The Retiring On A Military Pension series has sparked a lot of questions about whether it’s really possible. Several people asked me to interview people who are already retired. Today, I’m bring you just such an interview. Welcome to the first Military Retiree Interview!
So why am I posting this on a Wednesday if this is a military topic? Because I think the lessons within this story are applicable to a lot of people, not just the military!
Ginzu answered these questions about a month ago, so he is actually fully retired by now. If you have any questions for him about the transition, please ask them in the comments. He’ll keep an eye out and hopefully you can get an answer directly from the source.
1. Welcome to Military Dollar! We first met you on the blog when you commented on my post Is It Possible To Retire On Just A Military Pension. You mentioned that you are in month #2 of your terminal leave. To start off, can you tell us a bit more about your background? Which service, how long were you in, what rank did you retire at, etc?
Mil$, thanks for reaching out and adding in these segments to your blog on FIRE. Case studies usually resonate with some readers – but I caution and frown on comparisons. We’ve been evaluated, racked and stacked our entire military career, leave all that small stuff behind. FIRE, to me, is about finding out what works and learning a lesson from what didn’t.
“Look for the helpers.” – Fred Rogers recounting a phrase from his mother.
Correct, I am one paycheck away from the DFAS-Military over to the DFAS-Retired, hoping my password didn’t change with the pay system cross over. The career summary bullets are: Army LTC, 31 years total, 23 Active Federal Service. Financially, I have maxed out the TSP from the first year it was offered. That dates back to 01 April 1987 with the G-Fund for the young ones out here. Before FIRE was a catchy acronym (some Army CPT missed a promotion opportunity on that one), the advice from Mom in 1986 was to “live off of 50% of your income, invest 25% and have fun with 25%.” After 30+ years, I’ve been fortunate to stay within tolerances of her passed on (FIRE) wisdom.
2. You have a family of four and you are planning to live off the pension plus rental income, correct? Do you have any other sources of income?
The plan is to pursue what to do while having the freedom not to do it. Yes, the pension plus rental income will allow for a comfortable daily living marking time. Employment is always an option – passive income growth opportunities is my pursuit these days. I have a few DRIP (Dividend Reinvestment Plan) from some common stock holdings to add to positive cash flow should I need increased income.
3. I live in the National Capital Region right now, and I’m amazed at the cost of real estate in the area! You have a rental property here. Can you tell us more about it? When you bought it, how much it cost, basic features (size/bedrooms/bathrooms), how much it rents for each month, how much you pay for property management, and your monthly profit?
Yes, I bought a (4 story, three bedroom + loft, one car garage, 2 full + 2 one-half bathrooms, 2100 sq foot) townhouse in the NCR back in 2006 for $480K during my assignment to the Five-sided puzzle palace (The Pentagon). You know, the base that will never hit the BRAC list – a great investment home with a constant flow of people needing to rent.
The rental property is, thus far, a break-even on monthly cash flow. Meaning, the rent I collect is equal to the mortgage payment, taxes and HOA fees to the bank. Last payment on the house will be in October 2017 due to additional payments from any BAH I had left over during multiple PCS moves (Always live below the BAH allotment!).
I’ve sought only the equity growth in the home. FIRE professionals revolt here, but I rent to Service Members, below their BAH on purpose. The trade off, great people that take care of the property while I PCS all over the world. Selling the rental property next year will pay for 141% of my current home. Greed and Fear, the two big emotions behind most money have been defeated, no greed and no fear.
4. You also have a house in another state. Is this your “forever home?” Do you intend to buy any more investment real estate?
After seven PCS moves, I do not want a “forever home”, no adventure in that. But, we will slow the pace down a bit as my school aged children find comfort in a reduced pace of moving. We chose proximity to parents and in-laws and a good school system. Turns out the median income of “this-town” America, allows me to be the stealthy millionaire next door. As a side note, when the new neighbors stop by for an initial introduction and ask what you do, have an answer other than FI and RE ready that doesn’t make them uncomfortable. Note to self #2, have the AR-15 locked away in the safe at the time as well.
5. Which retiree benefit do you think is the best/most valuable? The worst/least valuable?
To me, the best benefit has been the experiences and lessons from all the people I had the chance to work for, work with and have work for me. It may sound cheesy, but where else are your peers going to have laughed and joked, cried and bled (and countless other experiences) right with you.
But, put those “feels” aside – the most valuable, the pension, plain and simple. Utilize the DOD Military Compensation calculator and peruse the 20 year cumulative number:
*Apologies in advance if there is an appearance of hubris, I do not intend in any form.
