate the payback if you’re recharging your EV for free.

       - A reduced rate in the future is possible but unlikely. Worst-case scenario is a reduced rate (2019 value) as low as $1800-2,700/month FOR LIFE

If you mean that your VA disability compensation could drop, then you’d want to work with that worst case. 

If your disability ratings are considered “permanent” then you’re unlikely to see the VA re-evaluating your disability.  (It’s about the same risk as worrying about an IRS income-tax audit.)  Over the last 17 years, my military pension (linked to the CPI) has risen over 40%... and there were three years of zeroes in those CPI COLAs.

3.   I can draw TSP at 62, I think. 

You can withdraw some of your military TSP account right now, unless you’ve combined it with your civil-service TSP account.  When done as part of a Roth IRA conversion ladder, it’s free of penalty and possibly free of income taxes.

Here’s a list of all the ways to tap a military TSP before age 59.5, free of penalty and possibly free of income tax:
https://the-military-guide.com/early-withdrawals-from-your-tsp-and-ira-after-the-military/

You’d have to be finished with your civil-service employment before you could tap that TSP account for withdrawals before age 59.5.

If you’re referring to the minimum age for totally penalty-free withdrawals from a TSP then it’s age 59.5.  (Withdrawals from a traditional TSP are still subject to income tax.)  Required Minimum Distributions start no later than 70.5. 

The Roth TSP also has the same RMD rules as a “designated Roth account” with its own RMDs, but they’re totally free of income tax.

In addition to TSP withdrawals as RMDs, you could satisfy the withdrawals through TSP annuities.  You already have a lot of inflation-adjusted annuity income from the VA and your FERS pension, but if you wanted an annuity with a survivor benefit then you could buy that version from your TSP accounts.

4.   I don’t know anything about Social Security, but I’ve been paying into it for 20 years.

I’d talk with your Veteran Service Officer about Social Security Disability Income, especially for your spouse.  I know a couple of vets who are earning SSDI in addition to VA disability compensation.

Otherwise you’d look at SS as early as age 62.  With your VA disability income, your potential mortgage payoff, and your low savings then you could treat SS as a safety net.  If you needed the income at age 62 then you’d start withdrawals.  If you’re still able to live within your means at that age then I’d defer the SS withdrawals until as late as age 70.

Age 70 is the age of your maximum withdrawal amount from SS, and the system is set up so that the payback for waiting this long is your mid-80s.  Depending on the nature of your military injuries, your genetics, and your lifestyle— your life expectancy might be a lot shorter than mid-80s. 

However if you defer the SS as long as possible then you’d have that much more lifetime income for long-term care (if necessary).  In addition if one of you died then the other would be entitled to the higher of your earnings record (survivor benefit) or their own SS earnings record.  Deferring your benefit as long as possible gives your survivor a potentially higher survivor’s benefit.

Freedom and ability to travel to and hike national parks several times per year

You might already know this, but the National Park Service gives free lifetime passes to vets with a VA disability rating.
https://www.blogs.va.gov/VAntage/60590/disabled-veterans-eligible-free-national-park-service-lifetime-access-pass/
I ordered mine through the mail and it came in a few weeks.

You probably already know this too, but in addition to the national pass, you may have considerable state benefits for vets with a disability rating.  You’d be able to learn more from your VA VSO or your state Veteran’s Affairs office. 

[Nords]

Read the next bullet before face punches.
I’m a goddamned 2x combat veteran of the 101st Airborne, so spare me the face punches telling me I need to toughen up. Not planning to discuss our personal disabilities in this space.

@arebelspy, we talked about this once several years ago, but I’ll bring it up again (in public) since this is a military example of the issue.

I think the posters of this forum would benefit from self-regulating a change to the face-punching commentary.

Long long ago in a blog post far far away, Pete mentioned “face punch” in an offhanded comment about hair-on-fire debt emergencies.  It was described as self-administered (“Give yourself a face punch”), and then he moved on to the point of his debt comment.

Since that blog post, way too many forum posters have enthusiastically volunteered for face-punching duty— to other posters.  It’s not the way Pete intended his comment to be interpreted.

Those poster attitudes add a tone to this forum which I’ve felt is needlessly confrontational and even offensive.  Now that a combat vet feels obligated to bring it up on their very first post, other forum members might conclude that it’s an issue derived from a military stereotype.  Yet it’s really coming from the forum’s interpretation of Pete’s tangential comment.

