Welcome to the Bogleheads Chapter Series. This episode was hosted by the Pre and Early Retirement Life Stage Chapter and recorded April 17th, 2024. It features retired military officer and longtime Boglehead, Doug Nordman aka Nords, answering questions on financial and life lessons learned as an early retiree from the military.

Bogleheads are investors who follow John Bogle's philosophy for attaining financial independence. This recording is for informational purposes only and should not be construed as personalized investment advice. Hello to everyone, Bogleheads, and our special guest, Doug Nordman. First, Doug, thank you for your service and thank you for sharing your time and insights tonight.

For the larger audience, we're fortunate to have with us tonight Doug Nordman, who retired from the U.S. Navy at age 41 after 20 years of service. Tonight, he's going to talk about his time in the military and especially as it relates to financial independence, as well as financial independence in general, and he's co-authored a book with his daughter, so raising a financially savvy kid is also in the mix.

Some quick housekeeping rules before we start. That is that Bogleheads often follow the investment guidance of Jack Bogle, the founder of Vanguard. This session is not intended to be investment advice. If you're not speaking tonight, please mute yourself, but we want for this session to be as interactive as possible.

We're going to jump right into an intro by Doug and then Q&A. So feel free to submit questions via the chat or raise your hand via the Zoom function. This session is being recorded, so feel free to change your name on screen if you'd like, and also turn on or off your camera as you like.

Miriam, Alan, or Lady Geek, did I leave anything out? Okay, I got a thumbs up from Alan, and then I'll also say thank you to the many folks that make this possible. So Lady Geek, Alan, Jim, Miriam, and many others. So with that, let's turn it over to Doug.

So a lot of folks are familiar with Doug has blogged prolifically, has posted to the Bogleheads site prolifically, and he's been a guest on podcasts, including Paula Pant's "Afford Anything" and others, Rob Berger. So our intent here is to expand on what Doug has shared and hasn't shared, you know, whatever's on your mind.

We'll take questions from the audience. But, Doug, why don't you fill in some of your background for folks who aren't yet familiar with you? Let me start that when I got Corey's invitation to show up tonight, that I wanted to not do a presentation. There's not going to be screen shares.

There's not going to be PowerPoint. Instead, we're just going to talk and go back and forth and answer questions. And I'd like to give as much time as we can for that. Hypothetically, most of you have something else you'd rather do after an hour. Please feel free to let yourselves out whenever you're done.

But I will try to stay here as long as I can to answer questions. I've got a little over two hours blocked out here, and we can go longer if we want to. I talk about my financial independence in terms of 22 years of retirement, retirement from age 41.

I'm 63 years old now. Let me reframe this starting back with my career, and I'll keep it short. When I started my career, we were perpetually saving, my spouse and I both, for a transition fund to get out of the Navy. You would do your initial service obligation. For me, it was five years.

And as you were approaching the end of that, you started to consider leaving active duty and having enough money to leave the Navy and go find a job in a civilian world. As we did that, we would get to that transition point, and we'd decide, "Oh, one more tour." I will tell people that I think the military can be a very good career field, especially if you take it one obligation at a time.

Don't enter the military with the idea that you're going to stay for 20 years and retire with a pension and cheap health care for the rest of your life. But instead, take a challenging and fulfilling avocation. Do it for as long as you feel that way, and then leave active duty for the Reserves or the National Guard, or even just cold turkey, full civilian life.

And we kept on going until we got about the 10-year point. And the 10-year point for most service members is a big decision because you're in your late 20s or early 30s. It's a great time to make a transition to the civilian world, but you're halfway toward that pension and everybody agonizes over the decision.

To make it even more interesting, my spouse and I had started our family in 1992. I joke about reaching financial independence in the days of clay tablets and wooden styluses and an abacus to keep track of the 4% safe withdrawal rate. But the truth is that there were very few tools back in the '80s and '90s to help you reach financial independence.

And most of those tools were in magazines or at the library. When we started our family in 1992, around 1993, the classic book, Your Money or Your Life, started showing up in libraries all over America. At that point, I was already beginning to feel like I wanted to spend less time in a basement with no windows, in the submarine force on shore duty, and more time with my baby daughter watching her grow up.

That success is evident by her reaching her 30s and her own financial independence today. But back then, I was chronically fatigued from submarine duty and from parenting, and I really wasn't very well informed on my options. I really didn't understand what I could do outside of active duty. I really didn't know much about making the transition to the reserves, and I chose that default of what I now call gutting it out to 20.

It worked. I got to 20 years of active duty. We got a pension. It all came out okay. My spouse also stayed on active duty for as long as she could until she got the unrefusable offer from the Navy. And then she moved into the reserves based on what we had learned over the years.

That's worked with her as well. She and I are both in our 60s now. Both of us are getting our pensions. She's getting her reserve pension. I'm getting my active duty pension. When you look at the end of this movie, it looks pretty good. But when you come in at 2002, when I was retiring and we were halfway through the second reel of the movie, the ending was nowhere near as clear.

So today, I'm paying it forward. I've been talking now for over 20 years and writing blog posts and books, and I'm going to probably keep doing that. Some of you have seen Paul Merriman publish a book at age 77, so now I have a new life goal. But the other aspect of reaching financial independence in your early 40s is being responsible for your own entertainment.

If you're going to stop working for a challenging and fulfilling career, whenever you decide to stop working, you have to figure out what you're retiring to, not just running away from a job you don't like or from a situation that's a problem. You would prefer to be in charge of your own retirement and your timing and the glide slope by which you get there instead of having life events forced on you, whether you have a health crisis or someone else in your family has a problem or whether you get laid off.

I get those questions many times from military families and now from people who never were in the military. Another side issue that's come up over the last 10, 15 years is spending time with my daughter as a young adult and realizing that we probably raised her a little differently than most kids, and we ended up writing a book about raising your money savvy family for next generation financial independence.

And that's based on the remembrances of Carol. Her memories when she was a kid and we tried these experiments on her with financial incentives versus the way she feels about it now as an adult, raising her own very challenging daughter and how those two experiences worked out in her mind and what she would use going forward.

And so now we're experimenting with a third generation of financial independence. She's only four years old, she hasn't even started kindergarten yet, but if she keeps going with the money that she's got invested in her 529, she might be able to declare her financial independence at high school graduation.

So we'll just see how this experiment works out. For the last 22 years, I've spent my time writing, talking, and blogging, and I've spent my time answering a lot of questions. As I've gotten older, I've gotten better at answering the questions and I hope we see that this evening.

I've also gotten less of a filter. I'm happy to talk about just about any issues that have to do with financial independence, with lifestyle, with all the glamorous aspects of aging into your 60s and what I see for my future. And also what financially will come as we continue to age into our 70s, 80s, perhaps even 90s.

With that, let's answer some questions. Fantastic. That was great, Doug. Thank you. So why don't we take a step back for a minute. I think the audience on this zoom call is probably wide ranging I don't know how many military, but certainly on YouTube will get the spectrum between early military mid, mid late retired military, as well as plenty of non military.

Why don't we say fast forward to your early in your military career, what turned on the financial independence light bulb for you, and what were the resources that you found that empowered you to effectively pursue it. The big changes for me were wanting to spend more time with my baby daughter in 1992 1993 and onward.

In 1993 the big influence was your money or your life. And in 1996 I'm pretty sure all of us have at least heard of the millionaire next door. These were on the library shelf as a hot pick. These were brand new books, and they had no credibility. As far as we knew they were just wild eyed hippies trying to come up with some other idea instead of being able to survive in a real career and earn traditional corporate money and climb the ladder in corporate America.

And this was completely different than anything I'd ever read about. So as I kept reading and learning I became more and more informed about being able to have enough money to stop working in my 40s or 50s instead of the traditional age of 65. I'll also point out that Bill Bengen's article about SafeMax wasn't published until 1994.

I didn't even know about SafeMax until the late 1990s. And frankly, we've spent the last 30 years debating it and still haven't really concluded whether or not it works as well as it should. My mind is made up on that debate, but it's going to be a perpetual internet debate for at least the next 30 years, I think.

So those were the three early influences on my decision to pursue financial independence. As far as the actual mechanics go, my spouse and I had both been saving up for that transition fund. And it was easier to do that when you're always on sea duty or shore duty, you're working hard in the Navy, but also we were naturally frugal.

We were saving 40, sometimes 50% of our income, the two of us, for most of 17 years. And when you do the math for an aggressive equity asset allocation, saving about 40% of your money for about 16 to 18 years, you'll reach financial independence right around the end of that time.

- Okay, great to hear. So let's explore further two specific things you mentioned. One is you digested the info. It sounds like it resonated with you. It came to you naturally. I mean, the understanding of personal finance and pursuing financial independence. And then also the lifestyle of frugality. It sounds like those weren't particularly challenging for you.

I'm making assumptions, but let's say in the broad range of folks in the military, as well as life in general, understanding personal finance doesn't come as easily to some folks. They say, "I'm great at other things. I understand plenty of complex things, but I don't get personal finance." And then folks who either get it or don't, but frugality doesn't come naturally, or they're just naturally extreme spenders and the opposite of savers and investors.

So what do you say to those folks who say, "I can't ever learn this personal finance stuff." And then what do you say to the folks who say, "Yeah, I just can't do the frugal thing." I've broken this down into three steps. And the first step, and it's aimed square at the demographic eyeballs of that new person who just joined the military, track your spending.

And I don't care how you track your spending, but you're going to track it for a few months, whether it's on a piece of paper or software like Quicken or personal capital or some other app on your phone, track it in a way that works for you, that you can do the data entry and keep an eye on where you're spending.

And you're not going to make a new year's resolution out of this. You're not going to go to the gym and work out three hours a day for two weeks in January. You're going to track your spending for a couple of months and try to incorporate this as a routine in your lifestyle.

And then at the end of the couple of months, you'll go back through your spending. And this is the part that people are a little concerned about. All you need to do is to cut out the things that you think are wasted spending. And that's what concerns them is, how will I know that I'm wasting my time spending this money?

And the answer is that if you don't feel like you're getting value out of whatever it is you're spending your money on, and frankly, when you're in your twenties, that's usually fairly easy to identify that you might be spending too much time on liquor, or you might be spending too much time eating out, or you've bought way too much expensive transportation.

Once you figure out what that waste is, then focus on just cutting out the waste. You're not going to come up with the world's best asset allocation right now. Instead, you're going to focus on knowing where the money goes, cutting out the waste, paying off your debt, and starting down that path to financial independence.

And from there, it's just an iterative process. And frankly, some people, after they've paid off their debt and started building their wealth, they get a little bored and they get a little restless because it doesn't really seem to be producing results. And that means it's working, right? You're on the path of financial independence.

You're starting to save the investments that are going to compound exponentially for the rest of your life. And initially, it's hard to see that progress. When it comes to frugality, the secret about the military is that military families are keenly aware of the dividing line between frugality and deprivation.

And frankly, we spend probably too much time on the wrong side of that line in deprivation. So I try to tell people right up front, frugality feels like you're challenged, you're fulfilled. It feels like winning. You're optimizing your resources, you've cut out the waste, you're reusing, reducing, recycling, whatever the R's are that you enjoy about being frugal, but you can do it at a sustainable pace.

Deprivation has its use. You're going to experience some deprivation if you're trying to buy out of consumer debt, you're trying to grow your net worth for a short period of time. Maybe you've got a crisis that you need to earn your way through to get through that. But we all know deprivation is not sustainable and it doesn't feel like fun.

It doesn't feel challenging and fulfilling. And you certainly do not feel like you're winning until you get back to being frugal. Or for military families until the deployment ends and you're back together again, or until somebody gets promoted and you have more of a paycheck or until you finally get all the spending sorted out and know where your path lies ahead of you.

