Military Financial Independence

Military Retirement Lessons Learned

Posted on April 4, 2013 by Doug Nordman

A friend’s spouse retired from the military a little over a year ago, and I asked them to review “The Military Guide”. This relatively new retiree has a shadowbox full of awards and medals. They didn’t make E-9 (or O-9) but they were on the short list. Their military pension is well into five figures. A typical bridge career for their résumé of their military experience would be “Director of…” or “Vice President of…” at a major corporation. They’d be supervising a hundred senior staff, billions of dollars of equipment, and a budget of hundreds of millions of dollars.

This reader prefers to remain anonymous but they’re happy to answer more questions. You can post them in the comments below, or send them to me and I’ll pass them along.

Here are their comments:

Thanks for the opportunity to review your book. I think it’s great; it’s comprehensive and deals with a lot of the issues that every retiree needs to think about. Here are my comments and suggestions in no specific order:

1) The generational paradigm has shifted. Specifically, senior officers and enlisted personnel are marrying later, having children later and as a result, providing child care and saving for college much later into life. I have personally seen this amongst some friends and it is something that needs to be factored in. Along with “Where do I live next?“, military retirees need to be realistic about “How much do I need to make?” and that often drives “Where do I have to live?” We planned it well in that I retired during our child’s senior year of college and so knew we would be done with tuition bills (for a while anyway).

2) The age old question of the Survivor Benefit Plan. I spent days concocting different scenarios where buying term insurance (or another type of policy) was a more cost effective plan than SBP. The bottom line is: it isn’t. Most everyone should elect SBP. Now, if the spouse of the person retiring has a lucrative retirement plan of their own, then they should consider not doing SBP (because he/she will be taken care of regardless). But, as I noted before, SBP should normally be elected.

3) Retirees should not take the offered Veteran’s Group Life Insurance. There are many civilian term plans that are much cheaper (USAA and Navy Mutual Aid are two examples). So if a couple moves to a new location and takes on a $400K mortgage for a house, it might be wise to take out a $400K policy to pay off the mortgage in the event of the retiree’s death. Then the spouse has SBP.

4) I didn’t have a retirement ceremony and I don’t regret the decision. Truth be told, I had received all the accolades I could want, had more medals than I knew what to do with, and didn’t want to host a party for a hundred people to hear them say what a great person I was. I had received numerous gifts during my career. I had trained and mentored hundreds (if not thousands) of servicemembers. I knew deep down that I had left behind a legacy of well trained and dedicated people. Frankly, that’s all I needed. A piece of paper that was auto-franked by the President or the Governor wouldn’t make a difference. After more than a year of retirement, I still feel this way.

5) Make sure and calculate your terminal leave dates correctly to maximize your pay, allowances, and permissive househunting.

Note: while you’re on terminal leave and househunting orders, remember that during this time (up to 100 days) you’ll continue to earn leave at the rate of 2.5 days per month– as many as 7.5 more days. Almost everyone ends up selling back some leave. ~~but the military will not give out (or buy back) a fraction of a day.~~ As noted in HalfTheMoney’s 27 May 2013 comment below, the finance command will now buy back a half-day of leave. It’s about time!

6) Jobs on the outside come with health benefits for you/family. TRICARE becomes the “alternative” coverage. Also, in many locales in CONUS, TRICARE Prime has now been discontinued (recent change). So TRICARE Standard coverage is the only option.

Note: more TRICARE information is in this post.

7) Your saving and portfolio management advice is good but if you are reading the book months before retiring from the military, the horse has already left the barn. In other words, it’s probably too late.

Note: “Plan B” is a civilian bridge career.

8) YOU CAN LIVE WHERE YOU WANT. We moved to a place with no base nearby, no military commissaries, and no other military support. There is a VA Center nearby but that’s it. Finding new doctors is a bit of a hassle but not all that bad.

9) I think that if the alternative to taxes is living in a state I don’t want to be in, then I will pay the taxes.

10) On the existential side, I tried to leave the military culture cold turkey. About a year after retirement, I am looking for a position with a company that does defense work. The toughest part of the transition is the loss of the cultural familiarity. It’s something everyone needs to experience and decide for themselves.

If you are a senior officer or NCO then you have grown up in a military culture that is very specific, comfortable, predictable and to some extent welcoming (for both you and your spouse). If you move to a place far from a military base, the likelihood that you meet or interview with someone who was in the military is very low. Turning a superlative military career resume into a résumé is challenging. I have found that my best success has been finding companies with executives who have served in the military and concentrating my search there. Linkedin is the best tool for this. I routinely get “thank you for your service” but the general public is absolutely clueless about what we in the military do.

Hawaii is completely different. Everyone you meet in Honolulu knows someone that is in the service or served themselves. It’s part of the culture of the islands. Many retiring people want to leave that military mindset and comfort zone and so go cold turkey doing it. I think though, that in my case, I went cold turkey, took some time to think about it, and wished I had considered further what the loss of that culture would mean (it’s like shedding a layer of skin).

11) If you were to write a supplement or “next edition”, I would recommend you include a discussion of the paradigm shift in hiring practices for corporations. Specifically, the automation of the entire process and the disappearance of hiring professionals. This is especially true if you choose an industry or vocation other than the military or defense. Many books have been written about this but it can be very frustrating and time-consuming sending your applications off into the ether, only to never hear from a company again.

