Will have pension, how much to save for retirement?

[theglobetrotter]

My husband is active duty and eligible to retire in 2018 (he'll be 40yrs old). We're 99% sure we're going to keep going until 2028 (E9 with 30 yrs in) BUT we'll go with the worse case scenario of retiring in 4 years time...

So, assuming he retires in 2018, with 20yrs in and an E-8, using this calculator (highest 3): http://militarypay.defense.gov/mpcalcs/Calculators/FinalPayHigh3.aspx he'll start receiving around $2400/mo the first year and then it'll go up with inflation. Here's a summary pasted from the website:

Summary Results Table

The following table displays: 1) the before-tax monthly, annual, and cumulative retired pay and 2) the after-tax annual and cumulative retired pay for selected milestones in your retired career.

Before Taxes                                                                          After Taxes

Years Out   Year   Monthly Pay   Annual Pay   Cumulative   Annual Pay   Cumulative
1   2018   $2,478          $29,741            $29,741           $21,414   $21,414
10   2027   $3,378          $40,534            $348,904   $29,184   $251,211
20   2037   $4,765          $57,177            $841,067   $41,168   $605,568
30   2047   $6,721          $80,654            $1,535,312   $58,071   $1,105,425
40   2057   $9,481          $113,771            $2,514,613   $81,915   $1,810,522

These results were based on your choices and assumptions. The future will differ from these assumptions and actual results will differ correspondingly. Remember these comparisons are not guaranteed; they are merely estimates.

I used to work for the State of Missouri and was 5-6 years vested. I'm not sure how much I'll get but I'll get a little something HR said. I am not working now because we're overseas but in 2018 when we return, I plan on working again. IF my husband decides to quit the military it's only because there's a really good offer. So either way, he'll be working still after 2018.

Hubby only gets taxed and claim social security on a bit over half his income since we don't get taxed on housing, utilities, COLA etc. I think last tax he was taxed on around $45k and before we left the US, I was taxed at around that rate also. I looked up the social security site and I think we'll get around $1700/ea? Our financial advisor, who we just split up from, believes that we'll still be getting SS. But who knows...

So, based on the numbers above, how much do we need to put into our investments? We have around $100-110k in investments and $30-40k in cash. I was messing with Fidelity's retirement tool (retiring at 55yrs of age -- although I'll probably work until I die, I LOVE having a career) and after putting in around $5000 in monthly spending (this is with a mortgage, insurance etc), and $800/mo of savings, we'll have LOTS of leftovers, in the low millions, 1-2 mil I think. If he does retire from the military in 2028, it'll be in the 5 mil after we die at age 100 (don't want to live that long but I put in  max age :D)

We're frugal and want to be comfy but we're not aiming to die with millions in our account either. Anybody with a pension know the formula for supplementing the pension?

[matchewed]

So you will be planning on retiring with $X of expenses. Your pension will be providing $Y of income. X-Y=Z You need your other investments to provide $Z income at whatever SWR you feel is safe. Generally if you're using 4% as a SWR then you will need 25*$Z in investments. X, Y, and Z are done in annual amounts not monthly for the purpose of this.

This is just a rule of thumb and doesn't take into account your particular risk tolerance or investment style. You will have to come up with an AA and a SWR assumption that you are comfortable with.

[theglobetrotter]

matchewed, thank you!! This is exactly what I need to know!

[matchewed]

You are welcome. If I were in your shoes I'd run my particular scenario through cFIREsim. Play with your assumptions and see what you are comfortable with. Post any questions you might have on using it or what sort of assumptions should be tweaked in order to stretch your scenario.

[Lkxe]

We are in a similar situation. 22 yrs in probably retiring in 2 yrs. In our case, his pension covers our expenses but don't forget to plan for the possible replacement of his pension should something icky happen- or plan on the lower amount with survivor benefits. It doesn't sound like it will be an issue with you working and loving it but stuff happens and plans are good.

[theglobetrotter]

I just noticed that there are more replies! I'll check out that calculator and lkxe, I just found out yesterday about the SBP!! I didn't know that! I'm lucky to have a bit of pension and that I can get more. But I feel bad for spouses who moves so much and no opportunity to have a career/pension of their own. That stinks of like me they didn't know and something horrible happens to their other half. They'd be left with very little after following their spouse around the state or world. Thanks for the little info!

[davisgang90]

Another AD guy here.  Currently at 24 years, planning on 27-28.

This calculator is handy for plugging in pensions, SS etc with your investments.

http://financialmentor.com/calculator/best-retirement-calculator

[sol]

If I'm reading that right and you're saving $800/mo and looking at possible retirement in four years, then your assets+cash in 4 years should be your current ~$140k plus 48*800 is a total of $178k.  If you were to invest all of that in a 60/40 stock bond split and you believe the retirement calculators that think 4% is a safe withdrawal rate, then it would generate and additional $7120/year on top of the anticipated $28,800 in pension for a total of about $36k/year.

If your expenses are $36k/year or less, you're golden.  At one point in that post you mentioned wanting a $5k/month spending level ($60k/year), but to do that you would need to come up with another $24k/year, or the equivalent of another $600k in invested assets.  That was $5k/mo at age 55, though, which is a lot less than $5k/mo now.

[theglobetrotter]

Thanks Davisgang! Will try that calc too!

Sol: Dh is eligible for retirement from the AF in 2018. He thinks, as of today, that he wants to keep going until the end of his enlistment, 2020, and if the military lets him, re-enlist for another 4 or 6 years. He'll be 46/48 yrs old at the end of the 4 or 6 yrs enlistment.

After some discussing with the hubby, I came up with this game plan for FIRE:

At the end of this tour, at 800/mo and 7% interest, we'll have about $180k in our investments. After we go back to the US I will work again. Before we got transferred overseas I made about $54k/yr. In 4yrs time, his base pay will be about $4900/mo + housing. I aim to get a job that pays at least $30k/yr (aiming low since I'd have been 8yrs out of my career field). Depending where I work and position, my job pays around $28k-100k/yr. We'll live on dh's salary and use mine to max out his TSP and our IRA at Fidelity and Vanguard. We're going to do this for 10yrs.

I used that FIRE calc linked above and while it looked dang confusing, even when the market is crap, we should be ok even if we only make it to saving $1mil. More than ok actually. I messed about with the calc and I think we can even retire when we have $800k in our investment.

I realize that his pension will pay our expenses but I need to prepare for when he passes before me since my pension, at this moment is only $487/mo+COLA, from age 65 on.