Military Financial Independence

Book review: “The Longevity Project”

Posted on May 27, 2013 by Doug Nordman

“Come on, you [men], do you want to live forever?!?”

— Marine Corps First Sergeant Daly, Belleau Wood
(slightly edited for a family-friendly blog)

One of the challenges of financial independence is “longevity risk”, where you ensure that your assets will last as long as you do. Unfortunately when we stop working for a paycheck (even at the “traditional” age of 65) most of us have no idea how long our assets will have to last. If you stop working in your 40s then the actuarial odds are pretty good that you or your spouse will be around for another five decades. Even the Internal Revenue Service has noticed the issue and revised the IRS required minimum distribution tables to reflect longer lifespans (and lower RMDs). Financially, the only way to hedge longevity risk is through annuities like a military retirement, Social Security, or an insurance contract.

But longevity is not just financial probabilities and statistics. If you’re going to minimize your financial longevity risk, how can you also maximize your longevity? For example, Dominguita Velasco turned 112 years old on Mother’s Day. That’s not a typo: one hundred and twelve years old, yet she’s barely in the top 30 centenarians whose ages have been authenticated. They’re humanity’s fastest-growing age group.

So what’s Ms. Velasco’s longevity secret? “Stay happy.”

The researchers of “The Longevity Project” have nearly a century of data, but it fails to confirm Ms. Velasco’s insightful analysis.

The book cover of "The Longevity Project" on what promotes long lifespans.

How long will you live?

The data came from a study that began in the early 1920s when a Stanford psychologist interviewed over 1500 elementary school children. Dr. Terman was looking for bright kids whose intellectual potential might be identified by its early signs and tracked to its fulfillment. (Terman invented the Stanford-Binet IQ test, which is still in use nearly a century later.) He checked back with his group every decade or so until the early 1950s, and then followup interviews were carried on by his successors. When “The Longevity Project” authors began their study, they spent a tremendous amount of time and effort tracking down all the death certificates of the participants. By verifying their subject’s ages and causes of death, they completed the collection of one of the 20^th century’s largest and most detailed databases of human health and longevity.

The children profiled by Dr. Terman were born between 1900-1925. A few of them lived into their 90s and as of 2003 over 200 of them were still alive. They dealt with the Great Depression, a world war, and the Cold War. They led America’s 20th-century expansion in population and technology, and they represented a typical segment of its middle class. A few found fame & fortune and some were well-known in their professions. They also died at all ages and of almost every cause, so the researchers could test many theories about the factors affecting their longevity.

Several books have been published on the study. “The Longevity Project” represents 20 years of analysis by Doctors Friedman & Martin, assisted by over 20 graduate students and other PhD collaborators in various research specialties. They explored the data from many different aspects and then compared their results to other (shorter-term) studies in physiology, psychiatry, sociology, mental health, and aging. They were even able to compare some of their data to the Grant Study, another longitudinal database of 268 Harvard undergraduates that continued for 75 years.

By today’s standards, Terman’s original study was flawed. The chosen children were recommended by their teachers and selected for IQ results. They were overwhelmingly white, middle-class, and from California. They were also a product of their times, when women had limited opportunities while these particular men were offered exceptional favor for their gender and race. Dr. Terman interfered in the study by writing recommendation letters for some of his subjects and even exerted his influence to get others admitted to Stanford. Years later, however, he concluded that IQ did not correlate to achievement. After modern researchers accounted for the study’s flaws, they agreed with him.

Friedman & Martin looked at longevity, not potential or achievement. They debunked some surprising conventional wisdom of their own. Based on their data, all of these myths appear to be false:

The good die young.
The bad die late.
Married couples live longer.
You’ll live longer if you take it easy and don’t work so hard.
Happy thoughts reduce stress for a long life (contrary to Ms. Velasco et al).
Worrying is bad for your health.
Don’t be so serious. Be more spontaneous and have more fun.
Religious people live longer.
Vigorous exercise is better for longevity than gardening or walking.
You’ll live longer if you believe that you’re loved and cared for.
You’ll live longer if you retire as early as possible.

So what works? Surprisingly, the words “prudence” and “persistence”. Children who Terman had assessed as “conscientious” were highly correlated with longevity. Modern society is all too familiar with the Darwin Award for a lack of conscientiousness (“Eh, brah, hol’ ma Primo an’ watch dis!”) and more conscientiousness also promotes longevity. It not only leads to healthier habits but to better friendships, improved workplaces, and happier marriages.

What’s wrong with thinking happy thoughts? It turns out to be a two-edged sword. There are positive health aspects to being cheerful, but it can also result in a happy-go-lucky disregard for health. Centenarians like Ms. Velasco are optimistic, but the problem with studying this age group is that darn near all of them are smiling. There’s no comparison group (the ultimate “survivor bias”). Happiness seems to be a result of longevity, not a cause of it. It’s more likely that they’re happy only because they survived so long– not because lifelong happiness makes them healthier. Ironically, some studies determined that worrying and neurotic behavior were better survival tactics than maintaining a cheery outlook.

Since this is a blog about financial independence and retirement, I’ll skip ahead to the end of the list. Does early retirement really reduce your longevity? If that’s the case then I’d better type faster.

