Ten years from now, my husband and I will be eligible to be young, fabulous, and semi-retired as he approaches his 20th year in military service. We knew, going in, that the 10-year mark would be our do-or-die-in-or-out deadline for deciding whether or not he’d stay in the service for the long haul or bow out for employment opportunities in the civilian sector. Well, we’re in it to win it. Twenty years, here we come.
The United States Military has one of the most generous, albeit well-deserved and hard-earned, pensions around. After dedicating 20 years of service to our country, my husband will earn a 50% pension, calculated by averaging the last three years of his base pay based on time in pay grade. But that’s not all.
In addition to his vested benefits (earned pension), we opted into participating in the Thrift Savings Program, or TSP for short, which functions as the military version of a 401(k). TSP initially operated as a tax-deferred investment program (meaning you don’t pay taxes on any funds saved until you withdraw in retirement after age 59 ½), but now TSP offers “Roth” like investment options that allow you to invest already taxed monies, which means that you can opt to pay today’s tax rates instead of tomorrow’s.
“Why we like ‘Roth TSP’ investment options: We’re banking on the fact that we’ll pay a higher tax-rate in our retiree years since we plan on continuing to work. We’d rather sock away post-tax dollars today at a lower income tax rate, rather than withdraw taxable cash later at a higher income tax rate.”
Funds range from conservative to aggressive investment strategies or you can elect to participate in fully managed life-cycle funds (L Funds) that automatically tweak your holdings from an aggressive strategy the further away you are from retirement to a more conservative investment approach the closer you get to retirement.
In addition to my husband’s military retirement and taking advantage of the Thrift Savings Plan, he’s also paid into the Montgomery GI Bill (MGIB), which we’ll be converting into the Post-9/11 GI Bill to help us cover our two girls’ higher education costs. Early in his career, he opted to use his Tuition Assistance (TA) benefit to complete his master’s degree that will not only help propel him through his military career, but also translate to better job opportunities once he leaves military service.
So what about me? What have I done to contribute to our big retirement plans? I thought you’d never ask. As a military spouse, maintaining full-time employment has been a big challenge for me over the past 10 years, but that doesn’t mean that I can’t contribute toward my own retirement savings. When I was working full-time, I contributed to my employer’s 401(k) plan and I still have those accounts. I also opened a Roth IRA where I’ve consistently invested $200/month, whether I was working or not, since 2008.
“Don’t be a boomerang parent! One of our biggest motivations for saving for retirement are our children. I think we’ve all heard about boomerang children, but what about boomerang parents? The last thing we want to do is become a burden to our children once they become adults. Consider your retirement planning to be the very best gift you can give your children bar none.”
Not sure where to start or what to do? You’re not alone. We didn’t really know what we were doing at first, but we knew that setting aside something was better than setting aside nothing. We put our retirement savings on autopilot by setting up a systematic savings plan via my husband’s paycheck. After a few years of muddling through on our own, we worked with a certified financial planner to help us make sure our retirement was on the right track. Meeting with a CFP was such a great experience; not only did we learn a lot, we got great advice, and tons of validation that we were taking the right steps to secure our financial security in retirement.
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