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Author: JBtheJunkist Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 5069  
Subject: Situation Date: 9/13/2003 12:28 PM
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Wifey and I are planning on retiring by age 55. We are both 36. She is active duty National Guard, E5 with 11 years of active service. I am traditional Guard with 12 years active. I am self employed and we do pretty well.

We are completely out of debt and have a $10K e fund. We are saving for new(er) cars and are beginning to fund our childrens college funds and have begun to fund our retirement to the tune of 20% of our annual incomes.

Situation: We own a piece of commercial property where my business is located. We could sell it and clear over $100K. I could then rent another space (much smaller and much lower overhead), thus returning lower income (but acceptable). I could also go active with the Guard as an E6 and retire in 8 years.

DW and I have put pen to paper and agree that we could put my entire paycheck into our investments and live on her salary, while still funding the college funds. We could suppliment our income with the business income (around $1K per month take home) as well as occasionally holding an auction (as I am a licensed auctioneer).

I think it's a WONDERFUL opportunity but I LOVE what I do, but I can RETIRE in 8 to 10 years, with a very good salary as well as our investments.

Am I missing anything? Thanks in advance!

JB
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Author: NuclearRedneck Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 750 of 5069
Subject: Re: Situation Date: 9/14/2003 12:37 AM
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My wife and I are both active duty Navy (O-3s). Currently we are considering if one or both of us should leave the service. We would be eligible for retirement in 2016 probably as O-5's and we would have a very nice retirement income. The biggest problem for us is the amount of time we spend apart from each other. Out of seven and a half years of service we have been deployed or stationed apart for more than four years.

To me the biggest consideration about having both of you active is the potential for long separations. If you are comfortable with that then go for it.


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Author: TMFDj111 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 751 of 5069
Subject: Re: Situation Date: 9/14/2003 1:20 AM
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I think it's a WONDERFUL opportunity but I LOVE what I do, but I can RETIRE in 8 to 10 years, with a very good salary as well as our investments.

Military retirement is not the lucrative retirement many people imagine. Retirement pay is taxable income. Additionally you must pay for SBP, TriCare for Life, and VGLI from your retirement proceeds. The bottom line is net retirement pay is generally 1/3 to 1/4 net pre-retirement pay. There are excellent non-financial incentives to military careers, but the financial rewards are slim.

The Air Force has an excellent retirement calculator for military members who retire form active duty on their personnel web site, but you must access the web site from a .mil computer. I'm not personally aware of a similar calculator for military members who retire from the Reserves or National Guards, but I would expect there're appropriate calculators on the Reserve and Guard web sites.

- Surf to: http://www.afpc.randolph.af.mil/

- Under the "Officer" or "Enlisted" headings, select "Retirement". The calculator is the same for both corps.

- Look for Retirement Calculator.

- To use the calculator, you'll need to know several dates from your personnel file. Those dates include 1405 Date, Date of Initial Entry into Military Service (DIEMS), pay date, promotion date. The calculator has links to explanations of each of these dates. You should be able to get the dates from your Leave and Earnings Statement. If they're not listed there, then a personnel specialist can help you dig through your records to find them.

(NOTE: The 1405 Date is difficult to find for military members with service in the Reserves and National Guards. It's roughly the date of the last day of the last calendar month before you entered onto active duty, but there are adjustments made to account for Reserve and Guard time.)

Regardless whether you decide to commit yourself to the military or to remain in the commercial world, the key to a timely, secure, comfortable retirement is to save more and spend less. By saving more, you'll have more money to support yourself in retirement. By spending less you'll accustom yourself to a lifestyle you'll be able to support through retirement.

To enjoy a comfortable, timely, secure retirement, most investors must save at least 15% of their gross incomes every year starting in their early 20s. Investors who start late, want to retire early, or want to retire in luxury must save more. If you look through posts on TMF's retirement discussion boards, you'll discover many TMF subscribers claim to save 25% of their annual gross incomes, and a few claim to save over 50% of their annual gross incomes -- in addition to what they save for houses, cars, vacations, and other immediate needs.