The most notorious claim relating early retirement to early demise is the Boeing Study. Although it’s been debunked, it regularly resurfaces and resonates across the Internet. Other studies purporting to prove the same conclusion do not distinguish between early retirement for health reasons versus early retirement for financial independence. Once the data is corrected for that difference, there’s no correlation between early retirement and shorter lifespans.

There’s also no correlation between early retirement and longer lifespans! In fact the data seems to conclude that working longer leads to extended life. “The Longevity Project” authors analyzed this hypothesis against their data and determined that the actual workplace correlations to longevity are conscientiousness, prudence, persistence, and productivity. If you satisfy those factors through working for a paycheck then you’ll live a long life. If you satisfy those same factors by reaching financial independence and retiring early, while still maintaining your personal productivity, then it also turns out that you’ll live a long life. If you retire early due to poor health, or if you retire early to vegetate on the couch all day (perhaps sipping margaritas and nibbling bonbons), then your longevity is also dramatically reduced.

By the way, the definition of “retirement productivity” is up to you. In the workplace, it’s usually measured by happy customers, meeting deadlines, and cashing paychecks. If you’re financially independent then it’s whatever you find entertaining and fulfilling. That could be training for an Ironman triathlon, working on your house & garden, painting portraits, or simply reading & writing. If you’re active and happy then you’re probably healthier and more likely to live longer.

If you’re curious about marriage and religion, you’ll have to read the book. (It’s been out for two years so you’ll probably find a copy at your local public library.) The important longevity factors turn out to be the quality of those two institutions for their participants, not merely their membership.

Despite the flaws of the original Terman research, “The Longevity Project” is still the world’s best collection of lifespan data. Regardless of why it was started, it offers insights on what led to long life in the 20^th century. Death certificates are objective evidence of the cause of death, and a tremendous amount of data was collected on these people as they lived their lives. The analyses conducted by Drs. Friedman & Martin are peer-reviewed, statistically rigorous, and frequently confirmed by other sources.

Better yet, applying their recommendations won’t require any radical lifestyle changes. We can pick & choose from their results and implement the concepts which suit our confirmation bias. Just by reading the book and reflecting on our own lifestyles, the placebo effect can practically guarantee an improvement in our own longevity.

One day you, too, might be offering the media your own analysis of how you managed to stay alive for so long. And when you do, you’ll be happy about it!

Posted in Reviews | 10 Comments

Military Retirement and Divorce – How Does a Divorce Impact Military Retirement Pay?

Posted on May 6, 2013 by Doug Nordman

A reader writes:

“If my ex husband was active duty for 10 years and 20 years Reserve and he has 5300 retirement points at the rank of O-6, how much will he receive? I will receive 50%.”

After exchanging more e-mail, we learned that her ex-spouse is under the Final Pay retirement system (for those starting their military service before 8 September 1980). He filed for Reserve retirement in 2006 and will turn age 60 in late 2013. When their divorce agreement was mediated it was agreed that she would get 50% of his retirement and “spousal insurance” benefits.

Disclaimer: I’m a fast learner, but I know very little about military benefits for divorced spouses. Military divorce is a complex issue with many of the answers depending on state law and the wording of the divorce decree. Even though I can come up with a slew of numbers to answer the pension question, ex-spouses still have to check their divorce agreement. The decree also has to be filed with the Defense Finance and Accounting Service in order to claim the divorce’s pension payments. If any of this seems confusing or conflicting, it may be due to the extensive differences among state laws. It’s essential to consult a divorce lawyer with experience in military benefits.

Reserve retirement is also nearly as confusing as divorce agreements. Most of my reader questions come from servicemembers, not the spouses. If the servicemembers are confused, then imagine that you’re a military spouse who’s not quite sure how the system works, and you’re not aware of what information sources could help you learn more. If your spouse is hiding the facts during a bitter divorce then the research becomes nearly impossible.

For example, I’m sure millions of veterans have heard of the legendary military retiree who refused his pension so that his ex-spouse would not get her share of it under the Uniformed Servicemembers Former Spouse Protection Act. (One state court eventually handed down a judgment awarding her that amount regardless of whether he was receiving his pension.) A Reserve servicemember could try a similar tactic that’s completely legitimate, although ethically dubious and financially disastrous. Instead of applying for “retired awaiting pay” status, they could elect to be discharged. “Retired awaiting pay” means that at age 60 the pension will start at the max longevity for their rank and at the pay scale in effect when they turn age 60. That’s what 99.9% of Reserve officers choose, but “retired awaiting pay” means that they’re still technically eligible for mobilization.

A discharge has no risk of mobilization, but discharge also means that longevity and pay scale are frozen on the date of discharge. At age 60 the pension would start at their rank and longevity that they held on the date of discharge (their actual years of service) using the pay scale in effect on the date of the discharge (not the pay scale in effect at age 60). If a Reservist wanted zero risk of mobilization (or if they wanted a smaller pension to spite an ex-spouse) then they could choose a discharge. However, choosing “discharge” instead of “retired awaiting pay” means that years of missed pay raises can reduce a pension by 10%-50%. An unsympathetic court could still award the ex-spouse the pension share that the retiree should have elected.

Even when a servicemember elects to “retire awaiting pay”, they won’t know the precise amount of their pension until they turn age 60 and can use that year’s military pay tables. However, the pension amount can be estimated using today’s 2013 pay tables and then making hopeful educated guesses about how military pay will keep up with inflation until age 60.