Lucas et al are still doing a bang-up job….for junior officers and department heads. Although they advertise as such, their forte is not the senior servicemember market. In fact, I know of no senior officer (post command) who has gotten a job through them. Their model is based on working with specific companies in specific industries in designated areas of the country. For senior retirees who are looking to branch out (away from nuclear power, defense, manufacturing, etc.) and in a specific non-defense centric part of the country, it’s of little use. Absent using an executive recruiter, a senior job seeker in one of these out of the way places, is left to applying on the internet, networking and… patience. To better understand the new executive hiring paradigm, you might want to go to Amazon and download a book entitled “From Bedlam to Boardroom” by Colleen Aylward. She is a former Seattle-based executive recruiter turned author who after 20 years in the business decided that it’s better to teach people how to fish instead of doing it for them. It’s a fast read and very eye-opening. Added benefit is it’s got a lot of very neat tricks for executive job searchers.

I was very surprised by the last comment. Military-friendly career-transition companies advertise heavily (and on Linkedin) and I’d assumed that was the same as always. MOAA also seems particularly active in career seminars and transition services.

I decided to seek a reaction from the other side of the career-search table. My classmate Lee Cohen has enjoyed a full military career as both an active-duty submariner and with the Navy Reserve. After leaving active duty he started his bridge career with Lucas Group, and today he’s an executive senior partner. I’ve been in Lee’s Rolodex database since the late 1980s and I’ve sent him dozens of transitioning servicemembers over the last 20 years. He enjoys his work (he has autonomy, complexity, and fulfillment) and he has no reason to ever retire. (Submariners take note: both Lee and I have managed to rise above our conduct records and leverage our nuclear power training. You can do this too.) Any servicemember, officer or enlisted, who’s leaving active duty can contact Lee directly or at Lucas Group.

Lee responded:

Here’s the tough reality for senior officers who want to start a corporate career: the number of non-Beltway companies that will hire an officer and pay an executive compensation package right out of the military is very very small. We work very hard to surface those opportunities, and have the most success with supply and technical officers (nukes, civil engineering, engineering duty). But the non-technical O-5s and O-6s with BAs have a really tough go of it.

There are bunch of outfits that place technical sailors. There are a bunch of outfits that place JOs. But Lucas is the only outfit that places senior officers (that I know of). And I’ve placed a good number of post-command officers (I placed another classmate last week!). So it does happen! Hope that helps!

This retiree’s story is still getting to the “happily ever after” part, but they have the safety net of their military benefits. Although their bridge career is heading in a new direction, they’re close enough to financial independence to have the flexibility and time to step back and try a different plan. They’ve also learned a few new things along the way (personal as well as professional) that should further simplify the search.

When you leave the military, be aware that your bridge career search might not end with the first employment contract. You’ll evolve, and your needs might change too. Once again, when you have financial independence then you have choices!

Note: Most of these related links were excerpted from “The Military Guide to Financial Independence & Retirement“. If you like what you read then check your local library for the book– or you can buy it from that link.

Posted in Military Retirement | 21 Comments

Joining the Military During a Drawdown

Posted on March 18, 2013 by Doug Nordman

A reader writes:

Nords, can you talk to me about my son joining the military?

Here are some things we are wondering about. Times are changing and the way it’s run doesn’t give the kids the options like they used to. For example we are told they are releasing them at four years and not letting them sign back up. A recruiter recommended that if he goes in to get everything he needs out of the four years period. There also seems to only be openings in Army infantry? My son wants to work with computers. He had originally wanted a plan like yours and I still will probably get him your book but it looks like “retiring” from the military is now only going to be for the very top and most highly educated people? What are you hearing and do you have any advice?

There seems to be some misconceptions out there about military benefits. I think people confuse active service benefits with 20 year military retirement ones. I worry so much for the boys at his school who have poor grades and think that the military is the way they will get ahead in life. With the cuts this may no longer be a way to accomplish that.

From the military’s perspective, the next few years will be terrible because the wars are winding down and the government is slashing DoD’s budget. The personnel staffs have to cut back on recruiting, although they still need E-1s and O-1s to fill in for the servicemembers who are promoted.

From your son’s perspective (or at least a parent’s), this could be a great time to join. The wars are winding down, fewer servicemembers are getting shot at, and everyone should be doing more training in garrison instead of deploying. However, budgets still get cut so there’s a squeeze on benefits (like tuition assistance), training suffers (not enough fuel or ammunition), wages don’t grow very fast, and promotions are slow. Meanwhile the servicemembers with a year or two of seniority are getting the good deals and the recruits might feel that life seems miserably stagnant.

Servicemembers seeking advanced training usually have to agree to longer enlistments. Infantry troops (with shorter enlistments) tend to leave the service at a higher rate while tech fields and advanced specialties may be overfull. Recruiters have to make their own monthly quotas (in numbers as well as specialties) so they don’t always have a full slate of choices every month. They also can’t guarantee re-enlistments, although people in the top third of any specialty can probably count on a career.

So here’s my advice, which might be tough love– or a realistic perspective on corporate downsizing.

Don’t Join the Military Just for the Retirement Benefits

Nobody should plan an entire career around the retirement benefits. It’s impossible to predict your attitude that far ahead, and it’s too big of a commitment to mentally lock yourself into. Join the service for the training, for the chance to fulfill your potential, to be part of something bigger than yourself, for the teamwork, for the incredible responsibility at a very young age, and maybe for the GI Bill. But don’t expect to stay for a military retirement any more than you’d expect to have the same civilian job at the same company for 20 years.