It’s also a needless distraction from helping people to help themselves.

I suspect that the attitude might be making life harder for you moderators.  If that cultural face-punching issue could be clarified or even eliminated then it might make life easier for everyone.

[nereo]

Reflecting on it, Pete always did talk about face-punches as something one should give to one’s self.
While intended to help people reduce spending (or at least note where money is being needlessly wasted) people can be a bit to gleeful at handing them out.

[FIRE for Effect]

It took us more than two weeks to build our initial post before publishing. Thank you to those who've replied. Got some thoughts, but we're really thinking over these suggestions and ideas. :)

[Viking Thor]

Thank you for your service.

My thoughts on the financial picture - you are almost financially independent already, but a little short at current spending if you retired today. Still on balance in fantastic financial shape.

If you keep going like you are now, you'll be in great shape to retire in a few years if you maintain spending as is. It's just a matter of how.much cushion you want to build and if you want to build in a little extra savings in case you have an unexpected expense or want to be able to slightly increase your spending in retirement.

I would suggest to have life insurance for a while. I'm 45 and have it because it's not that expensive and my family depends on my income. I hope to live a very long time but I will keep life insurance until such time that my wife and kids would have enough money even if I had an untimely passing.

Overall great job financially and congrats - by the time you are my age (45) at this pace you will be in shape to retire if you choose to do so.

[former player]

Two thoughts to add to what is above -
 
1.Your current expenses and your income from your service are pretty close to providing enough income for you not to work.  But I get a bit nervous when people are looking at FIRE and aren't taking into account future capital expenditure.  Cars and electronics and houses and no doubt other future capital expenditures on things we don't even know exist yet need to be paid for in the future either out of capital (which you don't currently have) or savings from income (which you also would not have if retiring now).  I think a lot of people ignore this because it's very hard to calculate future capital needs.  My experience is that having a cushion of money for future capital expenses is what makes life on low regular expenses tolerable in the long term.  Once you've got enough of a capital cushion that you are comfortable with it I think you are good to go.

2.  Where do your kids fit into your timeline for retirement?  In 9 years' time probably both will have flown the nest.  Are you happy working full time until then, would you like to spend more time with them while they are still at home, would they like to spend more time with you while they are still at home (teenagers, amirite?)?

3.  Someone with the expertise to make money fixing up old audio gear is likely someone who will always be able to add to their income without being tied to a full time desk job.

Your FIREd life with your spouse sounds pretty idyllic to me.  I hope you get there soon.

[insufFIcientfunds]

Maybe this was covered, maybe it hasn’t, but have you been in the GRB Platform to run an estimate of what your FERS pension would be, to estimate your income would be based on years of service when you separate?

20 years has been mentioned a few times, and unless you are on different retirement schedule (OP doesn’t mention agency or job series), generally civilian retirement is based on minimum retirement age with a minimum years of service (10; hence – MRA Plus 10). If 20 gets you to retirement as a civ, but it’s not the military where you put in 20 and retire.

If you have not heard of GRB or use a different platform for civ benefits, access it and run the estimates. If you are vested and below the min retirement age, it sounds like you’ll likely defer your FERS pension, so making it to 20, or 18, 4, or 25 isn’t relevant entirely because of your age. So if that happens to be the case and your VA benefits cover your living costs, then get to living that badass list sooner than later. GRB estimates will tell you the difference in your FERS pension based on years of service and pay. I bet the difference per month is less than you think.

Good luck.

[FICurious]

Maybe this was covered, maybe it hasn’t, but have you been in the GRB Platform to run an estimate of what your FERS pension would be, to estimate your income would be based on years of service when you separate?

20 years has been mentioned a few times, and unless you are on different retirement schedule (OP doesn’t mention agency or job series), generally civilian retirement is based on minimum retirement age with a minimum years of service (10; hence – MRA Plus 10). If 20 gets you to retirement as a civ, but it’s not the military where you put in 20 and retire.

If you have not heard of GRB or use a different platform for civ benefits, access it and run the estimates. If you are vested and below the min retirement age, it sounds like you’ll likely defer your FERS pension, so making it to 20, or 18, 4, or 25 isn’t relevant entirely because of your age. So if that happens to be the case and your VA benefits cover your living costs, then get to living that badass list sooner than later. GRB estimates will tell you the difference in your FERS pension based on years of service and pay. I bet the difference per month is less than you think.