In this reader’s case the divorce decree splits the pension (50% to each) and the Reserve retirement starts later in 2013 (the current pay table).

The military retirement pension formula is:

Pension = (service multiple) x (pay base).

“Service multiple” comes from the number of years of service or Reserve drill points (two different formulas). “Pay base” is different from “base pay”. It’s the pay amount calculated for the “Final Pay” or “High Three” retirement systems. We’ll come back to that in a few paragraphs.

Let’s start with the easier part of the retirement pay calculation: the service multiple. For a Reserve retirement it’s:

Service multiple = (# points) / 360 * 2.5% .

(The divisor is 360, not 365, because military pay is based on 30-day months. There are 360 days in a year of 12 30-day months.

For this reader’s situation the service multiple is:

5300 points / 360 * 2.5% = 36.806%.

The pay base for “Final Pay” is simple: the highest base pay scale earned on active duty or in the Reserves. That Final Pay number is in the O-6>40 column (maximum longevity) of the 2013 military pay table: $10,736.70/month.

The pension would be:

36.806% x $10,736.70 = $3951/month. The ex-spouse’s half of that would be $1975/month.

If the retiree’s date of initial entry into military service (DIEMS) was 8 September 1980 or later, they would be under the “High Three” retirement system. That requires calculating the average of the highest 36 months of base pay. If the retiree was turning age 60 in October 2013 then their High-Three average base pay (from O-6>40 pay tables of 2010, 2011, 2012, and 2013) would be $10,520.95.

36.806% x $10,520.95 = $3872/month.

Unfortunately, that pension amount may not be the final answer. The USFSPA legislation only affects the retiree’s “disposable retired pay”, which is the pension amount minus authorized deductions. Among the authorized deductions is “amount of retired pay waived in order to receive compensation under Title 38 (Department of Veterans Affairs) of the U.S. Code”. (See Q#10 of the USFSPA FAQ at that link.) In other words, some disabled military retirees have a smaller DoD pension because they waive a portion of it in order to receive that amount from the VA.

Mahalo nui loa to Rob Aeschbach and Jason Hull for correcting my misunderstanding of the VA disability process and helping me check my references. The specific statute is in section 1408(a)(4)(B) and (C) of Title 10 of the U.S. Code and a more specific divorce discussion is at this link.

Here’s a brief example. If a military retiree has a $1000 pension and his divorce decree awards 50% to his ex-spouse, each would receive $500. If the retiree is determined to be eligible for $200 of VA compensation, they waive $200 of their (taxable) DoD pension in order to receive $200 of (untaxed) compensation from the VA. Now their “disposable retired pay” is $800 and the ex-spouse would receive $400: $100 less than they expected. The divorce decree can anticipate this issue by changing the pension payments to the ex-spouse (still limited to a max of 50% by USFSPA legislation) or awarding more funds (alimony) from other marital assets.

If a retired veteran has a disability rating of at least 50%, or combat-related disabilities, or a Chapter 61 disability retirement, then the situation is even more complicated– and far beyond the scope of this post. Seek professional legal advice.

The rules got even more complicated in 2008. Although most Reserve pensions start at age 60, a few Reservists are eligible for a pension that starts earlier. They had to deploy to a combat zone for at least 90 days anytime after 28 January 2008. For every 90 days that they deployed during a fiscal year after that date, the starting age of their pension is 90 days earlier down to as young as age 58. “Luckily” that wasn’t the case in this situation, because the ex-spouse would have to ensure that she filed her application with DFAS before the retiree’s pension began.

Ex-spouses have to “claim” their portion of the retiree’s pension at by filing with DFAS before the pension starts. If the claim isn’t filed soon enough then DFAS will not pay retroactive to the start of the pension. This is controversial and a lawyer may be able to suggest a resolution of missed pension entitlements, but the problem can be avoided by filing the claim before the retiree starts drawing their pension.

Three more issues for this ex-spouse: first you should check whether you’re eligible for Tricare healthcare at age 60, followed by Tricare For Life healthcare at age 65 (second payer to Medicare). Many financial aspects of divorce can be negotiated while other military benefits are set by law. The expert in what’s known as the 20-20-20 rule is “Ask June” at Military.com.

Next, you’ll want to check your “spousal insurance” paperwork that you negotiated during the divorce. It sounds as if you’re describing the Reserve Component Survivor Benefit Plan, which certainly covered you for the last seven years. If your ex-spouse has been voluntarily paying SBP premiums on your behalf then he can change his mind and cancel the insurance after paying two years of premiums (starting at age 60). If he remarries then he can change the beneficiary to his new spouse, but the wording of the divorce decree may affect that. If you trust that he’s treating your honestly then you’re probably getting the straight story. If you’re not sure then you need to seek a lawyer who understands military divorce, the RCSBP, and Former Spouse Coverage.

Finally, you probably already know that you may be entitled to a portion of your ex-spouse’s Social Security benefits based on his and your earnings records.

I’ll end this post by encouraging military spouses to educate themselves on their benefits. As Kate Kashman writes over at Military.com, the more educated and involved you are then the better you’ll be able to take care of yourself and your family. When your spouse is working on their military career, they can use your help to make sure that you both understand your pay, allowances, and benefits and use every program you can. When they’re deployed and you’re managing the family finances, you’ll need to know what you’re entitled to and where to find it. If you ever have to deal with divorce like this reader, the day you visit a lawyer is the worst possible time to start a personal cram course on military benefits acronyms.

Posted in Military Life & Family, Military Retirement, Money Management & Personal Finance | 16 Comments

Lifestyles in Hawaii: Hawaii Island (the Big Island)

Posted on April 15, 2013 by Doug Nordman

Let’s take your mind off your tax returns for a more interesting fantasy subject.

A reader writes:

“Hi Nords – my spouse and I are thinking of moving to the Big Island for early retirement. I spent time working in Hawaii during my career and absolutely loved it. We are thinking of taking a risk and moving to an area designated lava flow 2 because the only way we could swing this money-wise would be by moving to the Big Island. Any tips regarding local resources (websites, blogs, books)?”

Believe it or not, it’s the third time I’ve been asked that question in 2013. The Mainland winter must have really sucked this year!

You can probably think of plenty of reasons to move to Hawaii. I certainly understand why– my spouse and I plan to spend the rest of our lives on Oahu. Instead of building on your confirmation bias, however, I’m going to take a contrary approach: I’m going to suggest reasons why you might not want to move here. At the very worst you’ll have full disclosure. If you’re already an informed consumer, then I doubt anything I say will change the way you feel. You’ve experienced some of the island lifestyle, so I hope that none of this will upset you or discourage you. My family and I love it here, but Hawaii living makes a few people feel as if they’re stranded on a lump of lava in the middle of the ocean!

Hawaii blogs, books, and media websites

I’ve linked my blog posts that you might want to read. You’ve probably seen most of this before, but it could spark a thought or start a discussion. The first one is very good for zooming in on satellite images of real estate listings. The next four links bring up issues worth considering:

10 good reasons not to move to the islands (pitfalls you’ve never considered)
Tsunami in Hawaii (two years in a row) (Hilo Harbor was destroyed twice in the 20^th century)
Military retirement in Hawaii (more pitfalls)
Hawaii long-term travel tips (adapting to local life)

Those posts also link to these books, blogs, & websites. As always, try your local library for a copy before you buy a book:

So You Want To Live in Hawaii
Your Ideal Hawaii Move: A Guide For Moving to Hawaii Island
Affordable Paradise: The Secrets of an Affordable Life in Hawaii
How To Live In Hawaii
Hawaii Threads (large forum of threads on moving to Hawaii… or leaving)

If you haven’t already been reading the local news then here are a couple of links to get you started:

Hawaii Tribune Herald (The Big Island newspaper website)
Big Island Now
Big Island Weekly
Civil Beat (Their “Fact Check” section debunks political claims)

Those are the newspapers & websites that I’m familiar with, but I haven’t been on the Big Island in several years. You may find better media as you click around those. Read these for several months before you move here. Get a feel for the local media, politics, living conditions, and social issues. If it seems like small-town news, you’re absolutely right.

Living with lava

I’ll admit that I had to look up the classification of the “Lava flow 2” zone, but you can already predict where this is going. Take a look at this profile of Hawaii Island’s Ka’u community (that link downloads a 5MB PDF) and see the definition on page 4-47, along with adjacent pages showing the images of various existing flows. You’d be living “adjacent to and downslope of active rift zones”. Kilauea Volcano is not too far uphill from you, and it’s been erupting continuously since 1983. (There’s also the probability of frequent temblors.) I guess that means you buy your home for cash and pay higher insurance rates– if you can get home insurance. Just be aware that if a home is selling cheap on the southeast side of the island (the Ka’u/Puna/Pahoa area) there’s a good reason for the discount.

Here’s an example of living with lava. One of our favorite vacation rentals is in Kapoho Beach below Pahoa. Kapoho had some damage from a lava flow in 1960, so later when they rebuilt(!) the neighborhoods they had to excavate and re-landscape. As part of that, they dug an extensive system of shallow canals through backyards. You can swim (or stand-up paddleboard) from your house all the way out to the ocean, watch the honu cruise around your back lanai, and generally enjoy a very mellow resort environment. However, the water in these canals is warmed by subterranean lava flows. You start at the surface in 75-80 degree temperatures, and by the time you’re eight feet deep it’s in the 90s. The unspoken part of this lifestyle is that the lava might break through anywhere and retake the whole neighborhood. 53 years later, so far so good. Next year?

While we’re talking about natural disasters hazards, let me beat the insurance question to death. Insurance might hypothetically be available for residences in lava flow 2 zones, but it’ll be expensive– if you can get it at all. USAA, one of the nation’s largest insurance companies, actually stopped writing homeowner’s policies in Hawaii (except for first-time homebuyers) for nearly a decade. It wasn’t necessarily the tsunami zones, the hurricanes, or the drought-caused fires. They stopped insuring here because their analysts determined that they’d concentrated too much risk in a relatively small geographic area and couldn’t afford the exposure. In a lava flow 2 zone you might even have trouble with vehicle and personal-property insurance, let alone homeowner’s insurance.

(19 April supplemental note: See the end of this post for additional information from USAA.)

Hawaii has had two tsunami in the last two years (minor damage). The Big Island has many minor temblors (Kilauea lava) but the last major earthquake was 2006 (isolated damage). It’s been over 20 years since the state has had a major hurricane. While the odds of having a hurricane are about the same every year, the odds of extending our hurricane-free streak are dwindling.

Vog

Volcanic fog is mostly suspended sulfur dioxide droplets emitted by Kilauea’s caldera, near the home you’re considering. It pollutes the entire state and in my unscientific estimate, it’s been much worse for the last few years. One or two days a month look like a big-city inversion layer– and that’s on Oahu. I can’t imagine how much worse it must be on the Big Island. I’ve seen a 10% drop in the output of our photovoltaic array during bad vog months, and again that’s over 200 miles away on Oahu. Vog usually clears out after 2-3 days when the tradewinds resume, but the south side of the Big Island has much higher levels. Vog also makes you feel congested and snuffly, and if you have any respiratory issues then you’ll get very irritated.

Shipping, cell phones, and Internet service

Other minor annoyances: you will pay dearly for shipping to Hawaii from Mainland websites. (In some cases the shipping is higher than the item’s price.) More than 50 years after Hawaii statehood, I still encounter eBay sellers and “customer service” reps who tell me that they “won’t ship outside the United States”. You may also find that Internet bandwidth and cell phone services lag the progress of some third-world countries. It’s not the fault of the government or the providers. It’s the engineering challenge of stringing fiber across 2500 miles of open ocean and then having to cover every ridge & valley on the island with cell-phone towers. We have 4G service on some areas of Oahu, but I get excited when my DSL speed test is over 2 MBPS.

Schools

I don’t know if you’re raising kids, but I get the education question several times a year. Hawaii’s public school system has an undeservedly bad reputation compared to Mainland schools. This reputation does not reflect the island’s multicultural and multilingual challenges of teaching youngsters how to read & write English (let alone pidgin). Our daughter did just fine in the local public schools (with plenty of Advanced Placement classes) and got into a top-ten engineering college. (USNA was her “safety” school.) Setting aside all of the media attention and political manipulation, I think the biggest factor in the school system is the parents. Your kids will acquire your values & priorities (and your study habits). When our daughter got to her Mainland college, she immediately noticed that her new classmates are keenly focused on academic achievement and perhaps less on work-life balance. I don’t care about getting into Harvard, and I’d rather attend a high school with competitive teams in canoe paddling & surfing.

Roads

How hard could it be to lay a strip of asphalt on the ground where it never freezes?!?

Hawaii highways and streets are consistently ranked among the nation’s worst. Subsidence and potholes are particularly bad because the groundwater table is so high. In areas with frequent rain (like Hilo’s afternoon downpours) the water soaks into the road surface and causes the roadbed to move. Before long a pocket forms, the asphalt collapses, and potholes grow like tropical flowers. Winter downpours and hurricanes lead to flash floods which can take entire lanes or even bridges. The state is still seeking the magic mix of substrate (mostly concrete) and asphalt, but even those substances can be in short supply when they have to be shipped 2500 miles or recycled out of the existing road.

The Hilo area has relatively good roads, but the further you get from the population centers then the more likely you are to be driving on two-lane strips laid around agricultural plots. People (especially local residents) speed and occasionally wander over the center line. Accidents are surprisingly common. A few people who move here from the Mainland complain about not being able to drive for miles in a straight line at 80 MPH. Bumper stickers are common: “Drive with aloha.” “Slow down. This ain’t the Mainland.”

Having said that, Hawaii has the world’s most polite drivers. I hardly ever see anyone cutting each other off. Vehicles neatly take turns when two lanes merge into one. It’s considered extremely rude to use your horn, unless you recognize a fellow driver and you’re giving a “howzit honk”.

Family matters

Here’s my anecdotal list of the major reasons people move back to the Mainland just a decade or two after moving here. I love Hawaii life, and I’m a globe-trotting submariner accustomed to the ocean and small spaces, so my perceptions may be biased:

“Rock fever” of living in a geographically constrained area.
Other than Honolulu/Waikiki, much of the state is small-town lifestyle.
Honolulu is a small city. Los Angeles and San Francisco are the nearest big cities.
Difficulty adjusting to a multicultural lifestyle, very different from your hometown.
Lack of affordable housing for parents’ adult children.
Young adults build their careers on the Mainland.
Grandkids are on the Mainland.
Aging elders and other relatives are on the Mainland.
Mainland friends only visit a few times a decade.
Flying to the Mainland 4-5 times a year gets old real fast.

Experiential real estate research

The best advice I can suggest would be to move to the Big Island for about three months– preferably the summer and fall, with August-October being particularly “hot & miserable” by local standards. Find a vacation rental in your desired location through AirBnB or VRBO and see how you like the traffic and the amenities. Although big-box stores have been in the islands for over 20 years, you still may be dismayed by the commuting distance to a large food retailer like Costco, or a large home-improvement store.

You’ll want to check local realtor’s websites and subscribe to their newsletters. However, I’d be cautious about contacting local real estate agents until you’re actually on the island.

Plenty of my friends & neighbors are realtors, and they’re great people, but their experience has taught them to be aggressive with inquiries from the Mainland. The typical Mainland buyer is either rich not price sensitive or else they’re strapped for cash and unlikely to generate a big commission. The first will buy relatively quickly (with less realtor effort) while the second will buy very slowly (with considerable realtor effort, bordering on minimum-wage earnings).

In both cases, the realtors have learned to create an artificial sense of urgency and to push hard to close a sale as quickly as possible. To avoid disappointment on both sides of the relationship, don’t contact a realtor until you’re on the island. You know your way around and have an idea of where you’d like to live, so you don’t need a realtor yet. When you get here and settle in, start visiting Sunday-afternoon open houses and do your own research. The more knowledgeable you are before you contact a realtor, the better both of you will do.

Keep an eye on what the real estate listings don’t say. Of course, there are plenty of modern neighborhoods with sewers, electricity, and water systems, but you’ll pay a higher price. A few “affordable” bargains might be totally off the grid: photovoltaic panels for electricity, septic systems for sewage (in a volcanic lava field?!?), and catchment tanks for drinking water. People can adjust to these lifestyles and do just fine, but they can be an unpleasant surprise if you don’t realize what you’re getting into.

2200 words later, you might be reconsidering the idyllic Hawaii lifestyle. (Of course, if you’re a surfer then this is just a list of minor quibbles.) However, over 1.3 million people live here in multicultural harmony, and you’ll find your niche. You’ll definitely change your lifestyle, and Hawaii will change your attitude. (I’ve lived here longer than anywhere else, and now when I travel I feel more at home in Asian countries than I do in Texas or California.) I hope this post helps you avoid unpleasant surprises, and that you’re ready to give the experiment a few months!

19 April note:

As a blogger, I share an affiliate relationship with USAA that’s raised a good sum of money for military charities. I’ve also been a USAA customer for over 30 years, along with all of the ups & downs implied by such a lengthy relationship. It’s saved our Ohana Nords thousands of dollars, especially for our teen driver. My comments on USAA above are factual and based on my personal experience. They’re mentioned as an example of a lava-zone property insurance challenge which is so scary that even USAA hesitates to try to insure it.

But maybe I spoke too soon and put words into their actuary’s mouths. Here’s USAA’s view of the prospect:

“Matching price to risk is an essential element of helping protect our membership and maintaining our ability to pay covered losses. USAA offers property insurance on a limited basis in Hawaii and other areas with high exposure to hurricanes and perils including lava flow.

One solution offered to members is specialized insurance for these areas through alliances with a variety of insurance companies through The USAA Insurance Agency. This approach helps balance the association’s financial well-being with our mission to facilitate the financial security of our members and their families.

USAA is currently issuing new Homeowners policies in Hawaii and we would encourage members to contact USAA for a quote.”

Our homeowner’s policy is up for renewal, and I’ll be sending them a copy for their quote!

Posted in Travel | Comments Off

Reserve Military Pension for “Discharge” Instead of “Retired Awaiting Pay”

Posted on April 11, 2013 by Doug Nordman

“Am I eligible for a military retirement?”

A reader writes:

“I hope you can answer my question, or point me to more information. After more than 20 years in the Army National Guard, including a year of deployment in Iraq and numerous temporary home-station full-time orders, I went into the IRR. I was caring for an elderly parent and could no longer serve. I had originally thought I might return to the Guard, but that turned out not to be possible, and I ETS’ed from the IRR. I received my “twenty-year letter” the year before I went into the IRR.”

“I had read about the process to apply for retirement, but I wasn’t sure if my situation in going into the IRR had made a difference. I didn’t receive any information from the Guard when I went into the IRR, and I didn’t get any information from the Reserves either. I didn’t really pursue it, either, as it was an incredibly stressful time for me – my parent’s final years of life were difficult, and the decision to leave the Guard was the most painful in my life. I had very little contact with the Reserve unit that I was assigned to for IRR – I never even got an ID card, and I have no “grey card” now – the person in charge of making ID cards always seemed to be gone when I went there. The Reserve unit is over 50 miles from my home, and I could not leave my parent at home alone for more than a short time without getting a home-care aide to come in, which was very expensive.”

“I wasn’t given any information about having a choice of retirement. I was given an honorable discharge when my ETS date came. It came in the mail. I didn’t get any package of information, from the Reserves or the Guard. I didn’t get any counseling of any kind.”

“Am I eligible for retirement pay? What do I have to do? Thanks for any help you can offer.”

First the good news: Yes, you’re eligible for a National Guard military retirement. You received your Notice of Eligibility (the 20-year letter) before you were discharged. Your pension will probably start at age 60 but there’s a remote chance that it could start up to a year earlier. Your Tricare benefits will start at age 60.

The “other” news is that you have some paperwork to catch up on. You may also need to make a decision about Survivor Benefit Plan insurance. Luckily most of this can be started online.

You say that you ETS’d from the IRR. That can take two forms: “retired awaiting pay” or “resign”. If you elected were handed the “resign” option then you’ll need to request a retirement pay application packet. That’s described at the Army National Guard G1 Personnel Gateway. You could contact your nearest Army National Guard unit to start the process, or you could phone another unit in your state to discuss the retirement packet. The Army National Guard G1 staff doesn’t list their phone numbers or e-mail addresses, but you could start with the Army Human Resources Center. More links and forms are at the Army National Guard G1 Personnel Gateway website page on applying for non-regular retired pay.

You may be told that you should start this paperwork no more than nine months prior to the date at which you’ll be eligible for retired pay. However, you’ll probably still want to make sure that you understand what websites to use to start that process and who you could contact for help.

The discharge means that your retired pay will be calculated on the pay tables in effect at the date of your ETS and on the years of longevity in your rank at that time. In other words, your pension eligibility did not keep up with inflation. If that’s the case then don’t use a military retirement pay calculator— their numbers will be too high. You’ll need to manually calculate your retirement pay, or have it done by the National Guard or the Defense Finance & Accounting Service. Although you may have to wait until nine months before your retirement begins to request your retirement package, you can ask for the calculation now.