Stating a fact, to which an opinion does not matter.
The security of having food, water and shelter for the rest of your life…nothing compares. It shouldn’t, if you read and believed in my first paragraph, second sentence, of this short paper.
Which brings me to another tool brought to you by the Social Security Administration – it is an eye opener. Log in after creating an account and tally up the entirety of your working life in the wages captured by the SSA. Now, what is your current net worth compared to those lifetime wages?
(Mil$, you have another topic to write if it is not already on your extensive list).
The worst or least valuable is a harder question for me to put a label on. After all, even the idiotic widget had a purpose at one point – even if it was to just waste oxygen or time. Veterans and Service Member benefits were hard fought for, modified and kept. I cannot judge any unworthy.
6. How was the transition process? Do you think the transition process for retirees is adequate? If not, what would you change?
The transition process is as good as your efforts into it. Besides that it is mandatory at least once, go twice! Seek an additional class with a different instructor, you can start up to two years from your planned retirement. I would change the requirement to apply for two jobs. Often, SFL-TAP participants were too far away from an availability date for the civilian employer to offer a position, leading to a rejection.
7. You mentioned that you are working on gathering data for your budget to make sure it’s good for your new location. Can you share your current budget and any surprises you’ve come across so far?
During SFL-TAP, completing a budget is mandatory. A bit basic, yet invaluable if you’ve never done an honest assessment. I’ve modified the spreadsheet the military had us use and made it my own for this transition period. Make note of how “Savings” is considered an expense, yes – a mandatory expense.
Yes, there all holes and shortfalls all over the one scenario. What you do not see is the other four budget scenarios and all the FIRE spreadsheets on the excel workbook.
It appears the projected annual expense will be slightly below the military pension.
But:
“Everybody has a plan until they get punched in the mouth.” – Mike Tyson
8. Did you always plan to retire on the military pension, or did you discover it was sufficient later in your career?
When I first joined in 1986, I was not intending or planning to be a “lifer” (Who remembers that slang from the ranks?). The woken moment for me was seeing an aircraft I’d flown sitting atop a pole in front of a VFW Post. WTF? Hello! Where will the next years take me? It was then I seriously laid out a projection of being free from financial strife by serving as long as I am able on my terms. Or simply, eat when I am hungry and sleep when I am tired – my simplified definition of freedom, the ability and capability to say No.
9. What do you plan to do in retirement?
The crux of the transition period, identifying what is next. Short answer, I do not know. I’d like to go back to teaching the martial arts, a small school of practitioners to work out what works in the martial ways and train accordingly, no matter what the art is labeled. I love what Mr. Money Mustache has done by opening up a place where like-minded FIRE enthusiasts get together for conversation and quality brew. My third idea is to become active with Team Rubicon, an NGO full of Vets that deploy to disaster areas to lend assistance.
10. The question I ask everybody: What advice would you give to other military members hoping to retire early?
It isn’t hope, it is a very detailed process and plan for you, by you and with you involved every step of the way. The FIRE rubric that states the best time to start was yesterday, only to be seconded by starting today. Learn the miracle of compounding interest and delayed gratification; seek and take pleasure in simple and inexpensive experiences; and surround yourself by “the helpers.”
11. Finally: What question am I not asking, where you think the answer would help military members achieve their financial independence goals?
What do your FIRE numbers tell you?
- What is your ratio of lifetime earnings to current net worth?
- What is your survival number? (Liquid net worth divided by expenses per day)
- What is your FU number? (Mil$ Note: if you don’t know what “FU number” is, spell out “FU”)
- What will the “4% rule“ provide for you during your drawdown period?
- What is your savings rate?
- What is your time until FI? Does it match with your RE date? Reverse it as well…what RE date matches to FI?
- What passive income do you have now? What passive income will you have in the future?
- What is your FI Score? (Retirement Income / Total spending needs) Hint – Must be over 100% to be FI.
- Do you track your Net worth? Income, expense, and the spare change you find in the couch?
- Can you teach FI to your children? Your best friend? To a military buddy needing a hand?
Back to Mil$…
Wow, thanks Ginzu!
I tried to stay out of the interview so you guys could read his words without my thoughts, but now I’d like to summarize some of my own lessons from his answers.