Good luck.

This. I was about to reply basically the same thing, so I'm glad I scrolled all the way down.

It's usually MinimumRetirementAge+10.  I'm 42 and my CIV MRA is 57. With military time I'm at 15 years Fed service. For me, it works out that I'll hit 30 years a week after I turn 57, so for me, that's my magic number. It's still pretty young. I never wanted to be one of these grey beards that are hanging on. There's a voluntary retirement option, but I believe that has to be offered (like during force reductions), not elected. But please check out GRB (formally eBenefits) you might find some surprising information. You can put in different dates and estimate what your TSP and high-3 will be. There is also a FERS supplement that goes into effect if you retire before age 62 to make up for some SS benefit you wont be eligible for.

Also, on the VA front. Have you checked with your state on what some of their benefits are?  For instanace, Ohio has a War Orphans & Severely Disabled Veteran's Scholarship. It changes a little bit every year, but if you are 60% VA rated, Ohio public institutions will be funded 100% of tuition and general fees. That's an awesome benefit, even though my wife already has her GI Bill signed over to the kids. Every little bit helps.

We're sort of in the same boat as you, though I don't get any VA money. My wife is retired and gets 80%. Those numbers combined are almost the same as my GS-12 pay. The difference is I have to go to work and hate life, and she gets to go volunteer at the kids schools and have lunch dates with her friends! We also struggle with whether we pay down the mortgage. Currently we're buying back my military time and paying into TSP and Roths and a little bit on the mortgage here and there. It definately doesn't have to be all or nothing, though I do tend to want to concentrate all my effort into one thing at a time.

I think you guys are doing awesome. On a side note, we looked into travel baseball, and it was just too cost prohibitive. I just can't see spending that kind of money on it. But I think it's something my Son would enjoy a lot.

[insufFIcientfunds]

Maybe this was covered, maybe it hasn’t, but have you been in the GRB Platform to run an estimate of what your FERS pension would be, to estimate your income would be based on years of service when you separate?

20 years has been mentioned a few times, and unless you are on different retirement schedule (OP doesn’t mention agency or job series), generally civilian retirement is based on minimum retirement age with a minimum years of service (10; hence – MRA Plus 10). If 20 gets you to retirement as a civ, but it’s not the military where you put in 20 and retire.

If you have not heard of GRB or use a different platform for civ benefits, access it and run the estimates. If you are vested and below the min retirement age, it sounds like you’ll likely defer your FERS pension, so making it to 20, or 18, 4, or 25 isn’t relevant entirely because of your age. So if that happens to be the case and your VA benefits cover your living costs, then get to living that badass list sooner than later. GRB estimates will tell you the difference in your FERS pension based on years of service and pay. I bet the difference per month is less than you think.

Good luck.

This. I was about to reply basically the same thing, so I'm glad I scrolled all the way down.

It's usually MinimumRetirementAge+10.  I'm 42 and my CIV MRA is 57. With military time I'm at 15 years Fed service. For me, it works out that I'll hit 30 years a week after I turn 57, so for me, that's my magic number. It's still pretty young. I never wanted to be one of these grey beards that are hanging on. There's a voluntary retirement option, but I believe that has to be offered (like during force reductions), not elected. But please check out GRB (formally eBenefits) you might find some surprising information. You can put in different dates and estimate what your TSP and high-3 will be. There is also a FERS supplement that goes into effect if you retire before age 62 to make up for some SS benefit you wont be eligible for.

Also, on the VA front. Have you checked with your state on what some of their benefits are?  For instanace, Ohio has a War Orphans & Severely Disabled Veteran's Scholarship. It changes a little bit every year, but if you are 60% VA rated, Ohio public institutions will be funded 100% of tuition and general fees. That's an awesome benefit, even though my wife already has her GI Bill signed over to the kids. Every little bit helps.

We're sort of in the same boat as you, though I don't get any VA money. My wife is retired and gets 80%. Those numbers combined are almost the same as my GS-12 pay. The difference is I have to go to work and hate life, and she gets to go volunteer at the kids schools and have lunch dates with her friends! We also struggle with whether we pay down the mortgage. Currently we're buying back my military time and paying into TSP and Roths and a little bit on the mortgage here and there. It definately doesn't have to be all or nothing, though I do tend to want to concentrate all my effort into one thing at a time.