So those are the answers for those who are 18, 20, 22 years old. And frankly, they're not all ready to listen. That's the answers. But if they aren't ready to ask the questions, if they aren't really interested in pursuing financial independence yet, then I'm really just planting a seed.

And when I say I plant a seed, if I give a seminar in person, I'll hand out literally pieces of paper that they can hang on to take a picture of for their phone, whatever they want to do. And then later on in life, when they get to that point where they feel like they've been struggling and they're not making progress and they think things need to be different, that's when they're ready to start paying attention to those three steps of financial independence.

And they'll start working their way down their own path through it. And of course, I've got hundreds of blog posts now after 20 years of this that people can dive into to learn something about each tiny little detail, each little aspect of financial independence that they may have not figured out for themselves yet.

And then we can talk from that through not just the mechanics of saving for financial independence, but also lifestyle after FI. Okay, very helpful. Something you said it made it sound too easy to eliminate waste let's say someone's young, and they say this is their time to live, you know you mentioned drinking.

What are the other things that you said, you know, once you eliminate the waste let's say people's perceptions in that phase are just, you know, a mile away from how you described it, is there a bit of, is it just time and experience or convincing like how permeable. Do you think folks are in the early years to this idea of drinking is wasteful.

If it was my example, they'd be pretty hard headed about it and probably very reluctant to listen to feedback. And we joke about how if when I was in my 20s if today's person I am future me had gone back 40 years to the person I was in my early 20s to try to give me a few lifestyle tips and tricks that I would want to adopt to reach financial independence.

I probably would have immediately called security and had them escorted off the premises and I would have run away myself. So I completely understand people not being ready to follow those, those guidelines, or maybe they're not even ready to know where to start. At some point you get frustrated with the lifestyle you're living.

You, you enjoy the fun parts, perhaps it's expensive travel, perhaps it's alcohol, perhaps it's eating out, perhaps it's expensive cars. You enjoy that. But on the other hand, you are no longer willing to pay the price. You've run into a intersection where your life has to change and you're about to hit rock bottom.

And maybe you've got a good bit of debt to go with that. That's where you're finally ready to take another hard look at your spending. Hopefully you've been tracking it or you can start and then figure out from there how you want to cut out the waste. And just the act of cutting out something from your budget, because you feel it's wasted.

Even if it's that mythical $5 latte, even if it's eating out once a week for $50. Just doing one step and taking that one piece of action to exert some control over your life makes you feel like you actually have some agency. Now you actually have some power and you can actually do this.

Let's go find something else that we think is wasted. Let's cut that out. And then there's always, I say always as if it's easy, there's always the option of considering other ways to work more efficiently. I don't want to tell everybody here to start a side hustle. I don't want to tell everybody to have two working spouses and a family.

That might not be sustainable. But there might be a way to get promoted faster in the military. There might be a way to make that transition after your service obligation ends and get out and get a civilian career and start turning your human capital, that potential you've always had, into real earnings that you can put toward your own financial independence.

Excellent. Super helpful and more accessible to say, you know, break it down into the digestible chunks, as you mentioned. So let's say we pause on the concept, which could seem grandiose to folks in their early years of financial independence, but just put us in the shoes of someone who recently joined the military.

What's available to them in terms of the 401k equivalent? I believe it's called TSP. How good is the TSP relative to other efficient investments? And how do they start? What amount of guidance is available to them? I'll point out that when you're in your teens or your twenties, and you finally joined the military, that you get an overwhelming number of briefings and presentations and lectures and advice, and sometimes some scoldings on what you should be doing with your spare time.

And following all that advice works out to about 36 hours a day. So when you initially joined the military, you're going to be doing very well for yourself if you take the default sign up for the thrift savings plan. The thrift savings plan for the military is the same TSP that is in federal civil service.

We just adopted it for our own uses in the department of defense. And the default is this, this is today's military. Now, this is not the military of even two years ago, let alone 20 or 30 years ago. Today, if you sign up in the military and begin active duty, you'll be signed up for a default contribution to the thrift savings plan of 5%.

And you'll immediately after, well, after 60 days of successful service, you'll start getting the 1% agency contribution to the thrift savings plan, along with your default 5%. After two years in the military, on the 25th month, you'll start being eligible to receive a match of another 4%. So if you've maintained your default contribution of 5% to the thrift savings plan for this whole two years, you're suddenly going to start getting an entire total of another 5% of matching from the department of defense.

Also going into your thrift savings plan. The default asset allocation in a thrift savings plan is just a target date fund. It's the longest dated one at the day you joined the military. For those of you who have never heard of the thrift savings plan before, it's only got a few funds in it.

They're all index funds. They all used to have the world's lowest expense ratios in one of the largest collection of mutual funds. And it's run by BlackRock for the department of defense and for the federal civil service. The thrift savings plans expense ratios are now no longer the world's best, but they're pretty good for a 401k analog.

The fund choices are okay. You've got a S&P 500 fund. You've got a small cap fund. You've got an international fund. You've got a bond fund. And then the place that I see this fund discussed more than anywhere else in the internet is the G fund. The Vogel heads of a certain sector and age are very happy to have that as a sort of cash account to withdraw from during retirement.

So those funds make up the mix up of the target date funds. And as we all know, target date funds might be a little conservative, a little too soon. Many people joining the military could easily by the math and the logic, go for a hundred percent equity asset allocation, because you've just signed up for the military for four to six years of what is probably highly likely to be continuous employment.

So you have to find a comfort zone somewhere in there between that target date fund and your own personal mix of perhaps the CS&I funds. Those all work perfectly fine. The defaults are perfectly good. And that's probably going to get the majority of the people who enlisted in the military through the first, I'd say 18 months to two years, because you're busy.

You're going through your recruit training. You're going through your commissioning program. You're going through all the pipeline schools. You've gotten to your first job and you're not qualified. I don't care how much money you're contributing to the thrift savings plan. If you're not qualified to stand a watch and support the duty section and get stuff done in the military, then you're really just kind of wasting the air that we all need to work together to get the mission done.

So I tell people focus on getting qualified, focus on getting some experience, focus on getting those first couple of promotions. Around that two to three year point in the military, when you're starting to get those matching contributions, that's the prime time to step back, raise your savings rate if you can, contribute more to the thrift savings plan and move on your path to financial independence.

I try to keep it simple for that new person joining the military. I will say that everybody debates whether they should take that incredibly great deduction in a thrift savings plan by contributing to a traditional TSP and having deferred taxation. My advice is if you are in the military, you are probably seeing the lowest income tax bracket of your entire life.

That's especially the case if you are getting any kinds of tax credits like child tax credits or earned income tax credits. And that's most especially true in the junior ranks from E1 to E6, maybe W1, maybe even W2, definitely O1, O3, maybe even O4s. Contribute to the Roth TSP.

Matching contributions still go into the traditional TSP, but you want to make sure that you've paid the taxes now, especially if you've got credits, rather than throwing everything into traditional thrift savings plan and having the even bigger problem after you leave the military of someday facing up to all that deferred taxation.

Right. That was great. Thanks, Doug. Very clarifying. So I'll recap some of it. You clarified folks are automatically defaulted into the TSP. They don't need to actively register. They may be able to opt out. I assume that's typical. And they're defaulted into the target date rather than into some super low interest savings account.

So that's very helpful. Is there an auto escalation? Because some plans have that in terms of, I know you said folks can increase their own contribution percent, but if they don't actively change it, does it increase on its own? I had that question from somebody who hopefully has dialed in, or will at least be watching the video about the frustration of having to figure out what percentage of your pay to contribute to the thrift savings plan to maximize your contributions.

It would be so much easier if we could make our thrift savings plan contributions, both federal civil service and military in simple dollars. The reality though, is that putting a percentage of your money in there guarantees that you will raise your contributions as your career progresses. Every year in the military, there's a pay raise from Congress, just like most years for the civil service.

If you get promoted, then you've got a little more money in your pocket. And if you've been contributing that 5% to the thrift savings plan, then you're contributing more in dollars. Just about every two years in the military, you go through what's called a longevity pay raise. You know, congratulations, you survived another two years.

Here's a few more dollars in your paycheck. So those are the things that help you raise your TSP contributions. What I tell people, once you get a couple of promotions, if you've been trimming the waste and if your checking account balance is rising because you're not spending your money and you want to do something better than just putting it in a high yield savings account or a taxable brokerage account, then start buying your thrift savings plan and your Roth IRA and put as much money into those.

And that means you have to sit down and do the math on a thrift savings plan and figure out how many dollars a month you want to put into it and convert that into the percentage of your base pay. If you're getting specialty pay in the military, by specialty I mean aviation or jump pay for a parachute or submarine pay, something like that, pay that's beyond the base pay in the military, then try to put all of that in a thrift savings plan.

Hypothetically, everybody who's not in your special community has to live on the regular military pay, and your special pay might be just the extra pay you're getting for your skills, the bonus money that you need to reflect your human capital. And if you can bank all of that and invest it and grow it for your financial independence, it'll happen that much faster.

We talked about opting out of the thrift savings plan, and the answer is yes, yes, you can do that. Your chain of command is going to want to talk to you about that. And when I say chain of command, I mean about six different people, and every one of them will try to dissuade you from the foolhardy action of opting out of the thrift savings plan.

And the Department of Defense has seen this problem coming because if you are in today's military in the lended retirement system, that's the current pension plan for everybody who's enlisted since 2018, if you're in the BRS and you opt out of the TSP the following January, you will automatically be re-enrolled in the TSP at that default contribution to that long-dated retirement plan.

So if you did try to leave the TSP early in one year, you would spend the next nine months getting your chain of command to let you out of it, and the following January, you'd be jumping right back into it without any action on your part. So we really try to push that because the pension behind the blended retirement system is a little smaller.

It's only a 40% pension instead of a 50% pension at 20 years. And because that pension is a little smaller, that's why service members today are getting the matching contribution of their thrift savings plan. So it's important in the long-term for those matching contributions to go into the TSP for people to become eligible for those matching contributions and invest them in the TSP.

If they don't, they're going to leave the military with a much smaller pension than anybody who's been in any previous pension system. And the person they're going to become many years from now is not going to be very impressed with the foolhardy decisions those young adults made all those years ago.

People will ask, "Why do we have a blended retirement system?" And the answer is because only 15% of the people who join the military actually earn a pension. And that's 15% across all the ranks and all the services. As you might imagine, I'm not making fun of particular service here, but as you might imagine, the Air Force and the Space Force officers have probably the highest percentage of people reaching 20 years and retiring.

On the other end of the bell curve, the Marine Corps infantry enlisted the lowest percentage of people reaching 20 years and earning a pension. But there are 85% of people in the military who never intended to stay for 20. They might not even have wanted to stay past the first service obligation.

And that's why we hand out matching contributions in the Thrift Savings Plan is so that those people, when they do leave the military, they can also have a slightly bigger version of a 401(k) than they would have if they did not have the blended retirement system and if they did not stay for 20.

It's just like giving military families what civilian families have had in the 401(k) for all these years before they changed their jobs. Doug, that's really interesting. Can you go back to this point and clarify? Of the 15% or let's say one out of six that do stay the whole 20 years, if you had a guess, I don't know if there are stats for how well you may know those stats if there are, but how many of the folks who would like to go the 20 years, how many are asked not to or however that works, you know, let's say more people wanted to go the 20 years, is the opportunity difficult?

Like does the service say, you know, you're not suited to be a lifelong service member to some? That's what I call a perpetual internet debate. And the answer is that if you're in a portion of the military that is not overmanned, overstaffed, then you probably can hang around, do your job, get qualified, stay out of trouble, probably get to 20.

You might not enjoy it. If you don't find it challenging and fulfilling, then you personally are going to die a little each year inside that you keep on going past having to get out and get a reserve or a National Guard job or start a civilian career. I mean, stay on active duty as long as it's challenging and fulfilling.