Look at the Skills, Not Just the Lifestyles

Your son might want to consider all of the services, no matter what he’s seen or heard. Focus on the training and the specialty, not the uniform. “We’re an Army family” or “My best friend joined the Air Force” or “I get seasick” are terrible reasons to pick one service over another. The Army might want infantry or medics but the Air Force also needs technicians, the Marines need leaders, and the Navy needs all of them in its own communities. If he’s looking for technical training (computers, electronics, or mechanics) then I’d highly recommend the Air Force or the submarine force or the Marines as well as the Army. There’s also plenty of tech in Navy air and surface ships. If he’s looking for incredible leadership and teamwork then I’d go Marines or Army Ranger. The Air Force has the highest quality of life and the highest percentage of servicemembers staying until retirement but it might bear the brunt of the drawdown and the budget cuts. The Navy could come through the drawdown better than the Army, although all the services will suffer. I understand if your son feels that only one service is for him, but he needs to explore all of his options before he makes a choice due to misplaced affinity.

Many people dismiss the submarine force out of hand because of claustrophobia or being underwater. However, in the rest of the military, he could also be spending his computer time in a windowless building or an underground bunker or in miserable weather. I think all of the services require computer skills, but in the submarine force, he’ll literally be surrounded by computer systems. More importantly, he’ll be surrounded by people who will make him part of the team, cross-train him in other skills, and push him to do his best. It’s probably the same culture in any part of the service where you have to volunteer for special duty.

Study the ASVAB and the SATs

If he wants his choices from the day he takes the oath then he has to nail the top scores on every part of the ASVAB. Study guides will help with this, and their cost is cheap considering the future benefit. When he has the scores then he can shop the recruiters and see if they’ll match another service’s best offer. He may want your help at parsing the enlistment contract to discern “good-faith promises” from “guarantees”. If he wants advanced technical training he may also be asked to sign up for six years instead of four. This can be a very intimidating obligation but it’s well worth the price in skills and promotions, both in the military and afterward.

He might want to consider ROTC, which pays all tuition and gives him a stipend. (ROTC does not pay for room & board.) The first year is totally free of obligation but the second through fourth years carry an enlistment payback if he drops out. If he has at least 600 verbal & 600 math on his SATs then I recommend learning about service academies. If he’s not granted a service-academy nomination on the first round then he may be sent to a one-year prep school with a guaranteed appointment to the next service academy class. (Some caveats– ROTC and service academies have an age cutoff of being less than 26 years old at graduation, and service academy students can’t be married or parents.) The irony is that if he doesn’t feel ready for college now, then 12-18 months after enlisting he’ll realize that college is a better deal than he thought.

Take Some College Classes

If he decides to enlist instead of going to college, then his goal should be to complete that 4-6-year obligation while doing some undergraduate courses on the military’s tuition assistance money (when the TA funding cuts are restored) and his own time. (After his enlistment he’ll have the GI Bill with a housing stipend.)

Nobody can predict what military retention will be in the next few years, and he can’t predict how he’ll feel near the end of his obligation. If he likes what he’s doing then he can apply to re-enlist and see how it works out. If he doesn’t like it then he can go into the Reserves or National Guard (for the camaraderie and the income) while pursuing a college degree. He could combine Reserve/Guard duty with federal or state civil service, or leave the military behind and go his own way for a civilian career. Linkedin has a huge military/veterans network, and after a decade of war once again the employers appreciate what veterans can do for them.

Volunteer for Advanced Training in Any Service

If, after exploring all of the other choices he still chooses Army infantry, then I suggest he try for the Rangers. He has to have physical potential but the Rangers offer plenty of practice. They’re experts at safely building muscle & endurance while showing trainees how to do more than they ever thought possible. The Rangers are seeking the intensely hypercompetitive hard-driven young adult who won’t quit and who can work with a team. Only volunteers can be Rangers, and it requires more persistence and cognition than just showing up for the physical training. It also requires computer skills. I highly recommend a library copy of Dick Couch’s “Sua Sponte”, or I can introduce you to Rangers and other Army experts.

Posted in Career | 22 Comments

I Tried 23andMe Genetic Testing & Here’s My Review

Posted on March 7, 2013 by Doug Nordman

Very long post today (3000 words) but you have the time to read it– and it’s worth reading. Especially if you’re interested in genetic testing. Here’s my 23andMe Genetic Testing Reviews.

A genetics researcher and director of the National Institutes of Health once said:

“Genetics loads the gun and environment pulls the trigger.”

I think a more meaningful quote comes from the bank robber character at the start of the 1971 Dirty Harry movie, who’s trying to figure out how many shots Clint Eastwood has fired from his revolver:

“Hey– I gots to know.”

What Is 23andMe

I’m a tech geek, and I’ve followed startup companies for years. 23andMe came to my attention because a 23andMe co-founder is married to a Google co-founder, and nearly six years ago Google’s $3.9M early-stage investment in 23andMe was considered a controversial choice for Google’s venture funds. However, 23andMe used the money to develop one of the industry’s fastest and most thorough automated analyses of genetic data. They quickly established their credibility by earning Time magazine’s 2008 “Invention of the Year” award.

Back then the company was charging as much as $499 to analyze sections of a customer’s genome, along with a monthly fee for access to their research and genealogy databases. It was an intriguing idea, but I’d also decided that decoding my genome was also way out of my price range. I was financially independent, but I didn’t get there by shelling out $499 for this sort of purchase. What would I do with the data?