I think you guys are doing awesome. On a side note, we looked into travel baseball, and it was just too cost prohibitive. I just can't see spending that kind of money on it. But I think it's something my Son would enjoy a lot.

Good insight. 57 is my number too. Separating before your MRA at least allows a deferred retirement for OP, as it sounds like he is vested. There is also the ability stockpile some annual leave and sell it back when he separates and get a nice cash bump immediately that could help pay down some bills or pay for a long distance move.

[FIRE for Effect]

Thank you for all the wonderful replies. The Missus and I have done some work in recent days and are excited to share our thinking and planning, which we're almost prepared to share.

Couple things before I get to the below. Yes, I've (we've) been out of the military for a long time. Yes, I've already bought back my military time. Yes, I'm already invested on the civilian side. 11 years is my right now total including military and civilian. No, I don't need to get to 20, and no, I'm not looking at MRA. I'll hit 20 years federal service at 47.5, which is nine years from now. I'd hit MRA with 30 years at 57.5. But I don't care about that. I need the mountains, and I want to be young enough to still get there. Yes, my high-3, if I collected at 60 and based on my current high-3 + another nine years, would be about $2,100 per month when I turn 60.

For the others, let's just say that my current employer, which I don't want to say, is comprised of two letters, one from the beginning of the alphabet and one from near the end. Also, that I'm near an expert in that field. On all of the things it offers.

Re: travel baseball:

I am the co-founder and field manager and lead instructor for my travel team. My son has aged out of the team I manage; my son now plays travel on an older team whose co-founder and CEO has a son on my current travel team. It's a nice, no-cost swap arrangement.

That said, the travel industry is stupid. Don't bother. Just put your kid in Little League and seek out the passionate, talented manager who cares about development. My travel team isn't really travel; we're a development team that puts its emphasis into skills development and who also happens to play a few games on the side. Oh, and we do it for the cost of uniforms and the cost of tournaments/number of players. All of our kids play at least four innings per game, never sit more than one inning at a time, and play multiple positions, including pitcher. Why do we do this? Because we're training players for Little League all stars, not "travel." In 2018, my 12u all stars finished 4th in Maryland. In 2019, my 11u team won Maryland and finished tied for 4th-6th in the Eastern Regional.

Anyway, more soon on the financial stuff.  :)

On a side note, we looked into travel baseball, and it was just too cost prohibitive. I just can't see spending that kind of money on it. But I think it's something my Son would enjoy a lot.

[DoNorth]

I was in a virtually identical situation when I was your age.  About $5000 in retirement/VA disability comp, GS14 in DC, same mortgage, no prop taxes etc./had just found MMM/Nords and the others.

You say you need the mountains?  Are you looking at a move?  I imagine the DC prop. market is good.  Have you considered listing your house?  When we came to the realization we wanted to make a change, listing our house was one of the first things we did.  My neighbor bought it a week later for $50K more than I had paid 2 years prior.  That was the impetus to put everything else in motion to begin a new chapter of life.  Quiting federal employment, moving to a LCOL area near family, finding PT enjoyable work, building a new house ourselves.  In the end, I might've jumped the gun a little early, but I wouldn't change the experience for anything.  Even though I left permanent federal employment, I decided 3 years later to took a term job overseas a year and a half ago.  The deferred retirement isn't all that great when you account for the increased contribution rate (depending on when you began) so I take my FERS contributions back and invest them in my IRA.

[insufFIcientfunds]

I was in a virtually identical situation when I was your age.  About $5000 in retirement/VA disability comp, GS14 in DC, same mortgage, no prop taxes etc./had just found MMM/Nords and the others.

You say you need the mountains?  Are you looking at a move?  I imagine the DC prop. market is good.  Have you considered listing your house?  When we came to the realization we wanted to make a change, listing our house was one of the first things we did.  My neighbor bought it a week later for $50K more than I had paid 2 years prior.  That was the impetus to put everything else in motion to begin a new chapter of life.  Quiting federal employment, moving to a LCOL area near family, finding PT enjoyable work, building a new house ourselves.  In the end, I might've jumped the gun a little early, but I wouldn't change the experience for anything.  Even though I left permanent federal employment, I decided 3 years later to took a term job overseas a year and a half ago.  The deferred retirement isn't all that great when you account for the increased contribution rate (depending on when you began) so I take my FERS contributions back and invest them in my IRA.