If your sole purpose is to gut it out to 20, then not only will you feel a little bit burned out, but you'll also be a real prince of a person to be around. You'll be a real good company for not only your people at your military career, but also for your family.

And they'll start to see that stress and that tension. If you are in a part of the military that is struggling for retention, kind of like the submarine force, for example, then you'll get extra money thrown your way and you'll get all kinds of encouragement to go to 20.

If you're in an overstaffed portion of the military, then you might get asked to go find something else to do in the military, go retrain for another job. If you've struggled in your military career, and I've been there, then you will face some kind of retention hearing that says, "Well, should we keep this person?

Should we redirect them to another part of the military? Or should we just shake hands and give them a severance and tell them they're welcome to leave?" So those are the paths, and it's very similar to the civilian world, except in the civilian world, you rarely have to sign an obligation of six to eight years in between these decisions.

Got it. Okay. Super helpful. I'll pause. Alan, I assume you'll let us know if there are questions in the chat. Until then, or I'll just ask, do we have questions in the chat? We do have four questions in the chat. Okay. I can take them chronologically if you'd like.

Sure. The first one David asked, this is a good question for those, I guess, approaching retirement in the military. How have your pensions altered your perception of investment risk in retirement? You might not be surprised to hear the answer to this one, but you're getting one of the world's best inflation-fighting annuities from one of the world's most reliable annuity providers.

And as long as the federal government keeps paying my pension, I'm going to keep an asset allocation that's greater than 95% equities, and that's the way we are now. When I was on active duty, we had an asset allocation of 100% equities because we were always expecting that next paycheck.

In retirement, I made many of the same assumptions that we would have that steady pension income, and that would iron out any volatility from the asset allocation that was in equities. And I'd also assume the federal government was going to keep paying the pension. So from an asset allocation perspective, a military pension is a lot like social security.

It's the world's analog of treasury indexed inflation securities tips, or it's the equivalent of an I-bond. And that income that you would get from that portfolio bond-like income that's adjusted for inflation means that you can go much heavier into equities than your other investments. That's math and logic. And math and logic says you can do that financially.

Emotionally, it might be another idea, another problem. And emotions are where your, your fantastic investing ideas will get trumped every time, no matter how much math and logic you apply to your asset allocation, the way you feel about it and the quality of your sleep at night will probably determine how well you're going to hang on during volatility.

And so I tell people that if you do have a pension, that's great. Hopefully you got that pension because you stayed on active duty, challenged and fulfilled 20 years. And now you're ready to take that pension. And hopefully you're also comfortable with the volatility of your taxable account of your IRA.

And you have an asset allocation, high inequities, and you're knowing that you're going to be able to play good defense by cutting your spending down to your pension, maybe a little more than that anytime you need to, and continue to let the mercy of that money grow. If you've got a military pension, you also are eligible for cheap healthcare.

And by cheap, I mean that right now I'm paying a little more than $14 a month for the equivalent of being able to go out and see any provider who takes Tricare. And when I do that, I may have a 20% copay for the healthcare that I get. There are even cheaper plans in, in Tricare.

Tricare prime has a slightly higher registration fee for slightly lower copays, but we're pushing nickels around on the table here compared to the affordable care act and having to get employer health insurance on the civilian side. So those two things, the pension and the cheap healthcare for life for a pension for a retiree from the military mean that you can be invested much more aggressively provided you can tolerate the volatility.

Excellent. Should I go on with another question? Sure. Yeah. Frank says he's a Naval officer at 16 years thus far planning to retire at 20. And he's got two questions. Number one, from your experience, what was the single most important action you took in retirement to set up your success?

I'll let you answer that. And then we'll follow up with one more from him. The first thing there is, and some of this is going to be forced on you, whether you think it's a good idea or not. The first thing you need to do is go to your services, transition retirement planning seminar.

That's typically three to five days. Sometimes it's online. If you are married and can show up at that transition seminar with your spouse, that's even better. The two of you will hear different things from the seminar, and you'll be able to reconcile the different opinions and things you've heard during those thoughtful conversations over lunch or between presentations.

So go to that transition seminar. This seems fairly straightforward. Go to the transition seminar. How hard could this be? But as you get more senior and as you approach retirement, you suddenly feel like you're a little bit vital to the continued operation of the command and the mission you're on.

And you feel like you can't make time in your life to go to this transition seminar. So I am here today to give you permission to go to that retirement seminar. No later than a couple of years before you retire from active duty, preferably twice, you know, maybe the three-year point and a two-year point or the two and one-year point.

The whole idea is to gain an appreciation for planning the next stage of your life. Uh, so the most important step there is go to that tab and, uh, along with that, start thinking about your life in retirement. And it's literally the question, what are you going to do all day?

You want to retire to something, uh, not run away screaming from the stress and the burnout you suffered in the military. You want to have a time, a chance to figure out what you're going to do. And maybe it's as simple as finishing your 20 years and then taking several months off to spend more time with family, to take naps, to decompress, to have those thoughtful conversations with your family about what you want to do with your life.

But if you can do some of that preparation on active duty, then you will be that much less stuck in a transition gray zone. After you retire from active duty. That's the step. The first step, uh, it was a two-part question. Alan, you're Alan, you're muted. Uh, Alan's still muted.

Um, I'm going to read the second part. Oh, okay. Yeah, I got it. Sorry. My space bar on muting isn't working. Uh, the second part of the question is on the contrary, is there anything you wish you had done differently at the retirement milestone? That's a hard question to answer.

Uh, the biggest regret I have on a scale of one to 10 from tiny little regrets to gigantic regrets. The biggest regret I have is maybe about a 1.5 or 2.5. Uh, my daughter might think it's more like a five or a six, but that regret is that I was a little too tight on the purse strings after we retired.

Uh, after I retired from active duty, I did what everybody does when they suddenly reach financial independence and stop having a regular paycheck. Come in. I went back and reviewed every single expense and got a better estimate. I negotiated discounts on things like insurance policies. And I was hyper aware of the pitfalls of the 4% safe withdrawal rate.

Uh, in my defense, retiring in June of 2002 was just in time to watch the internet recession reach its pit in October of 2002. Uh, we had some fairly intense financial events, family discussions about asset allocation and about the quality of the investments that I was trying to put together back then.

Uh, but I also felt like I probably in retrospect was a little too tight on our spending and probably should have opened up the purse strings a little bit more during those first few years of financial independence. And I say that because six years later, when we got to 2008 and a great recession, all those skills we had learned during the internet recession came back in the professional varsity version of the great recession.

And we came through it not happy, but much less stressed for those two to three years that we're going through all of that. And that was an example of learning to tolerate the volatility, learning to understand the strengths and weaknesses of the 4% safe withdrawal rate, and generally being comfortable with who you are, what your lifestyle is and where you're going.

I would also suggest that if the book, designing your life had been out in 2002, that I would have made many better decisions instead of fumbling around, trying to figure it out for myself, uh, designing it. Your life was published eight or 10 years ago. It's written by a couple of Stanford professors, and they suggest that you strike out on an initial plan for what you want to do for the next five years.

And then keep iterating on that plan. Maybe after five years, you'll go in a different direction. Maybe after five years, you want to do more of what you want to do. Five years earlier, maybe you're going to make tiny little changes along the edge, but they give you a framework to think about how you're going to design the next few years of your life.

Once you make that gigantic transition from active duty or the reserves or the guard into full retirement. Great. Um, Alan, I see there are other questions. Um, I just want to ask a quick follow-up, uh, from Doug on that. So you were talking about, you were tight on the purse strings in retrospect.

What do you enjoy spending on these days? Wow. Uh, I'll tell you our biggest expense by far is travel and travel as someone who's financially independent and is not restricted to working hours and someone who's an empty nester, not restricted to the school schedule with your kids. You're not homeschooling or you have some freedom in your life.

Travel to me means going to some place for the rest of your life. Travel to me means going to some place for a month or two, uh, or maybe even up to the 90 day visa limit, whatever that might be. And just learning to live there like a local, uh, digging into one neighborhood or going to one city and seeing all the sites in that city without bouncing around like a flea on a hot griddle.

And, uh, maybe if you are in an area that's like a country like Portugal or Spain, you're going to spend a week to two weeks in several small towns in a region over a couple hundred miles, just to get somewhere to settle and see the sites. Uh, I enjoy that kind of slow travel far more than I expected to man.

It's grown over the years. So it consumes a big chunk of our budget. Sometimes it's as much as a quarter to a third of our spending. Uh, uh, unfortunately, wherever we go on slow travel, one of the things I check for is the quality of the surf. And, uh, to date 22 years of searching, I still have not found any surf that's better than Hawaii.

So we keep coming home and saying that was fun, but thank goodness we live in Hawaii. And then we start thinking about either spending more time with our family now that they're here on the Island or we spend more time planning our next slow travel. So travel expenses by far, uh, if I had to categorize the next couple of categories of expensing, it would be gifting family and philanthropy because we're in our sixties.

Great. Have you been to Nazare Portugal for surfing? Not yet. Uh, there's not much going on in Nazare and, uh, I hear like 80 foot walls or like, yeah. Yeah. I'm going to see that once if I ever try to do that, I, I, I am quite comfortable in 10 to 15 feet.

I have surfed 20 feet. I have tried to surf 25 feet. Uh, I've gone far enough on that. Okay. Alan, do you want to read the next one? There are a couple that are related to the TSP kind of specific individualized questions. Lady geek posted a link to the bogey has a wiki about that.

Uh, but, uh, one of them is, uh, related to, uh, uh, being, uh, is there an annual limit for TSP contributions? And you have to reach a certain age before withdrawing from traditional TSP. It's, uh, it's not, as I understand it, strictly a 401k, but it follows a lot of the same rules of the 401k.

Maybe it's a slightly different portion of the tax code. So yes, you are subject to the same contribution limits and thrift savings plan that you're a subject to in a 401k. Uh, you cannot do a mega backdoor 401k. You cannot, uh, oversubscribe to the annual addition limit unless you are sent to a combat zone.

Uh, if you're on active duty in the military and you're contemplating a deployment to a combat zone or a tour in an area that supports a combat zone directly, uh, contact me and I'll tell you how to maximize your thrift savings plan contributions up to the annual additions limit.

Otherwise you're limited to the elective deferral limit in a thrift savings plan. Uh, for those of you who are in the reserves or guard, you're probably already keenly aware that these contributions are tracked by social security number, which means that you as a civilian and your civilian 401k can contribute.

And in the military as a reserve or guard member, you can contribute, but you're subject to the same limit, the same elective deferral limit. And now you have to juggle both plans to come up with the best way to contribute. Uh, that's probably where I get most of my TSP contribution questions from is people who are dealing with a civilian career and a reserve and guard career.

Uh, Congress is aware about this inconsistency in a contribution law, and they've been trying for five or 10 years to gather the political will to change the rules and make things a little better for contributing. If you're in the guard or reserve, but it hasn't had much traction in Congress yet.

I don't see that problem getting solved in the next five years. Uh, you do have to reach a certain age before you can withdraw from the traditional thrift savings plan. Uh, and it's the same age as, uh, as, uh, uh, an IRA or a 401k 59 and a half, or if you're declared totally disabled, uh, by the medical system, uh, according to the IRS, or if you happen to pass away.

So it's the same rules as the 401k. Uh, but again, there are ways to roll your traditional TSP into your IRA after you completely separate from the military. And there are no in-service withdrawals from the thrift savings plan, uh, while you're in the military. And then you can continue on with ways to access your IRA at an earlier age.

Okay. Alan, does that cover or are there more? Yeah. Well, Maggie asked a question. We can't give individualized advice. She was asking about general guidelines and investing between a traditional TSP 401k and Roth 401k. I don't know if it's something you can really address in this setting. Well, I actually don't mind addressing that, but I won't do it publicly here.

And if somebody has a highly individualized question they want to ask, uh, please contact me, you know, we'll have my email or you can contact me through the Bogleheads forum and we'll dig into those details because there are many different military careers and it's quite possible to end up in a different situation than somebody else and have much better limits.

And I'll defer to Lady Geek, her hand is up. Yeah. To answer that question, uh, I think it's a general comment question, a general question, because what we recommended years ago, even when I first joined the forum was you're doing Roth, uh, you're assuming a certain tax bracket in retirement.

Since the Roth is not taxed upon withdrawal, it's taxed when you pay it in and the traditional IRA is the other way around. You're taxed when you withdraw, you're taking a gamble on what your tax rate will be in retirement. So while you're working, the idea is just to split the difference.

You say, well, uh, so if I could, if I have some Roth IRA, some in a Roth now, and some in a traditional IRA, maybe I'll even out in retirement, but the whole idea of contributing to a Roth now is taking gamble on what your tax rate, tax back will be in retirement.

That's basically it. And that's also why people do Roth conversions. They're taking gambles. So I think that's a general guideline. Uh, you know, just do some of each and who knows if you're right or wrong. So, uh, that that's, well, that's what the general advice is. Doing, doing some of each is far better than waiting 15 years to decide one way or the other.

Yes. And also there are estate planning advantages to the Roth. There are no RMDs. So for some other considerations. It's a sort of a decision that has to be personalized for your own tax situation and your outlook taxes now versus taxes down the road and, and other aspects. Uh, somebody didn't have a good point here.

Another big advantage of the GI bill is this transferability for your dependents. If you don't use the benefits, that's an interesting perk. I was not aware of. This is a, a relatively new benefit after nine 11. So it's been around for over 20 years, but many of us still think of it as relatively new.

The whole idea of the GI bill transferability is that you're going to take on an additional service obligation. I hope that you're enjoying your military career. You're feeling challenged and fulfilled because you're about to pay for it by signing up for an additional four-year obligation to allow you to transfer the GI bill to your spouse or to your kids.

Uh, once you've done that, uh, I would point out that maybe it's possible that you, the service member or your spouse should focus on their education with the GI bill to raise their human capital and their earning power and their promotional ability to earn far more income in our careers from getting that GI bill education now, rather than saving the GI bill for their kids who will figure out their own education many years from now after they finished high school.

So don't necessarily default to saving the GI bill for your kids. Think about using it for yourself to advance your own careers. If you do take that additional obligation to give the GI bill to your family, including your kids, then it's imperative. It's essential. I've seen this screwed up so many times that you make sure your kids are enrolled in the military's ID card system, which should be straightforward and make sure that your GI bill transfer has gone through, which should be straightforward because I see way too many people will discover just before they separate or retire that the paperwork was lost or there is a mistake in a system or a child was erroneously dropped out of the database, a problem with the database itself.

And suddenly there's a difficulty with their eligibility for the GI bill. But once you've done that, it's a wonderful way to save some of the GI bill for your kids in college. I'll also point out as you're probably aware that there's the yellow ribbon program where a university may automatically give you the tuition that's supported by the GI bill out of their own funds.

If you are a veteran, many States have programs to support your college education, Texas and California are among two of the biggest supporters of veterans getting out of the military and getting a reduced price college degree. And in California, you can even do that where your kids, if you go and get your veterans disability screening, the way the California law was written, the Cal vets program says that if you have even a 0% disability rating from the veterans administration, then you can make your kids eligible for a California state campus degree anywhere in the system, free tuition.

So there's many other ways to get a college education for your kids, ways that you as the military parent might want to do on your own for your own career and for your own benefit, but take a look at the GI bill. And that's one of those things that during the eighties and nineties was preceded by other programs that were not so good.

So I didn't become an expert on the GI bill until about 10 years ago, when I realized all the power of the family transferability today, I'd say, take the extra time, go to the family financial support center in your military base, go look it up on the internet, send me an email, however you want to do it.

And we can talk about ways to optimize the GI bill for you. Great. Alan, do you want to ask the question about travel? Yeah, sure. And a special terminology, I presume that's specific to the military, but the question is from Sonny, do you space a travel as a military retiree, or do you find it as a retiree difficult to get on flight since lower totem pole priority?

I love space. And for those who have never heard of this term before the air mobility command, the air forces, cargo and passenger system, the logistics of flying missions around the world has a space available instruction that says if the air force agrees that this flight is something that retirees or military families can ride on, then they will make that space available.

Now it's a big, complicated instruction. There's a lot of rules. One of the Bogle heads experts on military space, a is a woman named Stephanie Montague. She blogs is up in smoke pop and smoke has traveled thousands of miles, hundreds of thousands of miles in the world on space.

It's a wonderful program. If you can get on a plane now as retirees, you have absolutely the lowest category of priority for military space, a flights. And that's as it should be. The system is strongly favoring active duty, military families, people on emergency leave, and some other other minor categories beyond that.

However, the people who have the most time and the most resources to travel are the retirees. That's why we are such a big component of the category. We're category six. Uh, as a retiree though, you're going to travel when nobody else is traveling. So as a retiree, you're going to travel when school is in session, you're going to need to avoid traveling during summers.

You're going to avoid traveling during holidays when military families are traveling and you're going to be flexible. Uh, I've traveled, my spouse and I've traveled hundreds of thousands of miles ourselves over the last 40 years on military space. And it's a wonderful way to get to where you're going.

Eventually somehow, maybe you'll even get back home that way. Uh, but I enjoy space safe for the camaraderie. I enjoy it for watching that, that 19 year old who's been in the military for 10 months and he's giving you your flight safety brief. Uh, I enjoy the idea of going from one military base to another and learning what's in those areas around the military bases.

It's a whole adventure. Uh, there've been many times when we've taken off on a military space, a flight and ended up somewhere totally different than where we thought we were going. And probably the air crew didn't really want to go there either. So that to us is part of the uncertainty, the excitement, uh, and a little bit of the way it used to be in the military for us when we were in uniform.

Uh, I would say too, that this is a good thing. There are fewer space, a flights today than there were while the military was fighting wars in the middle East. Uh, just a few years ago. Uh, there are not as many logistics flights. There are not as many passenger flights in the space, a system as there used to be.

In fact, it was suspended for two years during the pandemic. Uh, now that it's come back, many more flights are carrying classified cargo or hazardous cargo. Uh, many more flights are flying classified missions. And so they won't take space, a passengers. So we feel like we've struggled a little bit to get the space, a flights that we used to be able to get in 2018, 2019.

But we're going to give the system some time, see if it comes back up. Uh, also in my sixties, uh, with, uh, probably more money than years to spend it. Uh, if I cannot fly space, a, my spouse and I will probably be flying first class anyway. So it's a totally optional recreational for us for new retirees though.

It's a wonderful way to indulge yourself in slow travel and see the world at a very affordable price. Good to hear. Um, I'll read the next one, Alan, could you provide general thoughts on how to optimize slash reduce the tax burden for military retirees? Oh, that's a Bruce. It's good to hear from you.

I recognize that question from the Facebook post, but the best way to minimize your tax burden as a military retiree is to have been investing in your Roth TSP and Roth IRAs while you were in the military. And what is probably in retrospect, the lowest income tax bracket and lowest tax bill of your life.

So if that ship has not yet sailed yet, take a good hard look at contributing to the Roth thrift savings plan and the Roth IRA in retirement. Uh, the next tactic is to, well, if you're financial independent, try to stop working for money. If you can lower your earned income after the military and lower it to a much lower income tax bracket, that gives you room to do a little bit of a Roth IRA conversion every year until you've finished converting all of your traditional TSP and your traditional IRA at the next lower income tax bracket.

And as Lady Geek mentioned earlier, this is a somewhat optimistic tactic of deciding that your tax brackets later in life are going to be higher than they are right now. If you're not working for money after the military, you're probably in the best time of your life to start doing some small annual Roth IRA conversions.

Uh, if you are like many military retirees that have a substantial thrift savings plan and go onto a bridge career after the military, now you're pushing that Roth IRA conversion out into your fifties or even your sixties. And you're starting to run out of time and the compounding in a very good way, the compounding is working against you and giving you more money than you'll be able ideally to convert before you have to start taking required minimum distributions.

Uh, all is not lost. You do the best you can with the Roth IRA conversions. You can eke out at a lower income tax bracket. And I would focus on worrying about what your income tax bracket will be in your seventies. When you're taking social security and receiving required minimum distributions, that's the tax bracket that you probably will need to, to beat, to do a Roth IRA conversion.

And for that income tax bracket, there's a lot of political risk. We don't know what future income tax brackets are going to look like. I can't help with political risk. I can say that, uh, you can make a qualified charitable distribution as part of your required minimum distribution. When you do have to start withdrawing from your traditional TSP, traditional IRA, and that will help ease the tax burden a little bit.

If you were planning to donate money to charity anyway, uh, for the first year ever, the IRS has started adjusting QCDs for inflation. So that a hundred thousand dollar number that we've known for the last few years is now being raised every year, a little bit for inflation, just like the social security algorithm that helps a little bit.

Uh, otherwise you're going to figure out how to do this around the period of your life where you're still buying health insurance. If you're not receiving TRICARE. So maybe you would like to do a Roth IRA conversion, but you also have to artificially manipulate your earned income to appropriately buy your health insurance from the affordable care act.

And so you've got to work around that. If you're at Medicare age in your sixties, but not yet taking required minimum distributions, you could do Roth IRA contributions, but now you have to worry about Irma and Irma is the higher Medicare premium you pay for having a higher earned income.

Two years before you started buying your Medicare print and paying the premiums for it. Uh, just be aware that Irma exists when you start Medicare. And that's one more reason why you should consider doing Roth IRA conversions in your forties and fifties and early sixties. Uh, those are the best ways to optimize the tax situation.

I will say that if you're facing a high income tax bill in retirement, that's a good problem to solve. Great. Thanks. So Alan, I'm going to ask a quick question on, um, the Roth since Doug just mentioned that, and then following that, if you want to ask the one about renting versus buying.

So Doug, you spoke about the, um, Roth IRA and this is from a young friend of mine who's in the Navy who you've actually been kind enough to interact with. His question is, what is the difference between the Roth TSP and the Roth IRA and do those contribution limits overlap?

Does one contribution count against the max of the other? Same here. Uh, and first, the first question is, is there a difference between the Roth TSP and the Roth IRA? Uh, not to the average wage earner. Uh, the difference is that the Roth IRA is a specific type of retirement account.

And the Roth TSP is a different category of a specific type of retirement account. They have slightly different rules on how you can roll them over and withdraw from them. Uh, however, unless you're studying for the certified financial planner exam or an accredited financial counselor's exam or a brokerage license, you probably do not care.

What I would say is that they each have their own limit and those limits are separate. And so if you contribute to your Roth TSP and maximize that contribution, you also can contribute to your Roth IRA and maximize that contribution. And I'll go a step further. Your spouse can contribute your earned income to their Roth IRA.

So technically if you're the wage earner in the military and you have a high enough wage, you can contribute up to the limit of your earned income or the limits of the contributions of the accounts to the TSP, your IRA and your spouse's IRA. So be aware that there are two IRAs floating around for married couples.

If I could just insert for a second, that's an important point for folks not familiar. IRA contributions are typically, they have to be from earned income. So I think Doug's point is if your spouse is not working, you have a way to contribute despite that. From your earned income.

And it is extremely important for spouses to have their own IRAs, not just financially, but also from the strength of the relationship and their future as well. Don't don't skip that step just because you didn't realize you could do it. I will also point out that the contribution limits to the thrift savings plan, Roth TSP and traditional TSP have some little changes between the elective deferral limit, which is the one you always hear about and the higher annual addition limit, which you can only exceed in a traditional TSP in a combat zone.