One other wrinkle: If you were deployed to a combat zone after 28 January 2008 then you may be eligible for retired pay a day earlier for each day of the deployment. You would have had to serve at least 90 days after the date of that legislation, and your retirement pay would start at least 90 days earlier. However, your Tricare medical benefits would still start at age 60.

I’ll put some pension amount numbers on a generic example that you can tailor to your specific rank and service dates. (I’m going to cherry-pick numbers that will avoid messy calculations & fractions, but in most cases, the math is carried out to three decimals and rounded to two.) Let’s assume that two E-8s complete 21 years of service with 5400 points by the end of 2002. One of them chooses to “retire awaiting pay” while the other (for personal reasons) elects to resign for a discharge. (Resigning means that they cannot be recalled to Reserve/Guard duty and cannot be mobilized.) They’ll both be age 60 on 1 January 2013 (10 years later) and will start drawing their retired pay then.

Because they both joined the service after 7 September 1980, they’re under the High Three retirement system. Their “base rate” for determining their retired pay will be the average of the highest 36 months of pay that they earned. However, here’s where the difference in their retirement decisions kicks in.

Calculating the Pension Difference

I don’t have a link to the Army Reserve instruction, but here’s the wording in the Navy’s Reserve instruction BUPERSINST 1001.39F (whose revision is nearly finished and should be back on the BUPERS website in a month or two*):

“Note that for purposes of entering the pay tables, a member’s longevity starts with the pay entry base date (PEBD) and continues to accrue as long as the member holds Retired status until the member starts to draw retired pay. Because of this standard, most reserve members will max out on the longevity scales by the time they reach age 60.

“Also note that should a member request and receive a discharge, instead of transferring to Retired Reserve status, at an age of less than 60 years, longevity would no longer accrue and base pay would be calculated on pay scales available at the discharge date.”

The E-8 who “retired awaiting pay” will receive their pension at the pay tables in effect when they turn age 60, and at the maximum longevity for that rank. (This is the reward earned for accepting the risk of being recalled to Reserve duty or even mobilized before age 60. Admittedly it’s a very small risk, but it’s a risk.) During the years before they file for retirement and actually start drawing their pension, the value of their pension will keep pace with the growth of the military pay tables. There’s no guarantee that military pay will keep up with any wage or price indexes, but Congress and the service chiefs know that they have to be willing to pay for military readiness.

This E-8 would use the military pay tables for the three years before they turn age 60: 2010, 2011, and 2012. Because their longevity continued to accrue while “retired awaiting pay”, they’d use the maximum longevity for their rank. Their E-8 monthly pay scales for these years are $5336.40, $5411.10, and $5497.80. The average of those 36 months is:

[12x$5336.40 + 12x$5411.10 + 12x$5497.80] / 36 = $5415.10.

The E-8 who was discharged would use the pay tables in effect at the date of their discharge and at the longevity held at discharge. Their E-8 monthly pay scale for their longevity was >18 years in 2000 ($2875.50) & 2001 ($3041.10) and >20 in 2002 ($3420.30). (Of course, if they went >18 or >20 during the year then you’d use some months in one longevity column and the rest of the year in the next longevity column.) The average of those 36 months is:

[12x$2875.50 + 12x$3041.10 + 12x$3420.30] / 36 = $3112.30

You can already see that for this particular example the Reserve/Guard member who was discharged instead of “retired awaiting pay” has suffered a heavy financial penalty for having no risk of recall or mobilization during those 10 years. Their pay base for the pension formula is only 57% of the amount for the “retired awaiting pay” servicemember.

Once the retirement High Three “pay base” has been determined, the Reserve/Guard retirement pension calculation is the same for each servicemember: their points are divided by 360 (12 30-day months in a year) and multiplied by 2.5%. In this case it’s 5400 / 360 x 2.5% = 37.5%.

The pay base is multiplied by the percentage and rounded down to the whole dollar to get the monthly pension amount.

E-8 retired awaiting pay: $5415.10 x 37.5% = $2030.

E-8 discharged: $3112.30 x 37.5% = $1167.

Back to the reader’s question: the Reserve unit discharged you without counseling, so they could be hypothetically be accused of negligence in their retirement processing. You may be entitled to appeal your discharge and have it revised to “retired awaiting pay”. It’s also possible that the Reserve unit decided that your need to care for your parent meant that you should not be at risk of recall, so they made the decision for you. In that case (whether or not the decision was made with your input) the appeals process may determine that the decision was the correct response to the situation.

Of course, your actual pension calculation will be different from this example. You’d use your actual rank and longevity pay table column at discharge as well as your final point count. Comparing your actual “discharge” pension to a “retired awaiting pay” pension may also require some speculation. If you’re younger than age 60 then you’d have to predict what the pay tables might look like at age 60. Only then could you estimate how much the Reserve unit’s actions cost you.

I can’t predict how an appeal would turn out, and you’d need to seek the advice of your own attorney. The difference between the two pensions in the example is $10,356/year. (In your case the difference might be less.) I don’t know how much a lawyer would charge for drafting the appeal and pursuing it, but it could easily be over $10,000. In addition, it could drag on for months or even years of processing and more appeals to higher authority. This is a very hard decision to make on your own, and a lawyer would help you frame the discussion. However, in this case, you may very well only receive the justice that you can afford to buy, and even then your appeal may be turned down.

Do any of you readers have any other advice? Have any of you ever processed an appeal of “retired awaiting pay” versus discharge? Contact me or send me an e-mail, and I’ll pass it on to this reader.

[* Thanks to Navy Reservist Mark Bell on Linkedin for updating me on the BUPERSINST 1001.39 status.]

Posted in Military Retirement | 4 Comments

Reserve Military Retirement For Active-Duty Veterans With Previous Reserve Or National Guard Service

Posted on April 8, 2013 by Doug Nordman

Thanks to David McDonald for sending the comment that led to this post!

This information applies to only a handful of veterans, but it may earn them a military retirement. You could be affected if you were in the Reserves or National Guard and then went on to serve an active-duty service obligation (more than a mobilization).

Servicemembers who separated from active duty before reaching 20 years of service are rarely eligible for an active-duty retirement (and then it usually involves a temporary early-retirement authorization or a medical issue). However, if you separated from active duty but had lengthy prior Reserve/Guard service, then you may still have reached eligibility for a Reserve/Guard retirement. If you’ve been in uniform for at least 20 years with a combination of Reserve/Guard service and active duty then you could be eligible for a Reserve/Guard military retirement.

Back before April 2005, Reserve/Guard retirement eligibility had to be attained in a Reserve or Guard unit. Servicemembers who reached 20 years had to serve their final six “good years” in a Reserve/Guard unit. I’m not sure why this requirement existed, but it meant that Reserve/Guard retirees were almost certain to be serving in a Reserve/Guard unit before they retired. Their service’s Reserve/Guard personnel staff had full cognizance over the tracking of their points and their good years.

When extensive military mobilizations began after 11 September 2001, it became painfully clear that Reserve/Guard personnel procedures varied significantly from their active-duty services– and varied even more widely among the services. Each service had their own stovepipe systems for tracking their Reserve/Guard personnel, and those procedures didn’t work very well for integrating individual Reserve/Guard servicemembers with active-duty units. However, Reserve/Guard servicemembers were working the same hours on the same duties under the same conditions as active-duty servicemembers. They deserved to be treated the same way.

In addition, a few active-duty servicemembers had served in the Reserve/Guard before 9/11. They might have separated from the military before 9/11 and then re-enlisted for an active-duty obligation, or they might have transferred from the Reserve/Guard to active status. They didn’t simply mobilize for active duty and expect that someday they’d demobilize. They actually left the Reserve/Guard to serve an active-duty contract.

In November 2005, DoD policy required that the same procedures be used to manage all active duty (regular duty) and Reserve duty of servicemembers. This included tracking the crediting and accounting of Reserve retirement (“non-regular retirement”) along with active-duty retirement. This also includes tracking any non-regular service credit achieved by active-duty servicemembers.

When a Reserve/Guard member qualifies for a Reserve (“non-regular”) retirement, they receive a Notification of Eligibility that their 20-year requirement has been completed. In addition to their points, they’d achieved 20 years of qualifying service– 20 “good years”. With the new DoD policy, if they reached Reserve/Guard retirement eligibility while serving on active duty then their active-duty personnel staff were now responsible for delivery of the NOE.

Another law was changed effective 26 April 2005. After this date, Reserve/Guard servicemembers could retire without serving their final six qualifying years in a Reserve/Guard unit. (Scroll down to the “Retirement Eligibility” section of that link.) This meant that a servicemember on active duty who had previous Reserve/Guard service could reach eligibility for a Reserve/Guard retirement (a “non-regular retirement” on page 3 of Encl(1) of that link) while they were still serving on active duty. I’m not sure why this requirement was changed. (Please contact me if you know!) Now active-duty servicemembers with lengthy prior Reserve/Guard service might be eligible for a Reserve pension at age 60 (with gray-area benefits before age 60).

It’s been nearly eight years since the rule change, but not all of the data has transferred over from the Reserves to the active-duty personnel staffs. Reserve/Guard units are informing their members that they no longer have to serve their final six years in a Reserve/Guard unit before retiring, but active duty personnel staff may not be passing the same information to active-duty servicemembers who have previous Reserve/Guard experience. Even worse, active-duty personnel staffs are not tracking the total “good years” of service for those members and they’re not issuing them a NOE when they qualify for a Reserve retirement.

In this post, “lengthy” Reserve/Guard service before active duty probably means at least two years. If you have two years of prior Reserve/Guard service then you’d reach non-regular retirement eligibility after 18 years of active duty, and you’d probably choose to try to do two more years of active duty for an active-duty retirement. Even if you had 4-5 years of prior Reserve/Guard service then you’d probably still try to stay on active duty for another 4-5 years of an active-duty retirement. However, you’d have a choice, and that choice could be based on personal or family priorities instead of simply the financial difference between a Reserve retirement and an active-duty one.

Eventually, the systems will be reconciled to cover this gap in tracking. However, you have to be responsible for your own career and you have to stay aware of your own benefits. If you think you’re eligible for a Reserve/Guard retirement then talk with your personnel staff or a Reserve unit, or contact me. If you had lengthy Reserve or National Guard time before you went on active duty then you may want to explore a Reserve retirement now.

Posted in Military Retirement | 7 Comments

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