If/when OP retires, deferment or cash out will most definitely be a consideration. I myself have considered separation and what to do with the FERS pension. I am 10 years in as of this year, and if I were to go to private industry, I’m not sure how I would handle that.
For sake of OP (and me), how did you do the calculation to determine whether to cash out or not? I doubt my agency would assist me with this if I chose that route, so how did you get that ball rolling?

[DoNorth]

Your age plays a big factor.

For example, if you are in your 20s and work for 10 years and wait for the deferred pension, it makes almost no sense to wait until your 60 to collect because the pension isn't subject to COLA increases until you're collecting it.  There are almost 30 years of inflation eroding the value of the pension as opposed to collecting your contributions + the interest the government owes you for holding on to them (at about 2-3%) and depositing them into your IRA where they hopefully outpace inflation for that same period of time.

If you've been working for a long time and are leaving in say your early 50's, then yes, you should keep the pension and hold out especially because there are other benefits like healthcare which are impacted by collecting an annuity or not.  Another factor to consider is whether or not the OP is under FERS or FERS-RAE, the latter of which requires a 4.1% contribution which makes the pension that much worse of deal for those hired after 2013 I think.

To create the comparison, I would do the high 3 x 1% x years of service calculation; let's say a GS 13, step 5 ($112,393) x 1% x 20 years = $22,478/year beginning at age 60.  Over the 13 years of waiting, this static amount becomes worth considerably less in future dollars.

If the OP is going to work until 47,  and is under FERS .9% contribution and willing to wait 13 years, this might be compelling enough to wait for the deferred pension especially if he is risk averse.  If under FERS-RAE at 4.1%, I would probably take the contributions and reinvest them in an IRA for two reasons:  1.  the money goes to work immediately and continues to work during what would have otherwise been the deferment period and 2. you have flexibility to invest that money how you see fit so if you're an early retiree, that money can be moved from the treasury to tIRA then from tIRA to Roth IRA using a conversion ladder which gives both flexibility and the opportunity to create a tax free income stream by leveraging low/no income earning years.

[FIRE for Effect]

Since my initial post above, and in a span of just one week, my spouse lost a close family member and I lost my grandmother. A number of comments above posed the question of having some kind of savings, something on hand, to be able to account for the what-if scenarios that life often throws at us.

Now being CC debt-free, we weren't concerned about having to charge a plane ticket to the other coast to be there with family--it just means that we'll have less cash later this month to go toward those things we spelled out. It also underscores the fact that we don't yet have a pile built up for such situations.

Last week, in between the phone calls, the spouse and I read your comments and then planned out a rough draft road map for the next two years. We can't thank you enough for raising questions and ideas that aren't natural to us and which we're too FI green to have yet discovered on our own. While there are more direct questions and ideas in the comments above that I won't specifically address right here, they have informed our thinking in creating the below.

1. The Outback financing is 0%, and we can afford the monthly $600 payment. This was the thinking that ultimately led us into this purchase in the first place, but we now see how we'd rather free up that monthly payment and direct it toward pushing us forward in other ways. Initially, we hd planned to speed up payments and have it paid off in a few months.

Now, we're going to make those interest-free minimum payments through March. This reduces the principal another $3000, to about $20,000. The dealership trade-in for our model and mileage is about $24,000, with private sale in the $27-28,000 range. We're going to save $4,000 cash per month from January to March; I'm also going to list my 1992 Honda for sale, and it's worth $3,500 - 6,500.

In April, with cash, trade in, and selling the Honda, we're going to buy a used eGolf in the $11-14,000 range. This also reduces the gasoline budget by $120 per month, and should reduce our insurance, too. That's a savings of maybe $750/month.

2. With the home refi complete, we received a $1200 escrow refund; there is also an extra paycheck on December 27th (26th of the year). This $3,200 will establish a Roth IRA; these contributions will be 2019, and we've decided not to max out the 2019 contributions through April 15. In January, we'll spread out 12 months of contributions to max out for 2020, and continue doing so until whenever I do decide to stop working. I like the idea of opening this in Vanguard with the non-admiral VTSAX to get started.