23andMe eventually dropped the price to $299 to attract more customers, but I still didn’t see the value. Nearly 200,000 other people ponied up, however, so 23andMe’s databases grew large enough to be statistically significant. Researchers and specialists use the (anonymous) data to search for the genetic roots of many diseases. Pharmaceutical companies are also using the data to develop effective drugs and possibly even gene therapies. These corporate customers are willing to pay a lot more than $299, and rapid growth is financial catnip to a venture capitalist. Late last year 23andMe secured $50M in a venture round and announced their pursuit of a database of one million genomes. Shortly after they cashed that check, 23andMe accelerated their sales (and the growth of their database) by dropping the price to $99 with free lifetime membership.

$99?!? I can make room for that in our budget. Ironically the announcement came shortly after the start of the holiday shopping season, so we made it an ohana Nords present: the gift of self-awareness.

Like Dirty Harry’s bank robber, I’d suddenly found an intense personal reason for my curiosity. My father developed Alzheimer’s four years ago in his mid-70s and is currently deep into mid-stage symptoms in a care facility. (He’s doing well, but the disease’s progress is relentless.) His father lived until age 97 but spent his final 14 years(!) in a care facility under the vague 1980s diagnosis of “dementia”. My mother and her father both died in their 40s, so we’ll never know their genetic flaws. However, my mother died of breast cancer and I wanted to know if I’d passed those genes on to my daughter. My spouse has a few questions about her own genealogy, and I’m pretty sure our daughter has wondered many times if she’s really related to the people who tried to raise her.

How it Works

Each box contains a test tube, instructions, and the return shipping label. You just add your spit.

23andMe boxes arrived in the mail

The process is straightforward: spit it out. Literally. You sign up on the company’s website, charge your credit card, and wait for the snail mail. A few days later a specially loaded test tube shows up in your mailbox and… you expectorate into it. (Only about 15 milliliters– one spitball.) It comes with directions (in an ambitious 14 languages and pictures) and plenty of helpful spitting advice. You seal the test tube, drop it in a plastic bag, and return the (postage pre-paid) box to 23andMe. After a couple of weeks they e-mail you the announcement that your data is on their website.

Fill it, cap it, bag it, and send it back in the box.

The spit tube with cap and preservative.

The actual analysis has been industrialized and automated. Your spit ends up on a slide tray coated with nearly a million different copies of various genetic fragments. When your genes match any of these fragments, a chemical reaction occurs to trigger a sensor on the slide. A scanner reads the sensors and pulls the results out of the 23andMe database.

Better still, this is not “one and done”. Samples can be saved for a very long time and sent back through the analysis. As researchers find more interesting genes to analyze, bioengineers will improve the sensitivity of the chip and the number of genes it can detect. All 23andMe does is provide more data to the researchers and pharmaceutical companies who are paying them for answers to specific questions, but a copy of your data is also uploaded on your account.

Psychological, Ethical, and Legal Issues

Although genetic testing is “affordable” and the technique is established, the concept has incited an explosive ethical and legal debate. I doubt that the controversies will ever be resolved, but we have choices. I can’t presume to recommend how you should tap-dance your way through these minefields, but here are some issues to consider before you decide to get tested.

The first question is whether your awareness would actually lead to behavioral change. We all “know” that we’re supposed to eat healthy and exercise– how’s that workin’ for ya? Why in the world would we expect that our genetic data would inspire us to pursue an enlightened self-interest?

If you found out that you’re carrying genes which have a marginally statistical link to a fatal disease, would you change your habits? How far are you willing to go? Most heart attack survivors fail to make significant lifestyle changes (like quitting smoking) to improve their health and reduce their cardiac risk, so what makes you so sure you’d change your behavior? What statistical risk would cause you to change: 25%? 50%? 100%? A few women at high risk for breast cancer have opted for preemptive double mastectomies– what if your genes are linked to a 10-25% chance of breast cancer? If you’re at an elevated risk for prostate cancer… ouch, I don’t even want to think about it, and my Dad’s a prostate-cancer survivor.

Other questions: What if you learn that you’re adopted? What if the guy you’ve called “Dad” all your life learns that he’s not your biological father? If you’re carrying the genes for a serious disease, do you want to have kids? What if you decide to get tested but your spouse isn’t interested? If your unborn child turns out to have a genetic disease, would you choose an abortion?

Geneticist Bryan Sykes has documented dozens of situations in his books. What if your ancestry has a statistically significant percentage of other races in what you thought was a homogeneous family tree? What if your ancestors include both Thomas Jefferson and Sally Hemmings? What if you’re descended from Neanderthals? What if your culture’s creation beliefs might be more mystical than factual? What if you believe in the power of specific prayer for your own situation– or for others? These may seem like minor controversies if you’re not part of the affected culture, but there’s been a huge uproar in many societies around the globe.

What about other risks? What if your genes keep your body from responding to certain chemotherapy drugs? What if you’re exceptionally sensitive to a drug, and a “normal” dose could kill you? What if you’re violently allergic to a food you’ve never tried? What if your college daughter turns out to be genetically slow to metabolize alcohol? Hey, I’m just reporting the news here, I don’t judge.

Could this affect you financially? If people learn about your genetic profile, how will they treat you? More importantly, how will your health insurer treat you? Can you still get life insurance? How much will you pay for long-term care insurance, if you can even get it? Will the insurance company insist on checking your genome for the longevity gene before they quote you a price on an annuity?

It turns out that your genome is legally protected by federal law against genetic discrimination in health insurance– and employment. Although there may be a statistical link between your genome and some diseases, that statistical link is not considered significant enough to affect health insurability (and certainly not employment). You can’t be turned down for health insurance because of your genome any more than you can be turned down for tobacco or alcohol consumption. However, the law does not cover life insurance, disability insurance and long-term care insurance. The law may also be changed someday to allow different rates for different risks, and maybe an insurer could require genetic testing before setting those rates. Even if you’re protected by the full power of the law, do you really want to have to defend yourself through years of stress and costly litigation?

23andMe promises to keep your data private, but the Internet’s history is littered with the corpses of confidentiality vows. What if your genome is splashed across the Web, and on your Facebook profile? What if you’re blackmailed or humiliated or bullied because of your genome? This isn’t hypothetical or ancient history– you only have to glance at today’s headlines to read about ethnic atrocities. Even when the privacy controls work the way they’re supposed to, any data you make public could be compared to other public ancestry databases to personally identify you. And although 23andMe promises to keep your data private today, what if they get a court subpoena for a criminal investigation or a paternity suit? What if they just decide to change their policy and sell your data to the highest bidder? Oh, wait, they’re already doing that– although they promise to keep it anonymous. As far as you can tell.

Let’s bring this down to personal finance: if you have a 50% chance of developing a fatal disease in your 50s, then what’s your “safe” withdrawal rate? More importantly, when would you choose to retire? Would your spouse want to care for you when some horrible genetic event comes to pass? Would you abandon your family responsibilities and spend your 401(k) “experimenting” with “alternative lifestyles” while checking off your bucket list? If you have the fabled (and rare) “longevity gene”, then should you invest 100% of your portfolio in an inflation-adjusted annuity? Should you buy extra disability insurance? What about self-insuring for long-term care?

Enough questions. Luckily 23andMe has thought about this too. They’ve added checkpoints to their results that you have to acknowledge and unlock on your profile before you can learn the facts. When you review your data on their website, you have to click several confirmation windows to find out about genetic susceptibilities to diseases like Alzheimer’s. You have to specifically opt-in to share your data, and frankly, Facebook could learn a lot from 23andMe’s incremental privacy & sharing settings. You can’t actually delete your data from 23andMe’s servers and pretend that this never happened, but you can keep it as secret as today’s Internet tech can reasonably achieve.

Remember this: once you share, you can’t take it back. You can turn the feature on & off, but shared data can be copied and stored by the people you share it with. You cannot un-ring the bell.

What You Get

23andMe organizes the results very well. Once you unlock your main page, you can elect to unlock each of the subcategory summaries. (Over 35 pages of printed summary alone, with hundreds more in the details.) Your personal web pages are broken down into dozens of categories with deeper links to background information, references, and other studies. You can spend hours reading up on your “favorite subject”. They compare your data to the averages and the statistics. You see all the research citations and you’re guided through some of the implications of the information.

Once your genetic profile is in their database, they keep updating it with the results of new studies & data. You can answer survey questions and volunteer for research. Even better, those researchers and pharmaceutical companies will share their data as well, and you might be invited to join the FDA trials. You can join 23andMe forums to discuss your genome with others who have a similar profile. You can share your genetic data with anyone else who’s also a 23andMe customer. (I shared mine with my spouse and my daughter.) You can build your family tree and post it on 23andMe for their database to track down your distant cousins.

My Results

Let’s cut to the chase: Was it worth it?

Heck yeah. Not only for me, but also for my spouse and our daughter.

In fact, our daughter is even luckier to be alive than she’s already been told (many times). I should’ve paid for this even when it was $499. I should’ve mortgaged our home to pay for it.

If you’re closely related to me then I strongly recommend that you sign up for 23andMe and get tested. (If you’re one of my cousins, or if you’re even considering having kids with one of my cousins, then please have this done today. Seriously. Stop reading and go to 23andMe’s website now. If $99 seems too expensive then we need to discuss your budget priorities.) If you’re contemplating an intimate relationship with my daughter… well… you were already in for some interesting Q&A with her– and now it’s going to get even more focused. (Good luck with that.) Oh, and it turns out that she really is my daughter, to 85% certainty. Sorry, honey.

For everyone else, I’d suggest that the ethical minefields are not your biggest concern. You should worry whether you’re a ticking time bomb. Not just your own blissful ignorance– what if the “professionals” in your life are also ignorant or negligent? If you develop an exotic disease or cancer, you’re hoping that your doctor thinks to check your genome to find out if you’ll respond to a medication– or whether a “low dose” could kill you. If you’re even considering procreating then I think you owe it to your hypothetical life partner (and your hypothetical kids) to understand the risks you’re imposing on them.

Scary example: I’m a carrier of cystic fibrosis. Luckily my spouse had already decided that I’m done procreating (me, too, sorry ladies) and everything worked out fine, but I wish we’d known this info about, oh, 21 years ago. [Insert “dodging a bullet” metaphor here.] If we’d had this information before starting a family then we would’ve definitely opted for additional testing, and the results would’ve justified the minimal medical risks of the testing.

I’m also a carrier for hemochromatosis. I have a couple of susceptibilities for exotic chemotherapy medications that I hopefully won’t ever encounter, and I’m at nearly a 3x elevated risk of deep vein thrombosis. I have a marginally lower statistical risk for prostate cancer– but I’m still going to keep an eye on my PSA.

Since my daughter and I have shared our profiles, she knows which parent to blame for a host of minor issues. Nothing serious or heartbreaking, but definitely things that I wish I’d known at her age.

I was highly amused when my spouse’s ancestry turned out to be slightly above the global average of Neanderthal genes… until we learned that I’m much higher at 2.9% (the max is 4%). That just confirms the suspicions of many people in my military chain of command. (Sorry, XO, I really was born that way.)

My ancestry? 100% purebred free-range Scandinavian Viking on both sides. (I guess we could’ve seen that coming from my surname.) Very few of my shipmates seem surprised.

My spouse’s genes? Well, no surprises there. The family longevity claims turned out to be fact. She’s already drafting her acceptance speech for our alma mater’s “Oldest Alumna” award. She assures me that she’s going to be around for a very long time… chronologically as well as relativistically. As for the rest of her genome, my relatives & friends would agree that I married up. Way up.

Alzheimer’s

Well, enough of the humor & snark. You regular readers of the blog are already wondering: “Hey, Nords, cough it out. Your grandfather died of dementia and your Dad has Alzheimer’s. Are you gonna get Alzheimer’s or not?!?”

I clicked through all of 23andMe’s website acknowledgments and warnings to learn the results, but I’m not ready to share that info yet. When I do share it, I can’t change my mind and take it back.

Alzheimer’s Disease is estimated to have a 60%-80% chance of heritability, so 23andMe tests for the APOe4 variant (which may be the primary cause of Alzheimer’s). There’s another gene which may actually offer some protection, and 23andMe tests for that too. Based on those gene combinations, the probability of showing Alzheimer’s symptoms between the ages of 50-79 can swing from as low as 7% (the general Alzheimer’s population of that age group) to 44%. There may be other factors, but 23andMe doesn’t test for them.

The main reason I’m not sharing is because I don’t want you guys to treat me any differently than you already do. You don’t know whether I’m protected or at risk, and I’d rather be judged on the purported quality of my writing than on the documented quality of my genome. Neanderthal or not.

Besides, I doubt the Federal Long Term Care Insurance Program will lower anyone’s premiums based on 23andMe results. At least I’ll always have Tricare, and I no longer have to care about employment.

Would I Do it Again?

I’m glad I did the testing, and $99 is a compelling bargain for ensuring that I’m invested in the results. I’m happier knowing about it than being blissfully ignorant. Dirty Harry’s revolver could be loaded with more than one cartridge, but it still has empty cylinders. I stopped drinking two years ago, I don’t smoke, I take vitamins, and I’m not going to widen my horizons of any other illicit experiences. (Sorry, ladies.) My myosatellite cells and my mitochondrial metabolism may be spluttering and my recovery time sucks, but exercise and healthy eating are no longer hypothetical benefits: they’re preventive medicine. My chocolate-chip addiction is heading toward sugar-free and possibly abstinence. Those last 10 pounds? They’re outta here. Luckily paleo still favors bacon and cacao, so life remains worth living.

No psychological worries. I may be disgusted by aging, but I no longer fear it. There’s encouraging research into every dark corner of the human genome, and lab rats are being treated with experimental therapies, but human trials seem to be perpetually a decade away. It’s my job to be alive (and sentient) when the FDA puts out the call for trials volunteers.

This experience definitely checked my priorities. I’m not going to make any hasty lifestyle decisions but I sure am glad that I’m already financially independent. Whatever happens during however much time I have left, I’m especially grateful that I have not traded any of the last decade for corporate employment. I’m already insured for financial longevity by my military pension. Long-term care insurance is always a good idea whether your risk profile is at 1% or 99%, and we can also afford it. I’ll revisit that purchase when we’re in our 60s.

No matter what’s in my genetic revolver, I’d don’t want to miss my chance of a lifetime. When my spouse reaches our college’s oldest living alumna milestone, I want to be there with her as a reminder that there’s still one more alumnus who’s just a little bit older!

Posted in Military Life & Family, Reviews | 17 Comments

Should You Start A Civil Service Bridge Career After The Military?

Posted on February 21, 2013 by Doug Nordman

A reader writes:

I’ve left active duty, but I feel compelled to get a federal civil service job so that I can apply my active duty time toward a federal pension. Would it be a wiser financial move to get a “civilian” job that pays a higher salary for investing in a taxable account that would be worth more than a future civil-service pension, especially if we’re already covered by my spouse’s military pension and medical benefits?

I think there’s only one way to determine the math answer to this financial independence question: build a spreadsheet. It’ll include your potential civil-service income, the tax-deferred contributions to your civil-service Thrift Savings Plan, the employer match to that account, and the cost of “buying active duty time” by contributing even more of your own after-tax money to that account. (Remember to include your civil-service pension if you’re planning to work long enough to qualify for one.) There may be other civil-service benefits like a cost of living allowance (for expensive parts of the country) or a subsidy for using mass transit.

After you’ve calculated your total civil-service compensation then you can figure out how much you’d earn in a civilian job. It’s not just the civilian salary (with its employer’s match for its tax-deferred account). It would also include other benefits like an annual bonus or stock options, perquisites like a company car or travel upgrades (if you feel that travel is a benefit) and other details that might only be available from their human resources website.

