What 3 Retirees Want You to Know About Money

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Believe me, none of us are financial planners, nor are we independently wealthy. But as we thought about future retirees’ worries over money, we knew we had something to share from the other side. After 11, 17 and 22 years of retirement respectively, we’ve learned what works and what doesn’t.

This isn’t about your military retirement, saving into the Thrift Savings Plan now, or using your military years to save extra money for retirement (although that’s not a bad idea). You’ve already thought about that stuff. Here is what we want you to know about retirement cash that you may not have considered.

What 3 Retirees Want You to Know About Money

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The truth about SBP — use it. The Survivors Benefit Plan (SBP) is a plan your service member can buy into when he retirees. He pays money into it and, should he die before you, you’ll have an income for life as a result. You can be insured up to 55 percent of his retirement income or any lesser amount you choose. You never see the money, you can’t borrow against it and you generally forget that it’s there until you make a claim. There’s only one downside: if you pass away first, the retiree has “lost” all of his payments. And know this: if your retiree asks you to decline full coverage, you need to ask if they have a better plan. Will they follow through? It takes your notarized signature to decline less than the SBP full insurable amount.”

Need more SBP information? Go here.

Don’t ignore the 401K. