Military Financial Independence

Retirement Lifestyles: “Can I Get Back Into The Military?”

Posted on March 3, 2016 by Doug Nordman

A reader question has hit my IN box several times this year:

“My spouse retired from the military after 20 years of active duty and is receiving their pension. They’re in their 40s and they miss it so much. Is there a way for them to get back in? I know they’d be happier serving than just receiving a deposit every month.”

This conversation goes a lot better when it’s started by the person who misses the military, although I appreciate that spouses are concerned– or even perhaps a little tired of being around the problem. It’s not an easy conversation, but this problem won’t go away on its own.

The short answer is “No, you can’t return to active duty.”

Image of old woman's hands holding an American flag as a metaphor for separating from military service| The-Military-Guide.com

Someday we’ll all leave the military.

In this case, it’s due to age, although all the services have experimented with waivers up through the late 30s. I’ve read that a handful of retirees have returned to active duty for short stints of 30-90 days for unusual skills like trauma surgeon or electrical utility grid operation in a battle zone. Other times it could be for a few months developing a special program or research project. Although the answer is usually “No”, if the retiree has a unique skill then they can always talk with the command who needs that skill and let that sponsor help with the waivers.

There may be a deeper retiree problem: they may not only miss the military, but they may have most of their personal identity wrapped up in the military. This is especially common among senior leaders (both officer and enlisted) who may have been responsible for large commands with hundreds of servicemembers. They may have had a great title, an important mission, a large office filled with military memorabilia, and perhaps even a staff to keep them happy. Retiring from that billet can be a huge loss of a temporary identity! That loss is exacerbated if the retiree tries to replace the mission (and staff) with home, spouse, or even family. Retirees have to create their own missions.

Most retirees never have this identity problem. Some knew when they’d seen enough and they wanted to retire from active duty. Others may have looked months ahead and realized that they’d be asked to retire at the end of a tour. The problem can be particularly vicious for retirees who expected a promotion or a follow-on assignment and were abruptly disappointed by the military’s changing priorities. If you’re a hypercompetitive overachiever who thinks the finish line is still years away, it’s difficult to change your plans and priorities in a matter of weeks.

It’s your transition.

Retirees (and all military veterans) have to take charge of their transition. Whether it’s a long-planned retirement or an unexpected discharge, they have to regain the initiative and figure out what brings them challenges and fulfillment. It’s perfectly fine to miss the military, and even to mourn the loss of a particularly strong identity or a choice billet. However, everyone eventually leaves the service, and everyone has to be responsible for their next steps.

There’s always serving the military in another capacity. Contact your local base’s Retired Activities Office, volunteer with a JROTC program at a high school, volunteer as a candidate guidance officer for students considering a service academy, or work with a veteran’s organization like MOAA. It could be as simple as taking a couple of shifts per week or a full-time job at a family support center.

Another idea is volunteer service with other military veterans. Look into disaster recovery with Team Rubicon, or helping with a local wounded warrior program, or volunteering with almost any other community non-profit organization. The key is to figure out what they really miss (leading a group? military camaraderie? mentoring and training?) and then find a way to do it without the military uniform.

A final suggestion is Ernie Zelinski’s Get-A-Life Tree. (Mr. Zelinski wrote a couple of outstanding books about the transition, too). Use it to jumpstart your thoughts and find creative answers that are way better than doing what you’ve always done before. This can also be used by couples and families to come up with shared activities.

I’ve had a copy of the Get-A-Life Tree on my desk for nearly 14 years, but frankly, I’ve been too busy to make the time to fill it out. I don’t want to get back in to the military, but I’ve found my way to continue to pay it forward and mentor while I enjoy the camaraderie. I surf a lot, too!

Explore your new life!

Surfing brings me to another important point: flexibility. I’m 55 years old now, but when I was in my mid-30s I could see that my military career would end at age 41. By then I’d discovered books like “Your Money Or Your Life” and “The Millionaire Next Door”. My spouse and I realized that we were close to financial independence and could choose almost any bridge career we wanted.

As we explored our options, I realized that I didn’t want a traditional corporate career. (Financial independence gives you the freedom to explore.) I knew that I’d find something challenging and fulfilling, but what I really craved was autonomy: more control over my time.

I could have started a corporate career during my retirement leave, but I’m glad that I didn’t. On the official day of my retirement, as a sort of family joke about our new life together, we took surfing lessons. I was hooked and I knew that I’d want to spend much more time at it. Nearly 14 years later, every time I’m in the dawn patrol lineup at our local break, I watch about half of the crowd reluctantly glance at their watches and paddle in to go to work. It’s a frequent reminder that financial independence gives you choices.

When you leave the military, it’s fine to mourn the loss of the life you’ve built. It’s even acceptable to feel a little sorry for yourself about leaving behind a great identity or the world’s best billet. But all the skills you’ve learned in the service make you capable of taking charge of your own transition and leading yourself to your next life. Instead of pining for the things you think that you’re leaving behind, look ahead. Figure out what’s important to you and find a way to add those things to your new life.

Check the “Related articles” section below the book link for more posts on this topic, and more solutions.

The book (scroll down a couple of inches) has great suggestions on other activities, too. Look for it at your local library or buy it online.

Posted in Career, Military Retirement | 12 Comments

“Should I Invest In The Thrift Savings Plan Or In Taxable Accounts?”

Posted on February 11, 2016 by Doug Nordman

A reader writes:

Nords, I’ve been tracking you across a few blogs and appreciate the military perspective. I just bought your book as well so I am looking forward to flipping through that. Anyway I am trying to set mine and my wife’s savings to combine the 40% you mention here with the pension for a cushy retirement. Do you have any advice on how to allocate savings across accounts? My numbers give me a higher average standard of living if I contribute about 30% to taxable accounts and 10% to the Thrift Savings Plan, which goes against all advice to max out retirement accounts. As you are currently living in the gap between retirement and TSP withdrawal, do you wish you had allocated one way or another?

Before we talk about accounts, here’s a minor emphasis on one point: if you maintain a 40% savings rate for 20 years then you’ll reach financial independence without the pension. The advantage of the high savings rate is that you don’t have to count on gutting it out to 20 for the pension. If you’re no longer challenged and fulfilled by active duty, you can choose to leave for the Reserves. It’s far better than grimly hanging on for 20 years (and sitting on a slightly larger pile of money) while risking your health and burning out.

I’m not sure where your numbers are coming from, and feel free to share them here or e-mail them to me. Frequently this difference arises when the taxable portfolio has a substantially different risk/return asset allocation from the TSP. Your first check on your analysis would be to make sure that those high-return taxable accounts are using benchmarks identical to the C, S, and I funds. Your second check would be that the fund performance is assessed over as long a period as possible (at least the lifetime of the fund). Too many fund companies will cherrypick the dates for their performance claims.

The reason I suggest this is because a passive equity index fund with low expenses will almost always outperform the vast majority of actively-managed funds (and their higher expenses) over a decade. There are a handful of exceptions to this generalization (like Berkshire Hathaway), but even then you’d have to be able to pick out those exceptions from over thousands of funds.

Here’s a link comparing the TSP’s funds to their equivalent Vanguard & Fidelity funds. Check their long-term performance against the TSP, and decide which you’d rather invest in.

From the tax perspective, the Roth TSP and Roth IRAs generally win again because military compensation is very lightly taxed. (Allowances aren’t taxed at all.) With income-tax deductions and tax credits, it’s possible for junior military families to pay almost no taxes. You’ll save more money during your investing life if you pay taxes now and invest in the Roth TSP and Roth IRAs before investing in taxable account. The same logic applies to a civilian employer’s Roth 401(k), especially when you maximize the employer’s contributions to those retirement accounts.

When you’re just starting out on active duty, especially with dual incomes and a high savings rate, you can invest in a high-equity portfolio. The TSP’s L2050 fund or any combination of the C, S, and I funds will do just fine.

Admittedly in the junior ranks it’s tough to max out the Roth TSP plus two Roth IRAs. However, you have to make the most of the Roth TSP (and the Roth IRA) contributions every year before that year’s opportunity is lost forever. When you promote to the next rank (and have a big pay raise) yet continue to live on your lower expenses, then you’ll be able to max out those contributions much more easily.

When my spouse and I were contributing to our TSPs, we contributed the maximum amount and invested in the S and I funds. (Small-caps and international funds generally have higher expense ratios than other funds, so we used the TSP for those assets and put the rest of our asset allocation in our Roth IRAs and taxable accounts.) I wish we could have contributed even more to the TSP: for the last decade our taxable accounts have been >90% invested in equities at an average expense ratio of about 0.25%/year, at least 8x the TSP’s expense ratio. In the 1980s-90s (before the military could invest in the TSP) it was even worse: we paid fund expenses of 1%-2% in our taxable accounts. Yet even at those high expenses we still saved enough to reach financial independence. Despite two recessions over my 14 years of retirement, today that’s grown to “way more than enough”. Life is definitely cushy.

If your spouse’s income includes a 401(k) then you should try to contribute enough to least maximize the employer’s match. 401(k)s have higher expenses than the TSP, but the employer’s match will probably overcome even a higher expense ratio.

Image of the Thrift Savings Plan's new matching contribution rules under the military's new blended retirement system | The-Military-Guide.com

Click on the image for a larger view.

So the priority for your 40% savings rate is TSP, 401(k) to the match, Roth IRAs, perhaps the rest of the 401(k) to the limit, and then even more in taxable accounts. Your asset allocation can be high in equities using passive index funds with low expense ratios.

When the military’s new blended retirement system starts in 2018, newer servicemembers might benefit from converting to it. In that case, you’d absolutely want to maximize your contributions to your Roth TSP account to obtain all of the DoD match.

You’ve asked a great question. Keep reading and learning all you can about investing. Your asset allocation (and your entire investing plan) also has to help you sleep comfortably at night despite stock-market volatility. The best way to do that is to read about investing and the markets so that you can confidently stick to your plan when the media is screaming about selling everything.

Continue that learning by checking the “Related articles” section below to learn more about your TSP and Roth IRA options while you’re in uniform and afterward.

Posted in Money Management & Personal Finance | Leave a comment

One Last Post Before The Pro Bowl Presented By USAA

Posted on January 30, 2016 by Doug Nordman

Short bonus post today: the runup to the Pro Bowl continues.

Thursday’s pre-game event was “Marine For A Day” up at Kaneohe. I can’t show it any better than this NFL player getting to try on a set of explosive ordnance disposal gear:

NFL #ProBowl players get to experience a day in the life of a Marine on base today. #SaluteToService pic.twitter.com/dTyst24AnJ

— USAA (@USAA) January 29, 2016

Once again it was hard to tell which groups were the bigger fans of each other: the Marines or the football players.

On Friday our USAA group recorded the Pro Bowl players practicing for the game. These are the teams picked by Wednesday’s draft, and they’re spending today and tomorrow figuring out their playbook. This year the team is staying at the Turtle Bay Resort up at Oahu’s tip of the North Shore, so they held the practice at a field by the golf course instead of riding a bus all the way down to Aloha Stadium.

The real thrill during the practice was having a player wander over to the sidelines every few minutes to sign autographs. They worked particularly hard to meet the kids and the servicemembers who showed up in uniform.

The Saturday Pro Bowl practice seems to be an event for NFL ticket holders, but there are several Waikiki Pro Bowl events that are open to the public. I’m going to take a break on Saturday and get in some sorely-needed dawn patrol surfing, but on Sunday I’ll be at Richardson Field at 10:30 AM for the tailgater.

My thrill? I don’t follow football, but I really enjoyed the conversations with everyone. Every 15-20 minutes, for over four hours, I found myself with a servicemember talking about Hawaii life or surfing or personal finance or military careers or making the transition. I met a lot of impressive military and spouses. Today alone I’ve handed out over 20 cards with my website & e-mail address. (NordsNords -at- Gmail.) I can’t wait to see what questions pop up into people’s minds after the Pro Bowl is over.

Personal financial independence: one reader at a time.

This is my final Pro Bowl post– I’m not going to analyze the game on Monday morning or put up more blog photos of the tailgater or the game at Aloha Stadium. However, I’ll be tweeting from both places, so follow along on Twitter or Facebook to enjoy a little more sunshine. When I pick up my ticket, I’ll post my seat location so that you can drop by to say aloha.

Posted in Travel | Leave a comment

The Pro Bowl Presented By USAA

Posted on January 28, 2016 by Doug Nordman

[Note: my condolences and sympathies to those of you digging out from Winter Storm Jonas. I grew up in Pittsburgh and was incarcerated at Annapolis for four winters, so I know how it feels. It’s why I live in Hawaii now. There’s a very good reason that the Hawaii Tourism Authority and the Hawaii Visitors & Conventions Bureau work so hard at this time of year to promote the Pro Bowl and other visitor attractions.]

[USAA members with storm damage can use the mobile app to file a claim (with your mobile photos!) and call a member service rep for assistance. If you don’t have USAA insurance then consider getting a USAA membership and a quote.]

We’re ramping up to Sunday’s Pro Bowl tailgater– and, oh yeah, the football game.

Those of you who know me well are probably smirking as you read: Nords at the Pro Bowl?!? I know, “pearls before swine.”

For the rest of you, here’s a confession: I hardly watch TV, I no longer follow football rankings or statistics, and I can’t even spell ESPN. The last time I got excited about the NFL I was an impressionable young teen in the 1970s, back when Terry Bradshaw had hair and Mean Joe Greene was making Coke commercials. But one of the USAA staff noted that I have a reputation as a numbers guy (guilty) and I’m fascinated by the tech and financial aspects of the business. They wanted an articulate military veteran (that would be me) sharing the Pro Bowl events from a different perspective.

Hawaii doesn’t even have a professional football team– and when’s the last time you saw the UH Rainbow Warriors in the college national championship? Never mind, don’t answer that.

Steeler Nation is everywhere!

No worries: no ticket buyers were denied access to let me into the game. In fact, USAA and the NFL gave away several hundred military passes to the pre-game events, and more tickets to the game itself.

That’s because Hawaii has tens of thousands of football fans. They might be a little island-style low-key, and there might be 32 different groups of them, but locals still enjoy a good professional football game. The islands also produce a surprisingly large number of high-caliber college and professional players.

It’s even better when you can vote for your favorite players to bring their families to Hawaii in January to enjoy the sun, surf, and sand– and maybe autograph a few jerseys.

The Pearl Harbor boat tour

Image of USS ARIZONA Memorial USAA tour group including COMPACFLT Admiral Swift and NFL football player Hau'oli Kikaha | The-Military-Guide.com

PACFLT Boathouse before the tour

Tuesday’s trip around the harbor was offered to three NFL players (and USAA’s staff & families) by the PACFLT Boathouse.

Frankly, this is a tough tour to get because it’s in high demand. You might have to know somebody, or your teen has to want to go to the Naval Academy, or you arrange it as part of a military retirement ceremony. This was my third one (in 26 years) and it’s still as impressive as the first. It’s not just cruising by the USS ARIZONA Memorial and the USS MISSOURI Memorial. It’s also a glimpse of the restored WWII air traffic control tower on Ford Island’s Pacific Aviation Museum. It’s seeing the USS NEVADA Memorial on Hospital Point. (The ship my daughter is on, the USS ROSS, is named for Donald K. Ross, who received the Medal of Honor during the attack for leading the engineering effort to get the USS NEVADA underway that morning.) It’s a reminder that the USS UTAH Memorial is right around the other side of Ford Island, and that the USS BOWFIN at the Submarine Museum is nicknamed “The Pearl Harbor Avenger”.

USS MISSOURI Memorial

It brings back personal memories. When I was stationed at the Naval Submarine Training Center Pacific, you could walk around Building 39 on Ford Island and see the concrete patches filling in the bullet holes. You could sit out back in the old smoking area, where several times a year WWII veterans would walk up to mentor, I mean, chat with you about their experiences during the attack. You could visit the COMSUBPAC admiral’s base house and see the concrete rooms in the basement’s old coastal-defense gunnery foundation where terrified families sheltered on 7 December 1941.

If you have the time, your small boat could take a 10-minute detour to the site of the West Loch Disaster. I’d never even heard of this WWII incident until a retiring shipmate asked for the admiral’s barge to go there.

Remember. Honor. Understand.

2016 is the 75th anniversary of the attack, and USAA will be sponsoring more Pearl Harbor events for servicemembers & families.

The tour’s three NFL players are from the islands: Hau’oli Kikaha (playing for New Orleans), and retired brothers Chris & Ma’ake Kemoeatu (with three Super Bowl rings between them). Like many kama’aina, the last time they’d toured the USS ARIZONA Memorial was during an elementary school field trip. They were thrilled to be able to see Pearl Harbor from this new perspective.

Image of four people in front of a wreath at the USS ARIZONA Memorial USAA wreath ceremony | The-Military-Guide.com

USS ARIZONA Memorial wreath laying

Our boat tied up at the Memorial to deliver a memorial wreath in the hall before the marble wall listing the names of the 1177 USS ARIZONA crew killed in the attack. The Memorial was open for visitors, and over a hundred people were hearing the history of the attack and how the Memorial was built. I’ve been on the tour a dozen times and it still gets to me.

(Trivia fact: I learned a lot of this information when I was fortunate enough to edit the expanded 10th edition of Michael Slackman’s “Remembering Pearl Harbor”. You can buy it online or browse it in the book store at the Memorial’s Visitor Center.)

After the boat tour ended, the NFL players met with a group of Naval Station sailors while the USAA crew worked on more interviews and video for this week and for future marketing products. I enjoyed chatting with the Kemoeatu brothers about life after football (a transition process similar to life after the military) and with Hau’oli about how his career is growing. He’s not a sports stereotype– he’s had a lot of time to think about his priorities and his local family, and he’s making sure he does football right.

The Pro Bowl Draft

Image showing Army attack helicopter surrounded by media interviewing military and NFL players for a Pro Bowl TV commercial | The-Military-Guide.com

Shooting a commercial… take #17.

The draft ceremony was held at Wheeler Army Airfield. (Before the comments start, I’ll backtrack a second to point out that this base was attacked about five minutes before Pearl Harbor. Several American pilots got into the air and scored the first dogfight kills of the Pacific war.) Wheeler is going through a huge multi-year renovation (my spouse and I drive by there a few times a month) and it’s becoming one of Oahu’s best-kept secrets for base housing and incredible tropical scenery.

This draft had none of the tension or suspense of the NFL rookie draft. If anything, it was more like the middle-school pickup game where you worry about being the last player picked for the team. I’ve never seen so many gigantic humans gathered in one big room to enjoy the ambiance while talking trash at each other. Hey, the coaches, players, & fans decided who could be here.

The Army’s attendees seemed to be having a good time, too. Pro Bowl Draft tickets were donated by USAA and the NFL for hundreds of servicemembers & families to view the event, and it was broadcast live on ESPN2.

Image of cameras everywhere among attack helicopters at Wheeler Army Air Field for the Pro Bowl draft event

“Best seat in the house”

The TV set for the draft was closed to all but a small audience of 50 military (too much noise on the set!) so most of the attendees were on the flightline or in the hangar next door. I spent my time brushing up on my helicopter recognition training and talking with the flight crews, but I was surprised at how many NFL players were out there with us. They could have stayed in the cool hangar drinking cold beverages and yummy pupus, but instead, most of them jumped right in among the helicopter crews– peppering them with questions and asking about war stories. Tyler Eifert even carried around a football helmet and asked the helicopter crews to give him their autographs.

Let’s just say that defensive linebackers don’t seem to fit into the cockpits of attack helicopters. One crew chief admitted that they’d spend most of the next morning fixing parts that were accidentally snapped off as people got in & out of the helos, and then another hour checking that all the switches were in the right positions.

Among the camera crews from USAA (commercials and member stories), the NFL, and the local media, we had a professional photographer for nearly every football player.

The rest of the week

So what are the players and fans doing for the next few days?

Well, that’s the funny part: only a couple days of football.

If you’re reading this post on the day it’s published, today is “Marine For A Day” at Kaneohe Marine Corps Base. It’s a private event for the Marines and families with the players and I won’t be tweeting from that. Being Marines, I predict they’ll be supervising NFL players generating plenty of expended ordnance and a few demonstration explosions.

Friday and Saturday is practice time, but with a twist. Instead of public events at fields around Joint Base Pearl Harbor Hickam as in previous Pro Bowls, this year the players are up at Turtle Bay Resort. Rumor is that they’ll use football fields at the resort or at local high schools where fan attendance will be limited to teens & student coaches.

Oh, there’s also plenty of meets & greets. The players are visiting local hospitals & charities, including Wounded Warriors at Tripler Army Medical Center. The media might occasionally run an interview or show coverage of the players getting ready for the game. But most of the people who flew here are seeking a couple of days of sunshine, surf, and sand along with the military events. Maybe it’s not the single-minded hard-charging aggressive pursuit of victory that’s happening on the Mainland this week, but if you’re not in the Super Bowl this year then it’s a great consolation prize. And if you live here, we call that “quality of life” or “island style”. If you’re going to work hard, then you’ll play hard.

Me? I’m still trying to convince a few of these Mainland folks to ride a longboard. They seem skeptical that if a veteran in his 50s with bad knees can learn to surf, then almost anyone can do it.

By the way, the Hawaii Tourism Authority just announced that the Pro Bowl will be played on Oahu next year on 29 January 2017. USAA will be sponsoring another week of activities for military & families. Save the date and make your travel plans now!

Related articles:
“I’m Goin’ To The Pro Bowl With USAA!”

Posted in Travel, USAA | 2 Comments

I’m Goin’ To The Pro Bowl With USAA!

Posted on January 21, 2016 by Doug Nordman

If you’re at the Pro Bowl events next week, please stop by and say hello. I’m the 5’10” 190-pound middle-aged balding ponytailed surfer dude who’ll probably be wearing sunglasses, surf shorts, & t-shirt. And SPF50 sunscreen in the middle of winter because, you know, Hawaii.

Brought to you by…

Most of the tickets to the pre-game events were handed out to active-duty servicemembers & families. You can probably still get your hands on a Pro Bowl ticket, and if you’re at Aloha Stadium then you can track me down on Twitter or on my Facebook page. I’ll post regularly on social media during next week and at the game itself.

USAA has been the NFL’s “Official Military Appreciation Sponsor” for nearly five years, and they’ve helped shine a big spotlight on the military at games and other NFL events. * As part of that campaign, I’m one of the select few USAA Member Community bloggers who was invited to cover the Pro Bowl. (Well, maybe it’s because I live here too. But I digress.) USAA is showing their appreciation for our servicemembers & families with a chance to share in the pre-game festivities. I’d like to chat with some of you to share your stories of how USAA has helped you over the years. In return, if you have questions about financial independence or USAA services & products, I’ll be happy to supply the answers.

On the afternoon of Tuesday 26 January, I may be on the Remembrance Tour of Pearl Harbor aboard the admiral’s barge from the PACFLT Boathouse. I’ve spent quite a bit of time on (and in) Pearl Harbor in the last 26 years, and it’ll be a pleasant change of pace to see it without being on duty.

I’m also planning to cover the Pro Bowl Draft on Wednesday 27 January from a secure location on a military base. It’ll be broadcast live because, you know, Hawaii. Laugh all you want, but our visitor numbers take a big jump in February.

On game day, Sunday 31 January, around 10:30 AM, I’ll be in the parking lot of Richardson Field with the USAA team to assist whoever needs help identifying our local kine grindz at the tailgaters. (No worries, we will post Twitter photos.) During the game, I’ll be wherever USAA and I think we can find military families to chat with.

The Pro Bowl only happens once a year, but USAA has more events planned for Hawaii. They’ll be a prominent participant around Oahu in 2016 as we prepare for the 75^th anniversary of the Pearl Harbor attack. (For many WWII veterans and their families, this may be the last Pearl Harbor ceremony that they’ll attend.) My spouse and I have spent quite a bit of time at the USS ARIZONA Memorial, and it’s fitting that USAA is supporting the motto of “Remember, Honor, Understand”. Keep an eye on USAA’s website during 2016 for more information.

(* Yes, I can already predict a comment! Some of you may be concerned that your insurance premiums are spent on military appreciation events at football games. However, that marketing tactic costs a lot less than direct mail or traditional media display ads, and it’s bringing in a whole new generation of members who did not realize that they’re eligible. They actually use more products– and spend more money– than us older members. This sponsor expense has a return on investment because the new members are holding down our insurance costs!)

Posted in Travel, USAA | 2 Comments

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