I know many people figure they'll save for retirement when they start making serious money or when they get closer to retirement. If you have a financial calculator or a spreadsheet, try this demonstration. First calculate the effect of saving $2,000 per year every year from your 18th birthday for eight years at 8% per year, and then never saving another penny until you're 65, but allowing your savings to compound. Then calculate the effect of saving $2,000 per year starting from your 26th birthday until you're 65, again allowing your savings to compound at 8% per year. Compare the total amount invested ($2,000 per year times eight years vs. $2,000 per year times 39 years) and the final values of the two portfolios at age 65. If this demonstration doesn't convince you to save early and often, I have no idea what will.

Here's a link to an article that contains the results of a similar calculation in a table (click on the link to Rich Man, Poor Man (The Power of Compounding)). The difference between my demonstration and the demonstration in the article is the article uses a 10% annual return (rather than 8%), and the article saves for seven years (rather than eight years).
http://dowtheoryletters.com/dtlol.nsf

Some people argue in retirement your income needs are less than when you're working. You're not saving for retirement anymore. You're not paying Social Security or Medicare taxes. Your children probaby are on their own. Your requirements for a business wardrobe are substantially reduced. You probably can get by with one car, rather than a motor pool.

However, in retirement, your medical expenses almost certainly will be higher. You'll probably want to spoil your children or grandchildren. You'll probably want to enjoy some of the things you denied yourself while you were working (e.g., frequent meals at restaurants and exotic vacations). You may even take up one of those hobbies notorious for consuming money (e.g., chasing a small, white ball across the countryside or trying to outwit an eight pound, 12-inch fish).

Investors can safely withdraw about 4% per year from a well-performing, well-balanced investment portfolio without cannibalizing their principal. They can withdraw a little more in years with good returns, and a little less in years with poor returns. Lower withdrawal rates are better, and much lower withdrawal rates are much better.

Another way to look at that 4% number is you must have 25 times your gross annual income in savings to retire. You can retire with less money, but you'll have to cannibalize your principal, reduce your standard of living, or reduce your expected lifetime to do it.

Retirement income needs and the timing of those needs vary from person to person, but when you do the research and crunch the numbers, you'll probably discover you have to max your 401(k)/403(b), max your IRA (and spousal IRA), and still make additional retirement investments in non-retirement accounts.

David Jacobs
TMFDj111

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Author: mazske Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 752 of 5069
Subject: Re: Situation Date: 9/14/2003 9:13 AM
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My wife and I are both active duty Navy (O-3s). Currently we are considering if one or both of us should leave the service. We would be eligible for retirement in 2016 probably as O-5's and we would have a very nice retirement income. The biggest problem for us is the amount of time we spend apart from each other. Out of seven and a half years of service we have been deployed or stationed apart for more than four years.

There are so many variables in your situation, that only the two of you can make the decision on what you want to do.

However, I would say that one of you should leave active duty service. Which one is a matter of decision. If either of you stay on active duty, who has the higher chance of going to sea? Who has the better odds of making a higher rank? Which one has skills that are more easily transferable to civilian life and getting a job on or close to a military base somewhere in the world? Which one of you is less inclined to have to have a career? That means, if you are a civilian, can you accept doing three years in a "career" type job, and then quitting it so that you can follow your spouse to her 3 year tour of duty in Puerto Rico?

Whoever, if either of you, leaves active duty, I would highly suggest that that person go into the Navy Reserves. The downside to this is that now days it seems Reservists have a stronger chance of getting deployed somewhere.

Good luck in your decision and keep us posted on what happens.


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Author: NuclearRedneck Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 753 of 5069
Subject: Re: Situation Date: 9/14/2003 9:34 AM
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She's Nurse Corps and I am a Surface Warfare Officer. Currently I am eight months into a three year sea tour. She has a better civilian job potential than me. I am committed to serve until May 2006. If I stay in then I will go on to do a two year tour on a CVN (I am a Nuke as well as a SWO). Perhaps our biggest challenge is that while I am on sea duty, we do not spend anymore time apart than we would if she were a civilian. It is the blasted schools that I keep going to that add up to significant time apart. The pipeline for Nuke was a year and for my current job as a department head it was ten months.

There is no immediate choice that has to be made. But I would like to have the decision made before we get to the end of this tour so that we can transition to civilian life.

I will keep you posted.

BTW, TAR is not an option for those of us with the Nuclear glow.


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