If you’re really digging into the details then there would be the neighborhood, the commute, and the workplace environment. Do you have to relocate for the job? How are the area’s costs of living and their school systems (both high schools and state universities)? Could you telecommute or adjust your work schedule for days off? Is there a possibility of having to move around the country (or even around the world) with the corporation for career experience? (Assuming you feel that’s a good idea.) A civil-service job would presumably avoid overtime, but what would you be expected to accept from a civilian employer? All of these aspects can be reduced to an approximate benefit (or expense).

The spreadsheet analysis is tedious, but the civil-service numbers are available from the government websites and it’s part of the estimate of when you’ll reach financial independence. The civilian job compensation is more difficult to estimate, but if you’re going to interview with a company then you’d be researching these numbers anyway. Best of all, the process of chasing down the data forces you to thoroughly analyze all aspects of both jobs– you’ll probably come up with other criteria that you hadn’t even considered before you started building the spreadsheet.

When you’re finished, you’re ready to compare the total compensation of the civilian bridge career against the civil-service career (with its additional tax-deferred benefits for buying your active-duty time). Ideally, your human capital would be more richly rewarded by a civilian career since you also have a higher probability of being laid off. Ideally, the civil-service pension would have a higher present value for its cost of living adjustment and its higher reliability of paying out for the rest of your life.

While you’re working on the numbers, take a look at this excellent Early-Retirement.org post on buying your active duty time. That poster’s Gubmints site has more tips on that process, and he’s done the same in his personal career. He’s an excellent blogger who delivers great advice, and it’s well worth your time to check your civil-service math with him.

But that’s spreadsheet math. We’re human beings, and math is only a part of our quality of life.

At some point you’re going to find yourself shaking your head and saying “It’s only money.”The challenge is figuring out where a great job crosses the line on work-life balance. Can you control your hours? Are nights/weekends part of the office culture? Does telecommuting really work? Will the employer be generous with days off, or would you be more comfortable with the civil-service leave rules? Is travel a benefit or a burden? A civil-service job may be regarded as boring, with little opportunity for advancement or bonuses. How much excitement are you seeking?

Here’s a personal issue that I grapple with at every job offer: commitment. Entrepreneurs and corporations spend a lot of effort (and money) seeking high-quality employees, so of course, they’re thrilled to discover the skills that a military veteran brings to the task. However, there’s also their unspoken expectation that they won’t have to repeat this search every six months. If you accept an employer’s offer, then I believe that you’re obligated to give it your best effort for at least a year. Unless the nature of the job is substantially and deceptively different from the offer, then stick it out.

Committing yourself to this term (even if it’s just a private personal goal) ensures that you understand the obligation you’re about to accept, and it also forces you to analyze your priorities. Do you value control over your time more than an interesting career or a paycheck? Are you really cut out for joining a team, or would you be better forming your own entrepreneurial team– or even freelance contracting?

In my case, every time I read the surf forecast I realize that I value my time more highly than having to show up for work on a regular schedule. Not many corporations will cancel the plan of the day for a longboard meeting, no matter how epically gnarly the conditions may be.

The advantage of financial independence is that it gives you the control over your time, and a choice on working. You want to answer your career “What if?” questions now and have time to change your plans once or twice. (That gets a tad more difficult as we get older.) The key is to find your financial comfort level of “enough” and not get sucked into “just one more year” syndrome.

Whether it’s civil service or a civilian career, you’ll know how much (and for how long) you feel like using your skills. It may take you a couple of years to find your financial comfort zone– and to gain confidence that you can succeed in a civilian career. Once you prove those points and answer your “What if?”, then you’re ready to stop working. Best of all, you’ll have no problem figuring out what you want to do all day.

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Posted in Career | 4 Comments

When do you stop contributing to tax-deferred accounts?

Posted on February 14, 2013 by Doug Nordman

A reader writes:

How do you know when you have enough assets in retirement accounts so that you can stop contributing and put your money in taxable accounts? We could probably stop now but it’s a hard habit to break.

This is a good question for both military retirees and for servicemembers with only a few years of active duty. It’s tempting to put all your retirement savings in tax-deferred accounts (both the Thrift Savings Plan and IRAs) because those options are only available for that tax year. If you don’t make a contribution before the deadline then that year’s opportunity (and the tax-deferred compounding) is lost forever. If you have a civil-service job (with TSP matching) or if you’re contributing to a civilian tax-deferred savings plan with its own matching, then it’s tough to give up the employer’s matching “free money”.

The question has become even more complicated with the advent of the Roth TSP. Military enrollment in the Roth TSP has quadrupled in the last couple of months,* even leading to rumors of automatic enrollment for new recruits.

In general, when you’re just starting your military career, the Roth TSP is a better deal because you pay taxes on contributions now (when tax brackets are low) rather than on withdrawals later (when tax brackets may be higher). But this strategy still requires predicting your future tax brackets, and it may seem more attractive to avoid paying taxes now.

I’ll discuss the options below, but I’m not going to go into the details of how to execute each one. I’ll link to other references, of course, but otherwise a detailed explanation would be several more blog posts of procedural steps.

The goal of this post is to give you the vocabulary to follow the links and create your own plan— perhaps with a review by a financial professional or a tax accountant.

When you’re just starting your first military obligation, you have no idea whether you’re going to leave after several years or stay until retirement. If you end up with a military pension then your retirement income will quickly bump you up to a higher tax bracket.