If you have more questions about that, contact me after this and we'll go direct you to the blog post that links to the tax code and shows you how to optimize this. But it's far more complicated than the civilian equivalent of a after tax contribution to your civilian 401k.

All right. Let me ask about, I guess the rent versus buying question. Nate asks what your thoughts are on renting versus buying a home as a military member. The poster currently resides in California. He's renting in California and he's upset because of the how much rent he's paying every month.

It could go towards a house. I had the comments yet due to the persistent issue of moving and high barrier to entry when buying, I'm still favoring renting. What are your thoughts on that predicament? If you think it's painful to rent in California, try buying and owning in California and then moving every three years.

One of the sayings, I can't take credit for this myself. I've heard this from another blogger, Kate Horrell, and she's probably pulled it from somewhere else. The saying is if you're renting, that's the most you'll pay every month for living in your house. If you're a homeowner, the mortgage is the minimum you're going to pay every month to live in that house.

So when you're in the military, back in years before the worldwide web rose to prominence, it has today, the conventional wisdom was to buy a home at every duty station. And when you finally left the military years or decades later, you'd have all these homes that you had converted to rental properties.

And even if you weren't making much money on rent, you were still getting some appreciation in the price of the property itself. And the whole idea was that real estate always goes up. And since the internet and the worldwide web have made this easier to parse the entire country by zip codes and dive deeply into individual neighborhoods, I would tell you that if you want to own real estate, then go figure out where the cheap real estate is.

I can pretty much guarantee you that it's not at your duty station. It's going to be someplace far from military bases too. It's probably going to be tiny little towns in middle central America. And it's probably going to be places that you wouldn't normally think of living in and places that still have a pretty good return on investment.

Or if you still want to own some real estate, then invest in a real estate investment trust. That's an index fund of real estate, or just invest in the Vanguard total stock market index fund that already owns some reits as a portion of that total stock market index fund.

You don't have to personally manage an investment rental property to make money from real estate. And if you do end up buying investment rental properties, the best way to do that in the military, when you go to a new duty station is actually to rent that house and house hack it.

And by house hacking, I mean rent the house you want to rent at the duty station you're at, and then bring in roommates so that you can bank more of your own housing allowance. You get a housing allowance, so you get as much housing allowance as you're allowed to have for your rank and family situation.

It's not use it or lose it. Instead you get to keep that housing allowance and bring in as many roommates as you can. That way, when you end your lease, you've saved some money from your housing allowance. If you're going to a duty station where you have a high guarantee that you're going to be there for four or five years, I'm from the Navy.

I never saw that, but some services do that for four or five years. Maybe you'd want to buy a house and maybe you'd want to have some roommates or maybe you'd want to try doing a live in flip. And by that I mean, take over a house that's in pretty sad shape and managing the contractors and managing the skills that it takes to renovate that add value and resell it when you leave.

However, I'll guarantee that even if you are supposed to be staying in that duty station for four or five years, at some point you're going to be asked to leave town and deploy on a mission for a few months. And you're not going to be able to be constantly present to manage the renovation and rehab of that, of that investment rental property.

So my advice, generic advice with some individual differences is that when you're on active duty, just keep renting or just keep living in base housing. If you have to buy for whatever reason, it's your choice. If you have to buy, then buy a property that could turn into a good investment rental property.

Don't buy your dream home by a property that has the potential of becoming an excellent investment rental property. After you leave and be ready to be a long distance landlord, because that's, what's going to happen eventually. If you have to buy a home, then separate from the military, move to your ideal location and live there for 12 to 18 months, doing your research before you buy a home after the military.

I say that because we have the statistics that tell us that. Of people that leave the military and settle in an area two years later, as many as half of those military veterans move again. And it's not because they're running out of money. It's not because they're miserable failures, sleeping under highway overpasses.

It's because after they left the military and started a bridge career, they did well enough at that bridge career that two years later, they're ready to upgrade to a higher salary, a better job and a different location. And that's why half of them are moving. So be very careful about buying a home as soon as you get out of the military.

Okay, go ahead, Gary. So you mentioned bridge career. There's a question on that, which we'll follow, but just to follow up on this rental idea. So let's assume some folks are making uninformed decisions. And opting to buy a house. I would assume around so many bases. Is there. A market opportunity or has it already popped up?

There are property managers who are looking to buy a house. Is there a market opportunity or has it already popped up? There are property managers who specialize in managing. Homes bought by military folks who have since been transferred. All of that is speculative. If you have bought a place that has a value.

As an investment rental property, then you can probably. Make some cashflow from it. And you might benefit in the long-term when I say long-term, I mean, five to 10 years from appreciation. I say this as hearing all the sad stories from military families that bought a place in what seemed like a really good location at the time.

And found out when they left that location, that there were many other houses in the area that were selling for a much lower price than they had paid or their cashflow did not even pay for the mortgage, let alone pay for all the other maintenance and repairs and property management fees.

And so buying at home every duty station and covering your mortgage with the rent is, is another way of saying that you're going to lose money slowly over the years. It takes for appreciation to catch up and someday make you whole again. Uh, the biggest speculation is that you are spending a substantial amount of money on the transaction costs.

When you buy that house. You're paying real estate commissions and fees and closing costs. And when you sell that house again, just two or three years later, maybe five years. If you're in that unicorn branch of the service that lets you stay there. You might not have had enough appreciation to pay another set of real estate transaction fees, closing costs, and the costs of selling the house.

So you're taking a very big leap of faith in a short term investment. You find military owners who have been transferred renting to new military people transferred into the base that they just left. Right. And, you know, we're doing this here on Oahu. Uh, we've been landlords of a property for 26 out of the last 30 years.

And we actually prefer military tenants, uh, but generally because they come in with a higher housing allowance, they have more assets, they have higher credit ratings, uh, because they're military, they can afford the house and they can afford to pay the rent and they do well. However, from a, from a investment standpoint, we are actually turning over tenants every two to three years, even, even, and I mean this with love when I say, even if they're in the air force, we're still turning over the house every two or three years, let alone somebody that's in another branch of the military that moves even more frequently.

So that vacancy will eat into your cash returns. Uh, the only advantage that we have by landlording for 26 of the last 30 years is an awesome amount of appreciation. And when I say awesome, it looks incredible in terms of dollars. But when you do that in percentages, the real estate here has appreciated at roughly the rate of inflation for the last 30 years and a little faster than inflation since nine 11, about four to 5% since nine 11.

So we are living proof that a real estate can go down. And I've experimented with that many times and learn my lessons from it. Fantastic. So you mentioned bridge career, Alan, do you want to ask this bridge career question? I've got a question on my own. Uh, first I'm curious as a non-military person, does the military offer through the thrift savings plan or otherwise like a fiduciary financial planning or advisor, uh, service for a active or reserve military individuals?

Uh, yes. Ironically it's free. Uh, if you live near military base, which is great for active duty, not always so great for reserve or guard members. Uh, if you live near that military base, then you have a family financial support center, uh, where they have, uh, people with some certifications.

Generally, it's a team of accredited financial counselors, AFCs, uh, along with one or two certified financial planners or chartered financial consultants, uh, CFPs or CHFCs. The whole idea is that they're there to help you understand how to budget, understand how to, uh, invest and how to grow your wealth and how to solve the typical financial problems of deployments or extra pay or pay problems or having extra kids, things like that.

So that's free. Uh, you make an appointment. There are limited hours of the day, which is a difficulty if you're a parent with limited childcare. Uh, many of the presentations might be given on evenings and weekends just because of people's work schedules, but those resources are there. And the sooner you tap into them and find out what's available, then you're well on your way to financial literacy.

The equivalent program in the Navy is a class called million dollar sailor. Uh, the idea is that sailors on active duty, contributing to their thrift savings plan for 20 years can actually have a million dollars in their thrift savings plan. And by the time they reach their sixties and million dollar sailors actually taught online and many of the other classes and the other services have the same feature.

Second resource is the relief centers. Uh, for example, there's army emergency relief, uh, air force relief, uh, Navy Marine Corps, relief society, all those, all those organizations are there to help you with debt. They're there to help you with pay problems that have led to you going into debt.

They're there to help you with collection problems. They're there to help you with getting enough cash to tide you over. Sometimes that's a low interest loan. Sometimes it's simply a grant to get you over a tough spot. Uh, they are also staffed by AFCs and CFPs or CHFCs and their main purposes, uh, financial counseling.

They're not going to try to teach you how to invest, but they are certainly there to help you get out of $40,000 of credit card debt or $75,000 in student loans. Great resources. And I'm free. I'm happy to, I'm happy to jump in. If you need that, that sort of advice for free.

Uh, uh, if you want to talk to me, you have to come on to Wahoo, or you have to contact me online. Uh, sounds good. Um, another question here is if you could give some general thoughts on finding a fulfilling bridge career for retirees who want to do something unrelated to their 20 plus year military career, the individual states has been doing technical work for 25 years, five as a defense contractor, and not entirely sure how long he wants to try to keep up with recent college grads.

Um, when I was reaching a transition point, I took all those same resources that you've probably taken, uh, before you started your bridge career, uh, after nearly 20 years in the Navy's nuclear submarine force, uh, after several days of, uh, interest surveys and assessments, we determined that I was optimized to be a mid-level manager or a nuclear engineer.

And, uh, the novelty of that had worn mighty thin. Uh, I would, I would suggest that it's going to be difficult to figure out your transition, but there are resources. And the first one is that book designing your life, uh, that designing your life book will not necessarily lead you to the answer, but it will lead you to the thought process.

It'll give you some inspiration and you'll start thinking, uh, orthogonally differently about what you might want to do with your life. Uh, the next thing I recommend is if you burn out on what you're doing in a career, you're in now, then you go for, uh, LinkedIn and look up the veteran mentor network.

That's veteran mentor network. It's one of the largest groups on LinkedIn and start asking the other veterans, the other military retirees who have bridge careers, what they're doing and what makes them feel challenged and fulfilled, especially the veterans who are similar to you with defense contracting or where they live or their family situation.

That networking is invaluable because the ones that are happy feel like they've already solved the problem and they really want to share. They really want to pay it forward. And you'll also find plenty of people who can tell you what they regret doing or did not want to do.

So that's the best place I know of to get peer tutoring on a bridge career. Uh, personally, I would say that if you can reach financial independence in the military, then when you leave the military and I don't even mean retiring, I mean, leave the military. Then you can plot your own path to financial independence and experiment along the way.

And I know people who have had incredibly high savings rates during active duty, reached financial independence in the military at the 10 or 12 or 15 year point. And then actually just simply left active duty, ditch the pension moved on and went to enjoy their financial independence. Great. Thank you.

Um, another question. Can you describe your asset allocation? Um, what your asset allocation currently consists of percent in large cap, international bonds, type of bonds, et cetera. I'm going to discuss that in life phases, uh, back in the eighties and nineties, when we were on active duty, we were a hundred percent equities.

We were investing in the popular mutual funds of the day. They were growth mutual funds. Some of them paid dividends, uh, were dividend mutual funds, uh, all of them with fidelity and a couple other minor, uh, investment firms that have been merged out of existence. Uh, all of them charged expense ratios, uh, one to 2%.

Some had 2% sales charges. Uh, we made all those classic mistakes of active management and chasing hot managers. The point is that we made a bunch of mistakes in the eighties and nineties, the high savings rate. We'll overcome those mistakes and still get you on the path of financial independence.

Uh, when I retired from active duty, I had a chance to go back and look at those mutual funds and their expense ratios. And. As we worked through the internet recession and had opportunities to do the, uh, switch in a tax efficient manner. We moved to exchange traded funds in certain indexes.

And back then we split it up. Into a dividend exchange traded fund, a international index exchange traded fund, a small cap value exchange traded fund. Uh, we even bought some, uh, some B shares in Berkshire Hathaway. And we did a tremendous job at reducing our expense ratio. We've got our expense ratio down from one to 2% per year down to about 0.3% per year.

And that was great from, uh, Our next stage of life came about in 2017, when we realized we were spending a lot of money in expense ratios relative to the collapse of expense ratios over that time in between. And in 2017, we started moving to simply. The total stock market.

Exchange traded fund. VTI. And we have greater than 95% of the total stock market exchange traded fund. VTI. And we have greater than 95%. Equity asset allocation, and it's all in VTI. And so active duty, a hundred percent equity. Allocation. The first 15 years of retirement, we're in exchange traded funds, but still greater than 90% equity asset allocation.

And then since 2017 onward, we've been over 95% equity asset allocation. Because of the reliability of the military pension. And I would say if you've got even a reserve pension at age 60, let alone an active duty pension, let alone. Two military retirees. If you've got any kind of military pension income, you can afford to be much more aggressive in the rest of your asset allocation.

Uh, it also helps to be comfortable with volatility, right? Again, uh, the math and logic will guide you toward an asset allocation that's high in equities, but you have to tolerate the volatility and the emotions of watching that volatility during a recession of trying to sleep well at night.

That can derail your asset allocation plans in a heartbeat, just because the stress can build and make you very unhappy with what's happening to your. Unsold your paper losses on your financial statements. So the more you do this, the longer you invest, the more used you'll get to. Volatility and probably be more comfortable with an asset allocation.

That's more volatile with equities. Time in most Bogle heads would state that it's important to understand the difference between, um, how much risk you're willing to take and how much risk you need to take to assure a secure financial future. And that's, that's a, an important consideration. And you'll, you'll know where that is right after you go past it, you'll know that you need to come back.

And Buffett says, why risk something you need for something you don't need. When you've won the game, why take risks with money that you need? So Doug, we have another question. Hi, Doug, military aviator here. Approaching the 11 year mark, trying to decide whether to enter the civilian sector or the military sector.

Do you feel like you're in a position where you need to take risks with money that you don't need? So Doug, we have another question. Hi, Doug, military aviator here. Approaching the 11 year mark, trying to decide whether to enter the civilian sector or to commit to 20. I know there is no easy answer, but can you recommend any books or research avenues to take while attempting to answer this difficult question?

Thanks for sharing your experience. I have a really hard time having this discussion with F-16 pilots, F-22 pilots, F-35 pilots, and F/A-18 pilots, because they're flying jets and they see no reason to stop. It's necessary to keep flying. For all the other military aviators, the first, the first criteria is, is your job challenging and fulfilling?

Is your billet that you're in challenging and fulfilling? And it seems to me from most of the pilots, most of the aviators I talk with, that involves flying. If you're stuck in a staff billet somewhere in a cubicle and you're not flying, then you're probably not feeling challenged and fulfilled.

If you cannot do more of the things that make you feel challenged and fulfilled, then that is a signal that you probably need to leave active duty. If you're an aviator, I would encourage you to look beyond your service when you get out to the reserves and also consider the National Guard, the Air National Guard.

You may not be flying the same airframe that you're flying when you're on active duty, but if flight hours are important to you, then consider taking your aviator skills outside of your current service to the other branches of the service, especially if you want to live somewhere in the country that's not near a major military base that flies aircraft.

One example of that is that if you can't get a flying billet near a major city, but you can get one out in the middle of Kansas in a small town that has an Air National Guard armory near it, then you're in good shape. The books to read, the decisions to make.

Of course, there's your money or your life. Of course, there's the millionaire next door of pursuing financial independence. I have mentioned this book too many times already this session, but Designing Your Life had a tremendous impact on me. I only read it four years ago and I had considerable experience of being retired by then.

But the thing that impresses me about that book is that it helps you come up with a framework around what you're going to decide and you're going to figure out what you want to do. And I got to tell you that if you're not feeling challenged and fulfilled with flying in the military, then it's definitely time to consider leaving active duty for those reserve or guard billets.

And if you're stuck in a cubicle somewhere, it's probably time to leave active duty as well. Got it. Thank you. I think we're caught up in the chat. So I'm going to ask another question from my young friend in the Navy. This question relates to investing for a potential early retirement.

I'm not talking about ERE, which she means early retirement extreme, although that would be nice. But retiring at 47 leaves 12 years before the withdrawal age. How do you plan for that? Beyond maxing contributions to the Roth TSP and Roth IRA, where else should I be investing? I realize this is a good problem to have.

That's true. That's absolutely true. Again, you're going to have to make the tough choices of deciding to pay income taxes now because you might be in the lowest income tax bracket of your life right now. You're also going to have to consider if you're approaching a transition point that you're going to set up more money in a money market fund or some kind of cash fund for the actual transition itself, if you want to start a bridge career.

If you have reached financial independence or you're almost there and you're getting ready to leave the military, you still probably want to have one or two years expenses in cash as you leave your last paycheck behind you, just to make sure that if you do end up retiring, leaving your career right at the beginning of a recession, that you don't immediately have to start selling off any of your equity portfolio from your taxable account.

Now the ways to tap your retirement accounts, your TSP and your IRA, there's several advantages to having a Roth TSP and a Roth IRA while you're in the income tax bracket of your life, that the lowest threat bracket of your life. And one of those advantages that you can withdraw the Roth IRA contributions anytime.

So if you leave the military and you're still short of age 59 and a half, you can still tap those Roth IRA contributions, tax-free, penalty-free. You've already paid the taxes. The next advantage you have, if you've been investing in the Roth TSP, is that you, once you're completely out of the military, this means off active duty, out of the reserves, out of the guard, completely out of uniform, you can roll your Roth TSP over directly to a Roth IRA.

The tax code also says that if you have had any Roth IRA for at least five tax years before you did that rollover from the Roth TSP, then once you've rolled your Roth TSP over to your Roth IRA, you are entitled to withdraw the contributions that you made to that Roth TSP while you were on active duty or in the reserves or guard.

That gives you a chance to tap the Roth TSP contributions from your Roth IRA, provided you had a preexisting, any old Roth IRA before then, for that five tax years. So that's another source of money that you've already paid the taxes on, and that is not taxed when you withdraw it before age 59 and a half.

Keep in mind that the gains in that Roth TSP, you can't touch those when they're in a Roth IRA until age 59 and a half without paying that 10% penalty. And of course, you already know that the gains in your Roth IRA are subject to that 10% penalty before age 59 and a half.

So other than those two sorts of funds, there's a third category. I'll mention this briefly. And that third category is people who have deployed to a combat zone, who have earned combat zone tax exempt pay. Now, if you have done this, you know who you are. If you have not done this, I've got a blog post that explains it in more detail.

Those contributions to your thrift savings plan made from that combat zone tax exempt pay, after you've left the military and rolled your TSP over to an IRA, you can withdraw those contributions tax-free, penalty-free. It's a special niche of the tax code for combat zone tax exempt pay. Again, if you have any questions about that, feel free to contact me.

If you have been to a combat zone and earned that money, you know it. It's on your leave and earning statement. If you've never done this before and you want to learn more about it, I've got a blog post that will give you more of the details about it, but it's far beyond the scope of this presentation.

There's a couple other things to consider. If you are determined to be totally disabled by IRS standards, by the Veterans Administration VA disability rating scale, but by a medical doctor in accordance with IRS criteria, then you're allowed to tap your IRA earlier than age 59 and a half. Of course, if you happen to die before that age, then your heirs can also tap that IRA as well.

The final answer to tapping these accounts, if you need to, is to pay the 10% penalty. The mad scientist blogger, Brandon Gansch, has some pretty good points about how it isn't as bad as you might think to pay that 10% penalty for a situation where you're just trying to bridge over that age 59 and a half hump and you've run out of money a little earlier or you needed the money for a larger expense.

Great. Thanks. Absent new questions in the chat, I'll ask another one from a young friend in the Navy. He says, "What is the percentage of my base pay that I must contribute in order to maximize the TSP contributions for the year? The MyPay website on DFAS doesn't allow you to see what the impact will be roughly to your paycheck if you elect a higher contribution." He's absolutely right.

And that is a problem, and the Department of Defense and the Defense Finance and Accounting Service, DFAS, they don't care. So this is a problem that military families have to wrestle with, with TSP contributions, not just this year, but every year for the rest of your military career. You have to do the math on your base pay and your special pays, and you have to determine what percentage of your base pay that you could contribute to reach the goal that you want to reach in your thrift savings plan.

Let's say that you want to maximize your thrift savings plan contributions this year, that means you need to put $2,000 a month for 12 months to reach that $24,000 number. So you'd have to sit down and look at your pay statement, do the math on what it would take to put $2,000 into the thrift savings plan from a contribution from your military pay every month.

And that's not complicated enough. You start out with a new pay scale in January because you got a pay raise from Congress during the last year, and if you get promoted, then you're going to earn more money once you start being paid at that rank. And every time you go over a longevity increase, roughly every two years, you get another small pay bump, and that will also raise your contributions to your thrift savings plan.

And, Guri, I don't remember exactly when your friend joined the military or what retirement plan they're in, but the families who are in the blended retirement system have to make sure that they leave room to contribute to their blended retirement system thrift savings plan account all 12 months of the year for the match from the Department of Defense.

In the blended retirement system, you cannot front load your thrift savings plan without risking losing some of those matching contributions at the end of the year. So if you're having a really good year where you got a big pay raise in January, you got promoted in March, and you went over a two-year pay increment longevity raise in July, you've had three different numbers for your pay that year, and you've got to adjust your thrift savings plan contributions accordingly.

And then if you deploy to a combat zone and you're getting combat zone tax exempt pay, we start all over again with a new calculation. Now, the good news is that if you set your percentage and do get promoted and do get pay raises, then you're contributing more dollars to the thrift savings plan.

That's the only thing that DFAS and the Department of Defense and the TSP care about is the percentage. However, it's important not to inadvertently front load your thrift savings plan, so you have to keep checking that math to make sure that when you roll into December that you've contributed at least 5% of your base pay for the 5% blended retirement system match.

One more point. That other point is that as you're contributing to the thrift savings plan and as you're looking at all these numbers, if you're contributing to the traditional thrift savings plan, DFAS will let you contribute 92% of your pay. The other 8% of that goes to FICA, to Social Security and Medicare.

So if you're contributing to the traditional TSP, you can put almost all of your base pay and 100% of your specialty pays into the TSP. However, if you're contributing to the raw TSP, you're limited to about 60%. It varies with the services, and you'll bump into those limitations when you try to enter the numbers in the little boxes on MyPay.

And it's about 60%, and the idea is that the Department of Defense, DFAS, is saving that other 40% for FICA and for income tax withholding. So you're artificially limited to 60% of your base pay for the raw TSP and 100% of your additional specialty pays. That's probably far more than your friend really wanted to know about the thrift savings plan contribution systems, but that's the way it works the way it does.

On a TSP website and on a DFAS website, there are tables you can look at, and those tables will try to break down the dollars versus percentages for you to help you do the math. But otherwise, you end up doing a lot of math. I know this because I probably get a half dozen questions a month from people that want to help doing the math, especially if they're in a combat zone.

Super helpful, and it'll help him and a lot of other folks since this will live on YouTube forever. So going back to early joiners, you mentioned the structure there that really protects people from themselves, right? The human behavior, the people who are actively opting out, and it becomes sort of just so many hurdles.

It sounds like folks may stay in. Great. What about the things outside of investments that folks should watch out for? So we hear of payday lenders near bases. We hear of people getting fancy cars at super high interest rates. What kind of warnings would you generally advise? What I'd tell people is, again, track your expenses and figure out what's valuable to you.

I would say to avoid the payday lenders and avoid buying the car right close to the base because those are the most expensive places to do those transactions. They're right next to the base. Most military commands with good leadership will have a process where if you want to take out a payday loan or if you want to go buy that car, you might have to talk to somebody in your chain of command.

I don't mean the boss. I mean your immediate supervisor. You might even be asked to go to get counseling from the financial support center at the base before you go out and buy that car, or if you're tempted to take that payday loan, you get a far better deal from going and talking to your services emergency relief.

The reason that people get in trouble with payday loans is because they do not want to discuss their financial indebtedness with their chain of command, and I can understand that. I also understand. I have spoken with the guy that's running the Department of Defense financial readiness system. We met him at this Mill MoneyCon seminar that I'm going to next week every year.

DoD will not take away your security clearance. DoD will not take you out of your specialty in the military just because you have debt. You might attract some attention if you're under extreme debt and the situation is getting worse, but nobody in the military had their clearances revoked in the last five years before 2023.

In 2023, the people who did have their military clearances revoked were not in financial trouble. It was for other reasons. So if you're in a position where you have a security clearance and you're worried about letting your chain of command find out that you have financial problems, it's better to go to them early, get the financial counseling from the base or from the emergency relief society, tell your chain of command you're working on it.

They would be happy to know that you're working on a solution as long as you've already identified the problem, and then move forward from there. So a payday lender is better for a grant or for a loan. And that car, it feels like a rite of passage. Everybody has to buy a stupidly expensive car at least once in their lives and learn from that lesson.

I would say that if you're new in your job in the military, that there's probably either public transportation or a cheap car lot near you. And in addition to that, I'll pass on a tip from my daughter. My daughter spent five years on active duty in the Navy and her spouse is approaching 10 years.

And their favorite commuting vehicle for the military is a bicycle. And it's not about the health. It's not about the exercise. It's not about the Mr. Money Mustache lifestyle. It's about beating the rush hour traffic. And it's about getting a parking spot that's next to your command instead of a half mile away in some open parking lot that leaves you with yet another quarter mile walk in the rain and the snow to get to your job.

If you're riding a bicycle and living near your command, if you're living in base housing, it's even better. You can avoid all the traffic jams, all the traffic around the gate, all the backlogs, and you can get to your job in a much more efficient amount of time. And you've got a bicycle, which has other benefits.

And one of the biggest benefits is financial. Love it. I'm picturing a world where the guy's having midlife crises by a fancy bicycle instead of the top-down convertible. Well, I'm also seeing a situation now where a '04 with 10 years of service is riding his electric bicycle past a long line of cars, all of which have $800 or $1,000 a month car payments filled with E4s and E5s.

Got it. So we're 20 minutes from 10 o'clock. We have another question in the chat. You mentioned TRICARE. This one is, "Could you talk a bit about TRICARE for life and health care options/costs for you and spouse/dependents after age 65? I know you're required to take Medicare A or B to be eligible for TFL, but I'm not sure how it works for dependents." And I am.

Take a look at the back of your ID card. And on the back of your military or terry ID card, there's an expiration date. You might not have that expiration date on the front, but the expiration date on the back is the day before -- the month before you turn age 65.

That's also coded into the scannable barcode on the military ID so that the military forces you to get a new ID card for your 65th birthday. The whole idea is that when you are forced to get that new military or terry ID card, it might have been confiscated at the gate by the base security office when they scanned your ID card.

When you get that new ID card at age 65, you're forced to sign up for Medicare. And once you've signed up for Medicare and gotten your new ID card, now you can also sign up for TRICARE for life. That part is automatic when you sign up for Medicare A and B.

The whole idea is that the military -- the lawsuits from 20 years ago have given older military retirees free supplemental Medicare insurance. Everybody's familiar with the extra 20% beyond Medicare that you have to pay and some other co-pays and prescription co-pays. This TRICARE for life insurance, which currently has no enrollment free, it's currently free, covers Medicare supplemental insurance, and it covers prescription co-pays.

So as the military retiree, when you hit age 65, you have no choice. You're going to sign up for Medicare A and B. You do not need to sign up for Medicare D, Delta. You don't need to sign up for Medicare D because you will have prescription coverage through TRICARE for life.

When your family, your spouse, reaches age 65, then they will also go through that same Medicare A, B, TRICARE for life process. If they're younger than you, then they'll stay on TRICARE select or TRICARE prime until they reach Medicare age. If they're older than you, they'll go on Medicare first.

I am not completely clear on the concept of whether or not they're eligible for TRICARE for life before you are. That's one area where I'm going to have to do some research to find out what happens when your older spouse reaches age 65, signs up for Medicare, and you have not yet reached Medicare eligibility for TRICARE for life.

I don't know the answer to that one, but I will find out. Okay, great. Thanks for that. You mentioned Mr. Money Mustache. You and I met at a camp mustache, so retreat with many mustachians. There's a strong overlap with the Boglehead community. This question is if you can elaborate how you reached your idea of enough because in the Money Mustache community, there's something called one more year syndrome.

A lot of people at the spreadsheets, they know they have enough, but sometimes it's uncertainty whether they have enough. Sometimes there's this gravitational pull to just earn more money, grow the portfolio. How did you get comfortable with enough? Well, I have to say that part of that is having annuitized income, whether you've got a military pension or social security or whether you went out and bought an annuity.

Having an annuitized income is wonderful for sleeping at night. In our case, it's a transition. When we left active duty, when I retired in 2002, it was probably not until 10 years later that we felt like we were on the track to enough. Some of that was just the difficulties of making a financial transition and being reluctant to spend.

Some of that was developing confidence and faith and a 4% safe withdrawal rate. I wish I had known all this stuff 20 years ago when I retired. Some of it is simply getting comfortable with volatility, which is completely different from math and logic. That's strictly emotions. But eventually you get to the point where you look at your net worth.

In my case, I was writing a blog post around I would say 13, 15 years into retirement. As I was writing that blog post, I wanted to index it to enough. Enough for me was the safe withdrawal rate, the 4% safe withdrawal rate. As I was doing the math of indexing the money we had and the income we had to enough, I realized that we were actually at 200% of enough.

We had twice as much income from my pension and from our 4% safe withdrawal rate. That was twice as much income as we needed. That's when I realized that our compounding had reached the exponential part. Humans can estimate growth, but we are not very good at estimating exponential growth.

We can do straight-line growth. We can estimate that just fine. But what humans are not so good at is the part where that straight-line growth of exponential compounding turns hyperbolic and does this. We can't see that. That inflection point happens for different retirees at different times, but it's probably going to start about 5 to 10 years after you retire from active duty or about 5 to 10 years after you reach financial independence, especially if you don't have a recession, especially if there's great growth in the stock market.

Once that part happens, you might have not only enough, you might have an estate planning challenge. You might be facing a problem, a good problem to have, but a problem of having to pay estate tax, perhaps in your state, maybe even at the federal level. The numbers are pretty big now, but in 2026, unless Congress changes the rules again, all of those generous estate tax levels at the federal level will revert to what they used to be years ago, and people will be back into 6 or 7 million estate tax deduction limit again.

If you've hit that exponential compounding in your 40s and 50s, by the time you're reaching the end of your lifespan, you're certainly going to be looking at paying some of that estate tax. That's an issue that takes a time, takes a while, and it might take 2 to 5 to 10 years to make that transition from knowing that you're financially independent to knowing that you have enough.

Personally, we could see it coming when my spouse started her reserve pension at age 60. We could see that one coming from a way off. That made it very straightforward to do a Roth IRA conversion before she started her pension and also made it a little more challenging on the estate planning side.

Today, we are still spending our money. We are still withdrawing from our investments at the 4% safe withdrawal rate, but we're also aggressively drawing down our net worth, and by that I mean that we're donating to charity and we're gifting our family. We've continued this for a decade because we can see where we're going with this compounding.

I've written a book with my daughter about raising a money-savvy family. The other reason that you want to understand enough early in life as you can and start gifting your family and having these discussions about estate planning is that someday your family is probably going to be managing your finances for you, and they might even be selecting your care facility.

And so when that day comes-- not if, but when that day comes-- you probably want them to have at least as much financial literacy as you do, and you want them to be as comfortable with managing large sums of money in your estate as you have become comfortable at managing.

So you not only have an estate planning challenge financially, but you also have the challenge of educating your next generation of whoever is going to be your financial caregiver or your family caregiver, or finding a fiduciary that will do that for you when you approach the point in your life when you're no longer either interested or maybe don't even have the cognition to take care of that for yourself.

Got it. So what do you say to folks who enjoy their work and have no interest in retiring early? And I know it's easy to say, "You know what? They can keep working." Do you also think they just are unaware of how much more they'd enjoy freedom or flexibility?

Do you ever suggest people try out early retirement and they can always go back to work? I feel like you're feeding me some softballs here, but thank you. This makes it easy. Work as long as you're feeling challenged and fulfilled. And when you're financially independent, that gives you even more flexibility to decide that you're unwilling to put up with the dissatisfiers.

You might still feel challenged and fulfilled, but you're dissatisfied with the way your workplace is running. You're always one bad boss away from an hostile work environment or an environment you just don't want to be a part of. So once you've reached financial independence, that's your trip wire. And at that point, your choice is to wait until work stops being challenging and fulfilling.

Now, I've never had a bridge career. I've never done anything other than earn money from the military, but I've talked to literally hundreds of people who have continued beyond that. You're going to consider drawing it down, going part-time or becoming an individual contributor instead of a team leader. You might even consider leaving your employment and taking on a consultant role in your industry.

I especially see this among the higher earners, the people that reach financial independence and declare their financial independence and have worked enough and no longer want to work a blistering 40- or 50-hour-a-week pace will frequently become consultants. And that means that they might still be working a 40-hour-a-week, but it's on their terms now.

And they tend to be more entrepreneurial people who prefer to coach or to solve a gnarly problem for the corporation for probably a lot more money because they're buying their own health insurance, but mainly because they can have much more control over their work schedule and the people they work with.

So those are two options going part-time with your corporation or going into a consultant role. I guess a third option would be individual contributor. Those are all some options for when you've reached financial independence and the challenge and fulfillment is starting to fade away. I'd also suggest that you should get ready for the fact that someday you are going to retire, whether you think that's a good idea or not.

It could be involuntary from a layoff. It could be involuntary from a health crisis. It could be involuntary from someone else in your family who needs your support. And I don't mean just caregivers. I mean sustained disability or a critical disease or even a crisis. So the sooner you are ready to make that transition, the sooner you have things that challenge and fulfill you other than paid employment, the better you'll make that transition.

And ideally, you would make it on your terms. Another famous blogger, Jillian Johnsrud, talks about retire early, retire often. And what she means is take a series of sabbaticals or mini retirements. Now, I joke that she came up with this idea just to find a way to spend nine months of the year outside of Montana in the warmer weather down south.

But whatever you do to take your mini retirement, that gives you a chance to have those thoughtful conversations about what you want to do with your life, figure out how you want to spend your money when you're financially independent, and figure out how you want to spend your time.

And so they're very valuable. Just by taking a month or two off in the military, by taking six to 12 months as a sabbatical or even a gap year from work, an unpaid gap year, those are very valuable for helping you to plan where you're going with your life.

And I would say again, network in your industry to find the job you'd rather have after challenging and fulfilling has peaked or start looking at a book like "Designing Your Life" for something you can do after you've left your career and figured out what your other interests are. And somebody who wants to contact me, I can give you some more references, some more resources from other bloggers who have solved this problem for their version of their life that will give you inspiration for solving it in your own life.

- All right, that was great. Thanks, Doug. So you touched on some later years aspects. So I'm curious about your thoughts or insights on this particular quote from a New York Times article in January. And the quote is, "Some combat veterans can qualify "for long-term care coverage "under the aid and attendance benefits "paid by the Department of Veterans Affairs, "although the process of claiming those benefits "can be complicated." So can you talk a bit about long-term care available to military folks?

- The first answer for long-term care for military is it's not available. You probably have reached your financial independence and you'll never be eligible for long-term care from the Veterans Administration. If you have not bought a long-term care insurance policy, then your choices are to self-insure for long-term care.