3. We've already replaced the water heater, the A/C and furnace, a new roof, new gutters and soffets, new shed, new privacy fence, a master suite and bathroom, and a new kitchen. While we do still have one more bathroom to remodel (we've already bought the sink and faucet and storage), and a laundry room to remodel, there really aren't any other housing expenses to account for after the windows. Yes, they're 0% financed, but we can't take them back or trade them in like we can the Outback, and we want that monthly amount for other things. So, we can pay the minimum from January to April ($625/mo); from May to September, we're going to throw $4,000/mo x4.5 months to pay them off. That's $1,375/mo extra in October 2020 going to investments that we don't have right now (Outback, gas, insurance, windows).

4. We dropped my TSP to the minimum 5% that also guarantees a maximum employer match. In September, I'll raise it to 17% and leave it there. I can handle a few months of small contributions to wipe out monthly debt (even 0% financed debt) that frees up a huge monthly amount of money for...

5. Above, I discussed two recent family passings, acknowledging the comments suggesting a need for something on the side to account for life's unexpected curveballs. We're going to continue living without a cushion until September 2020. From October to December, we're going to pad a cushion of $10-12,000 cash, leave it in savings or a money market or...? Should something happen before then, we'll still have zero CC debt and further wiggle room.

6. Toying with the idea of using all of 2021 to scrape as much as we can into a non-TSP, non-IRA investment account. Should be able to do no less than $4,000/mo, and some months more than $5,000. This is in addition to maxing TSP and the Roth IRA. We are comfortable with 80-90% stocks in VTSAX.

7. In 2022, we begin an accelerated mortgage payoff. No change to TSP or Roth IRA. If market tanks, we remain flexible and divert to buying more stock. The idea is to pay down as much mortgage as possible before child #2 graduates high school in 2028.

---

- Yes, my MRA is 57. If I wanted to, I could work to MRA and have exactly 30 years service. That sounds dreadful, and is the reason why I found MMM/FIRE/ERE in the first place.
 
- All this deferred pension business is Latin to me. I hired on in summer 2013. I think that makes me FERS-RAE? Right now, I have 11 years of service. In nine more years, I will have 20 total, and be 47 years old. With 20 years of service, I think this means I can collect FERS at 60 instead of 62. This entire post is essentially me asking if I can get by on compensation alone from 47-60 if I retired at 47? With a mortgage, cutting it close; with no mortgage, the numbers looks GREAT. Right?

- I'm not currently considering leaving the DC area, or my job. I am committed to my local Little League for at least two more spring/summer seasons. At that point, child #1 will be finishing freshman year of high school. Kids do it all the time, but we'd prefer to not move during high school. So, if we wait three more years after that (five years from now) so #1 can graduate, then #2 will be graduating 8th grade. Okay, so then four more years after that? Nine years from now. I get my 20, I'm 47, both kids graduated, huge equity in house, maybe paid off.

- My TSP hit $100,000 on Friday. My goal was six figures before the end of the calendar year. I know it'll fluctuate, but psychologically, that's kinda cool.

- Yes, we already have an NPS lifetime pass.  :)

- Spouse is not eligible for SSDI.

- Talked to my RVSR buddy. Confident that our comp won't drop. No scheduled RFEs. Spouse is P&T.

[Cassie]

The disabled veterans I know have been to hell and back and deserve every penny they get.  Congrats on getting your financial life in order.

[Huskerfan]

Just wanted to reply:
If a vet wants to punch themselves in the throat; go right at it.  For others that are doing the throat punching, I think you should back the heck off


Like the poster above me said: each have earned their Disability in their own way.  Each are fighting their own fights.  Don’t add to their battle by tossing little pot shots into their kidneys. 

To OP:
I think you have a really good grasp on things.  Going through my own case study and chatting with Nords, I learned a lot of things and value his opinions/advice.  Frankly: he knows his shit. Having a pension/VA Disability really lowers the nest egg you may think you need to survive.  I learned all of that after I had ran all of my numbers, and kept reading those wonderful articles of “you need 2 million in savings” or whatever. I learned I don’t need that, nor do I need even 1mil. The numbers worked out very well with pension, and a likely 50% disability payout. To be honest; without the Disability it was possible.  That’s without factoring things like Social Security benefits as well.

When you are talking roughly $5k a monthly in tax free disability and not paying any property taxes... that goes a long way.  PERSONALLY: I’d feel better about it by paying off that mortgage.  That’s a very personal choice though. 

:)
 

[Cassie]

Luckily we have 2 small pensions and SS so only need a small savings. Sounds like you guys will be fine too.