Once again the problem is taking advantage of the opportunity– if you contribute to the TSP (regular or Roth) now then you can always roll the money out later. It’s much more difficult to get money into the TSP if you delay until later.

Let’s look at the question from the other direction:

How much do you need to save in taxable investment accounts? Military veterans want enough savings to live on during their transition from the military to a bridge career, or enough savings to live on while getting a college degree, or enough to “bridge the gap” between leaving the military and reaching age 59½– the age at which penalty-free withdrawals can begin from tax-deferred retirement accounts. (See page 55 of the PDF at that link.)

Again, it’s difficult to predict those numbers when you’re just starting out. However, as soon as you finish recruit training, you’re going to start tracking your spending and developing a budget.

After you’ve been in the military for a few years, you’ll be able to project your expenses for the transition to civilian life. You’ll know your monthly spending, whether you’ll be drilling in the Reserves/National Guard, and roughly how long your job search should take.

Once you’ve forecast those numbers then you’ll know when to start piling up cash in your taxable accounts and reducing your contributions to retirement accounts.

The GI Bill can certainly eliminate your personal cost of getting a degree when you leave the military, especially if you’ve started classes during active duty on tuition assistance funds. However, not every servicemember will have the liberty or the flexibility to obtain a degree on active duty, and some programs (like a MBA) may require a full-time effort.

Again you’ll be able to forecast your spending, estimate any other sources of part-time income while you pursue your degree, and decide when you’ll be starting your bridge career.

Finally, the amount of money you’ll need to “bridge the gap” between military retirement and age 59½ is part of your retirement spending plan. It’s a longer and more challenging prediction because you’ll have a number of unpredictable expenses to support (for example buying a house, raising the family, and saving for the kid’s college fund) but you’ll still be able to build a spreadsheet that you can live with.

So the answer works out to four parts:

Forecast your spending for the period when you’ll draw from taxable accounts
Figure out how much you’ll need from those accounts
Decide how many months you’ll need to contribute those accounts at your current savings rate
Stop contributing to tax-deferred accounts and boost your taxable account to reach that goal

There are several “safety net” advantages working in your favor:

During your military service, your income will rise faster than the contribution limits to your TSP and your IRA. (You’ll also be aggressively cutting your spending to max your savings rate, right?) A few years after you start your career (and your contributions) you’ll be able to max out those limits and continue saving in taxable accounts. By the time you’re ready to spend from your taxable account, you may already have enough.
You can withdraw Roth IRA contributions at any time for any expense. (See page 69 of that PDF.) Ideally you don’t want to reduce the IRA account’s compounding, but you’ll have the ability to tap the contributions if disaster strikes.
You can convert your tax-deferred accounts to conventional IRAs and start a withdrawal plan of “substantially equal periodic payments“. This SEPP (or 72(t) withdrawal) is complicated and may require the help of a tax planner, but it’s a long-term solution to bridging the gap between the time you leave the military and age 59½.
You can make a hardship withdrawal from your TSP or (if your civilian employer’s plan permits) borrow money from your 401(k). In the absolute worst case you could simply withdraw the money from the account, paying both taxes on this income and a 10% penalty for the early withdrawal. These are all bad expensive options that will hurt your savings. Clearly these should be last-ditch tactics when your plan has been disrupted by unexpected catastrophic expenses, and you’ll cut spending or seek employment income (or even borrow money elsewhere) before taking this step.

There’s another side to the “When do you stop contributing?” question. When your plan works out and you’ve maximized your savings in your tax-deferred accounts: someday you’re going to have to start required minimum withdrawals from those accounts, and you’ll pay taxes on the income. (See page 34 of that link– it’s the “deferred” part of tax-deferred.)

You can minimize the RMD taxes by making your contributions to Roth IRAs (which do not require RMDs) and the Roth TSP (contributions have already been taxed). The solution to the “RMD problem” is to roll the account over to a conventional IRA and convert it to a Roth IRA.

You’ll start to execute the rollover/conversion plan when you can minimize the taxes that you’ll pay on the conversion, and the best way to do that is to start the conversion after you leave the military– and after you no longer have employment income. By the time you’ve left both the military and your bridge career, you won’t be contributing to those tax-deferred accounts anyway. You can spread the conversion out over several years to stay in the lower tax brackets.

Summary: You’ll stop contributing to tax-deferred accounts when you need to draw down a taxable account during a transition out of the military.

However, if you’re saving aggressively during your military career then you’ll max out your tax-deferred contributions and already have “enough” in your taxable accounts. When you’re no longer receiving earned income (and can no longer contribute to a tax-deferred account) then you’ll consider converting the account to a Roth IRA by paying conversion taxes when your income (and tax bracket) is lower.

Note: I’ve been asked before if you can convert your existing TSP funds to a Roth TSP. The answer is still “No…“, but it’s been modified to “… not yet“. Here’s the text of the announcement:

TSP examines in-plan conversion option — The President approved the American Taxpayer Relief Act of 2012, on January 2, 2013. This law allows the TSP and other qualified plans to give participants the option to convert their traditional account balances to a Roth balance. The amount converted would be taxable to the participant. We are currently waiting for tax reporting guidance from the IRS and will be studying the actions required to offer a conversion option. After that review, we will make decisions on whether to proceed.

[* But not for the Reserves & National Guard. The Roth TSP may be ready, but DFAS says they need until mid-late 2013 to make their Roth TSP software ready for you.]

Posted in Investing & TSP | Leave a comment

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