You might also try to find a hybrid long-term care insurance policy that has a death benefit with some cash value that could be used for long-term care. The aid and attendance program from the Veterans Administration is intended for merit-based, needs-based veterans. There are some minimal asset limits and some minimal income limits that you'll have to reach spend-downs, equivalent to Medicaid, before you're eligible for aid and attendance.

But the program is there, and the part where they talk about it being hard to navigate the application process, that's a theme of being a military veteran. The vets who most need the support from the Veterans Administration and from special benefits like aid and attendance, those veterans are almost always the ones who are least able to navigate, to persevere, to handle the emotional burden of getting through that application process.

And again, I'm getting a lot of those questions from veterans of my cohort, of my baby boomers. I'm also getting questions from their adult children, and I've learned a lot about that, and I'm happy to try to help and refer to more resources. I will say that if you're a veteran or a family member who's trying to navigate that right now, today, go to the VA website, va.gov, and look for a veteran service officer.

That's somebody who has been trained by the VA and is paid by various organizations. Their services to you are free. A veteran service officer can help you navigate that application for aid and attendance, if that's what you're able to do, or to suggest you to other community resources. Most VSOs are actually in your zip code, in your town, and will be able to help you work with the patchwork of local community and county and state resources in addition to the VA.

-Fantastic. So it's just amazing how well-versed you are in so many different things. I know that a lot of people are going to appreciate the resources that you're sharing. Given how prepared you are on so many things, and it sounds like you do a lot of research, you spoke about, say, cognitive decline, and you're planning with your own family and you're getting questions from children of retired vets.

How are you approaching potential cognitive decline? -Again, this may be too much information. I feel like I'm being fed the questions again. This is all in a very good way, but I have a family history of dementia, and so to me, as a submarine vet who was used to making hard decisions and doing planning when I was on active duty, this is another phase of my life where I'd better get ready.

I have watched my grandfather dump a whole bunch of financial disaster on my father back in the 1980s when his cognitive bandwidth declined and he suffered from dementia. I watched my father promise my brother and me that his sons would not have to bear that burden. He made that promise for 25 years until he also succumbed to Alzheimer's and left a trail of financial disaster in his wake.

As you may imagine, my daughter looks at me a little nervously now, and I've made the same promise to her that my father made to me, and it's probably just as valuable in many ways to her as it was when I heard that from my father. I have a very strong internal motivation to avoid doing to others what has been done to me.

I don't want to make my daughter or my spouse responsible for taking care of a financial disaster if I lose my cognitive ability to do that. So this is kind of cold-hearted, but if my genome should happen to overcome my lifestyle and my diet and all my other healthy living, then I'd better be ready.

And as part of that, I've opened the family books. My spouse and I have both discussed our finances freely with our daughter. We have made an estate plan that includes our daughter having durable power of attorney. The reason I say that is a durable power of attorney is the only power of attorney that is still valid when the grantor is no longer considered to be mentally capable or who is incapacitated.

So we've already set up the mechanism to where my daughter can step up and do the financial management that she would need to do if my spouse and I went through a health crisis or we're in a horrible accident and we're incapable of advocating for ourselves, not just medically, but also financially.

My primary goal here is to ease the burden on my daughter and to ease the caregiver stress that I felt. That's important to me. I joke with her that I am a really nice parent, but it's all about me. I want to make sure that she doesn't suffer like I suffered dealing with my father and him dealing with his father.

So I can dig into the details of that estate planning. It's also on my website where I talk a little bit about that. If somebody's in that situation or if they're having to step up for an elder who can no longer manage their own finances, I'm pretty familiar with that.

The main resource I would recommend right now for everybody is a book by a woman named Cameron Huddleston. The name of the book is "Mom and Dad, We Need to Talk." Everybody's nodding their heads here. That's very good. "Mom and Dad, We Need to Talk" is a great library book to read and then to reflect on where you're going with not just your planning, but with the planning for the elders in your family.

Great. Thank you, Doug. So we're going to wrap soon. I want to end on a potentially high note. Mainly want to thank you for your time and insights and just being so accessible. So I'll mention three questions. Take them as you like. One is, to what extent do you see financial independence interest in the movement growing in the military?

That's one. Two is, do you still recommend joining the military? And three, how do folks find you? I'll answer the joining the military question first. And the answer is, don't join the military to get rich and don't join the military to reach financial independence. Those things could happen, but they could happen equally as well for you in a civilian career.

I don't know. You should join the military to be a part of something bigger than yourself, to work with a team of amazing individuals, some of them who you might grow to despise later, but you form a camaraderie that is probably very difficult to find in a civilian world.

I speak with experience, and I hear this from many military families. Join the military to learn new skills. Join the military to accelerate your life. Join the military to get an education, not just a college degree, but also on-the-job training and leadership skills that will put you far ahead of your peers in their 20s.

And if you end up being curious about submarine force, please contact me because we certainly need more people to join the submarine force. But all the branches of the military will give you a foundational level of those skills that you can use in one service obligation, whether that's a four-year enlistment or an eight-year officer commitment, and take those into the reserves or the National Guard or take those into a civilian career and use those as the foundation to build the rest of your life and to develop the human capital that the military has already shown you that you have.

So, yes, joining the military is a good idea, especially if you're in a bad situation and you want to get out and you want to be the person who escapes from whatever environment it is that you feel like doesn't offer you any way out. Is FI interest growing in the military?

Well, people are joining the military because they want to find a better life, and eventually finding financial independence helps them realize that they can reach FI in the military. And, again, it's not easy. It's relatively straightforward. It just requires a level of persistence and discipline. And, fortunately, if you're in a military family, you already possess an extra amount of persistence and discipline, and best of all, you know the line that divides frugality from deprivation, and you've spent far more on the deprivation side of that frugality line, so you're keenly aware of when you're working too hard and living in deprivation and you know how to dial it back a little bit and enjoy more of the challenge and fulfillment and the winning feeling of frugality while you're pursuing financial independence in the military.

I'll also point out that if you're a relatively junior service member, enlisted or officer in the military, and you discover somebody who's 10 or 15 years down the road who is saving for their own financial independence, you'll look at them and you'll say, "Gosh, I could do that job someday, and if they could reach financial independence on a military paycheck, then how hard could it be for me because I'm younger and smarter and I have more human capital?" And I think that's the thing that is mostly going to grow in the military financial independence movement is learning from the peers and from the mentors who have gone before you and taking advantage of all those tools that I desperately wish had been available in the '80s and '90s before the rise of the web has put that in front of everybody, not just military families.

And to answer your third question, I can be found at militaryfinancialindependence.com. I can also be found by searching online for Doug Nordman. I used to blog under The Military Guide, and that name is still out there on Facebook and Twitter. My blog, the original blog, The Military Guide, is now part of a friend's blog, The Military Wallet, so you can find a couple hundred of my blog posts at The Military Wallet under the byline Doug Nordman.

And I'm going to get my email address out here on the internet. It's okay. Everybody on the dark web already has this email address. It's nords@gmail.com, N-O-R-D-S, N-O-R-D-S@gmail.com. Feel free to send me an email or contact me on Facebook or on Twitter or through the blog, any of those, and please ask me your questions.

I have a lot of experience. I'm not necessarily smart, but I am experienced, and I have a lot of experience at looking up the references and asking those difficult questions and finding the answers. I will be at a conference next week that's all about military family finances, and I will be talking to the people in the Consumer Financial Protection Bureau's military branch.

I'll be talking to the guy that runs the Department of Defense's financial readiness program. I'll be talking with some of the military's top bloggers and podcasters and video producers, and I can find answers to your questions. So hit me up with those. If I don't know the answer, I'll go find out, and I'm paying this forward for all the other people who are trying to reach financial independence just as I was 40 years ago.

Fantastic. Doug, before we wrap, thanks again. You've been very generous with your time and insights. I'm dying to ask you this last question, so if I can squeeze it in. In your experience, what were the key factors in choosing where to settle, like where to reside long-term after you retired, and from your network of friends and folks who you may have seen they got it right at their first guess to settle, but other folks just kind of missed things and chose wrong and had to relocate.

So what goes into that decision? How do you get it right, and what can we learn from others? Put your family first, you and your family first, and that's probably going to be a location that offers the things you enjoy doing. If you enjoy an outdoor life, you probably want to watch out if you're moving north of the Mason-Dixon line.

If you like snow, well, then maybe Montana's for you, but the whole point is to find something that matches the activities and the things you want to do with your time. Do it for your family. Second thing is you probably want to live near other family members. If you're close to your family, to your uncles, aunts, cousins, that kind of family, then you probably want to settle there.

I would say that those two categories take priority over other annoyances like state taxes or cost of living or standard of living. You probably don't want to be commuting long distances to do the things you want to do, and you probably don't want to be commuting hundreds of miles to see your family, especially if they're having a health crisis.

So consider those two top priorities. Of course, if you don't get along with your family, if you don't have a family, or if you can literally go anywhere that you have bandwidth for the internet, you've got a much bigger part of the world open to you. Speaking of things in the world that are open to you, I would look at the website.

It's been developed by the Mustachian Forum. It's called The Earth Awaits. The Earth Awaits is not going to tell you what postal code to live in. It's not even going to tell you what country to live in, but it's going to give you a whole bunch of databases to look at as an inspiration for finding out what's important to you.

And by sorting through those databases and looking at what others have done, you'll be able to narrow down the potential choices for you. You might find out that you never do want to be a homeowner. You might find out that you just want to be a perpetual traveler. And I know many, many military families who do that for years, even decades, before they eventually decide to settle down somewhere just because they are done traveling.

So maybe you're not going to settle in one particular place anytime soon. In my case, we were transferred to Hawaii. It's a long story, but essentially, we thought we wanted to go to San Diego and the Navy had other plans for us. We ended up in Hawaii. After five years in Hawaii, including starting a family, we needed another duty station.

We'd run out of billets for my spouse in Hawaii. We looked around and- - What's a billet? - A billet is a job in the military. My spouse was looking for a job at her rank and her specialty. There were none available at that month and she ended up having to take one in San Diego instead.

So we moved to San Diego. And when we were in San Diego, we were both working at training commands. We were teaching other sailors and officers how to do their jobs. And we traveled to Hawaii two or three times a year to do some of that training because it's just cheaper to fly me to Hawaii than it is to fly 40 people to my classroom in San Diego.

When we did that, we noticed that flying back to Hawaii felt more like coming home than the trip back to San Diego's airport. And in the military, that's what we professionals call a clue. So we realized that that lifestyle was probably what we wanted to do our next few years of our lives.

And so we moved back here when we could. When we found more billets opening up in Hawaii, we leaped at that opportunity and came back to Hawaii in 1997. We've spent 32 of the last 35 years here, and I'm firmly entrenched in the outdoor surfing lifestyle. I love the climate.

I love the cultures. I love the residents around here. I'm older. My parents have passed away. My spouse's parents are older. They tried living in Hawaii, and now they've found their place on the East Coast. Our daughter's born and raised here. Our family is back here on the island now because her spouse has a billet here at a command on the island.

My daughter and her spouse are planning to send our granddaughter to mom's old schools. If you ever thought about that permanent record in your school system, that's when it comes back to you, is on a second generation. So we found the lifestyle that works for us after exploring and paying attention to our priorities and feeling the differences among the different locations.

We still travel two or three months a year. We still sit around and say, "Could we live here?" The answer frequently is yes. It would not be that hard. I would miss the kind of surfing I can do here in Hawaii, and I would certainly miss family and grandparenting.

I think, again, those are the most important things, is the personal activities, the family activities, and the family itself. Excellent. Thanks so much. You've been phenomenal. Communities around the world are grateful to you for sharing what you share so well. So thank you again. And thanks again to the team that helps put this together.