If I Only Knew Then What I Know Now – How to Catch up on Your Retirement Planning

Jeff Rose over at Good Financial Cents is a CFP who sees dozens of older clients. Nearly every week he meets people in their 60s and 70s who tell him “I wish I’d started earlier and saved more.

Recently I heard from a military spouse with the same sentiments. The difference is that she’s figured it out at a much younger age, and she’s already started on her plan.

Hi Nords, thanks for writing such a wonderful book. If I only knew then what I know now and had lived a strategic life– you can quote me on that!!

Here’s our story:

Spouse is active duty enlisted with one year left. I truly believe if he makes rank this year he’ll sign up for two more because it is in his comfort zone. We’ve been married for 10 years, but I tell him to do what he likes because he started this before I came into the picture. He’ll probably retire with a pension.

I was a single parent when we married but I managed to be successful in my career. I’ve had the opportunity to make lots of additional income– when we first married I made more than he did. I’ve always been a worker bee and never worried about taking care of myself. I worked two jobs for 10 freakin’ years because I remembered a time as a single parent when I didn’t have two cents to rub together.

Reflecting on those 10 years, I probably made at least $60K/year in my part-time job and $35K/year in my full time job. When I wonder where all the money went, I can tell you: we have three children between the two of us. Only our youngest is home with us now.

I estimate spending $40K in childcare alone for our youngest before first grade– plus food, clothing and additional childcare through the years. My oldest was cheaper but we spent at least $60K. My spouse’s middle child was a bargain because child support payments were relatively cheap. But when we were all together during the summers we tried to make up for lost time by taking the kids on expensive trips.

I never knew much about investments but knew I needed to have them. I contributed just enough to 401(k)s to get the match. I’ve had three jobs in our 10 years of marriage and I just rolled over the 401(k)s into my IRA when I left. I have about $15K in the Thrift Savings Plan and I used to have $25K in the IRA. (More about this below.)

Today I only contribute $100 per month to my IRA and I have a small taxable account. We’re renting out our underwater home (in another state) for less than the mortgage. To make matters worse, as an out-of-state landlord I was using credit cards to cover expenses and I racked up more debt. (We now have a property manager.) Speaking of debt, that is where the rest of all the extra money went from my 10 years of labor.

I received a late charge on one of the credit cards and got really angry. (I mean in my mind, you can call me a debtor but don’t call me a LATE paying debtor.) I flipped out and transferred $18K out of my IRA and paid off all of our debts. I know I’m paying taxes and penalties, but I actually feel great because now our only debt is the mortgage. With our other debts paid off, we’re really ready to start saving money.

Right now my spouse earns his pay and I’m currently bringing in $1500/month by working part-time as an instructor at the local tech college. I would like to keep teaching but I really need to spend the time training for my national certification. When transferring to new duty stations left me unemployed, the military threw spouse benefits at me like crazy. They paid for my additional training which will increase my income. (MyCAA even paid for my Registered Property Manager certification.)

I still have to finish competency exams before I can sit for the certification. This involves an hour’s drive to volunteer for the time and exams, which adds additional commute expenses as well. Unfortunately I am so burned out in this career field and really want to find an avocation. I’ve also been taking accelerated math classes so that I can complete my bachelor’s degree. That’s been a dream of mine since I was a baby toting single parent.

Our plan is to live below our means, maintain my part-time job, and start throwing all extra funds into investments.

My latest dream? Retire from active duty. Keep landlording our out-of-state home. Move to the east coast (near hubby’s family) and raise our youngest in the country where housing is cheaper. Use my college degree to leave this career and find an avocation. I’d eventually like to buy rental property for another source of income but I still have to learn how to do that.

Sorry for the long rant but it sure felt good to write it all down!!

Thanks for writing! I’ve learned that when I can write it all down, it helps me understand the problem. Then I can figure out what the next step should be.

You’ve been digging out of debt and now you’re making progress. If your spouse is enjoying what he’s doing then he should keep doing it until he’s had enough. You will both recognize when it’s time for him to retire. It won’t be difficult to figure it out. Until then you’re building your savings and the job security is a tremendous comfort factor.

You’re probably already considering these suggestions:

1. Build up your emergency fund. It can be small while your spouse is earning active-duty pay, but it should be big enough to cover a landlord’s major repair on your rental property. Find an amount that lets you sleep comfortably at night.

2. Consider contributing to the Roth TSP. The Roth TSP starts on 7 May, and it’s the world’s cheapest index funds. Try to max out your contributions to the TSP or the Roth TSP (however you decide to split it up). When your spouse retires then you can roll part (or all) of the TSP over to an IRA.

3. Teach yourself about asset allocation so that you’re comfortable putting your new savings into equity index funds. I recommend the Bogleheads.org wiki on investing and asset allocation. You could also read Rick Ferri’s book “All About Asset Allocation“.

(Rick is a retired Marine aviator; you can find his books in the library.) The more you know about AA then the more comfortable you are with stock-market volatility– and the less likely you are to panic during “buying opportunities”. Once you’ve figured out your AA, then try to max out the TSP and both your IRAs. Put any additional savings into taxable accounts.

4. If you’re not happy in your career then you’re going to burn out and get even more frustrated about the obstacles to certification. You want an avocation that’s fulfilling, interesting, and with autonomy. Could you use your certification & skills to focus on the teaching part of the field? Would that be an alternate avocation? Or maybe it’s worth talking to your base’s transition office about a new career search with those factors. I can tell you that the best time to explore a new avocation is “now” rather than “later”.

5. Do you have the GI Bill working for you and your kids? That would help you finish your college degree (if that’s not already being paid for) and fund some of your kids’ educations. The key is for your spouse to sign up to transfer eligibility, even if it’s just one month for now with more later.

6. You probably know enough about living below your means, but if you want to hone your skills then you could check the “Military Family Finances” forum at the Dollar Stretcher, as well as their other community forums. I’m perpetually amazed at how those posters can squeeze a nickel, and I mean that in a good way.

7. Review your insurance. Make sure you have enough insurance on your rental property, your vehicles, and your personal property. You could save a little on the premiums by choosing a higher deductible, but keep those premium savings in your emergency fund to cover the higher deductible. You could drop the comprehensive & collision insurance on your older vehicles if you put those premium savings into your vehicle replacement fund. The key is to insure yourself against a catastrophic loss or to have your own funds saved up for the expense.

8. Review your insurance again. Your spouse should have maximum Servicemen’s Group Life Insurance now. (Hopefully he already updated it to make you the beneficiary instead of an ex-spouse.) When he retires you should select the maximum Survivor Benefits Program (it’s your choice, not his). If he starts a bridge career after military retirement then he might need additional term insurance to protect his income. Once you start earning the big bucks then you should consider term life insurance for yourself, too. The idea is to cover each other with enough to finish raising your kids while you continue a career.

9. If you have the temperament for landlording, then I’m a fan of doing it near a big military base. (The trick is to make sure the military base doesn’t shut down on you and bankrupt the community.) Landlording is much easier if you’re within a short drive of your property, but a property manager can keep you out of trouble for a tour or two. Learn the property market around the base and start going to open houses to talk with realtors.

Eventually you’ll know the area well enough and they’ll start calling you about bargains. The two best books I’ve read on the subject are (1) Investing in Real Estate, 4th edition or later, by Andrew McLean & Gary W. Eldred (who’s taken over the new editions) and (2) Landlording by Leigh Robinson (7th edition or later).

(The books are probably at your local library.) Another website for hard-core financial analysis of a rental property is Frank Gallinelli’s “Real Estate Investment” blog. Subscribe to his blog, read his archives, and learn about assessing the financial potential of a rental property. You’ll also learn how to maximize the potential of your current rental property– eventually the area will recover and you’ll be able to raise the rent to generate cashflow.

10. Focus on your progress, not your regrets! It sounds like you’ve done a great job of raising a family under tough conditions. It hurts to remember where all that lovely money went, but at the time you were doing the best you could with the skills and knowledge and opportunities that you had. Now you’re smarter, and the pain of the experience has given you the motivation to succeed. Consider the money to be tuition payments to the School of Life, and now you have a graduate degree in the subject. Now that you’ve paid off most of your debt, it may take you fewer years to achieve financial independence than you expect.

Thanks for sharing your story, and please keep us posted!

Related articles:
Military retirement with low savings
Is the Roth Thrift Savings Plan right for you?
Save or invest?
Is the 4% withdrawal rate really safe?
Military retirement: how much can I really spend?

About Doug Nordman

Author of "The Military Guide to Financial Independence and Retirement" and co-author of "Raising Your Money-Savvy Family For Next Generation Financial Independence."
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