- Ginzu’s mom is awesome and taught him well
- I agree with Ginzu’s assessment of always living below your BAH allotment. This is the first assignment where I didn’t do that, and I regret it and am making changes. Even if you aren’t in the military, this is a good idea. You don’t have to follow the conventional “wisdom” of spending 30-40% of your income on housing. Finding a good-enough place to live can often be done for less. Unless housing is your #1 priority for your money, consider making some compromises – you’ll save a lot!
- Not a lesson, but a note – I also prefer to rent to military members and try to keep the cost under BAH. I get responsible tenants who have guaranteed income specifically for their housing. I also get people who are used to taking care of problems and asking questions later. They get a deal and I get good tenants. It’s a win-win, in my book.
- Ginzu has “retire to something, not from something” in mind. Martial arts, co-spaces, Team Rubicon – these are all great ideas to keep busy, sharp, and productive. Who says retirement has to mean wasting away? Not I!
Either great questions or bad answers to Mil$ interview.
FIRE blogging will not be my next career – chuckle. I gained good insight from writing this post, thanks to Mil$ for the opportunity to put some words out there.
Thank you, Ginzu! This post was very popular – you did a great job! Good luck!
It has been just over one year since the uniforms came off to be hung in the attic. Only for my accountability, and any curiosity of the Mil$ readers, I will post this summary:
1. Spending is about 25% higher that the planning budget completed during the mandatory transition classes from the service. Yes, a few one time costs for moving, travel and clothing.
2. Sold the rental property in VA. A gain of 5.2% after fees, taxes and maintenance items that accumulated over the years I was an absentee landlord. I used the capital to pay off my current home so as to be debt free. It came down to a cash flow problem (math). If the rental ever went a few months with no paying occupants, I’d have to sell assets to cover the current mortgage.
3. Passive income is higher than expenses, but not by much. No mortgage really helps in this area. True to form, we definitely miss the exchange, commissary and MWR activities active duty afforded. The math shows me it is about 30-35% higher costs out in the civilian arena.
4. VA Healthcare has been very good. Yes, some longer wait times, but nothing that cannot be coordinated easily with the clinic and specialty clinics. I worked pretty hard when setting up the initial appointments to communicate my plan for health care. No, not telling the medical staff their jobs, but informing them of my health issues and firmly requesting an aggressive plan.
5. WI GI Bill: Some pretty sweat benefits to my kids under this program. So much so, that I will cease my contributions to their 529plans when they reach 10 years of age. At birth, I stated placing one days pay per month to their education funds. It will not cover all the tuition, but adding in the WI GI Bill, they are over funded for undergraduate schooling.
Notes:
1. I do not envy the decisions SM are now facing with BRS. The help is out there, but I fear any first line leaders are unprepared to dole advice.
2. The FIRE community is great to learn from and contribute to. Keep involved, one foot in front of the other with only a few distractions will be very rewarding in just a few years.
As always, comment and question.
– Steve
Thanks for the update, Steve!!
And wow, good to know about the higher costs in the civilian world. I knew it would be higher, but I wasn’t expecting it to be that much higher.
MIl$. Upwards and on-wards…or some other like USAF phrase I picked up. I just didn’t think it would apply to budget and the expense column so much. Granted, recreation is now a large portion of the expenditures as the kids like their martial arts, girl scouts, swimming and horseback riding etc…
Steve, enjoyed your original post and update. Thank you!
I need correct a statement:
“Financially, I have maxed out the TSP from the first year it was offered. That dates back to 01 April 1987 with the G-Fund for the young ones out here.”
TSP became available to military members in the 2001 NDAA, so I could not have started the G-Fund investing back then. Even my best efforts have not replicated financial records prior to 2006 in Quicken. The SocSecAdmin has income from 1984 and forward. Moot point, just needed to hold accountable my statement.
The TSP is the 3rd bucket, available when I hit 59.5 years of age. The advice rings true, max it out to the best of your ability.
Thank you Josh, the post allowed me a method to account for my transition and publicly document some thoughts – a bonus if it resonated with Service Members!
Retiring O-6 with 30 in 5 months so this has been a nice confirmation of the path I took considering my age. I did the math years ago regarding a transition to CS and determined that retirement as much as 7 years early while pulling a CS salary and waiting for that check to come in was a wash. I figured a similar path, using the same spreadsheet, as a civilian would not pay off enough to pursue, given the tax advantages and the sum that would have to be invested to get the return to best the military retirement pay. Just not worthwhile. Would like to see an analysis/discussion along those lines. And yes, I knew I would get to 30.
You can’t actually know at the beginning of a military career, or even half way through, that you will make it to 30 years. But congrats on the rest!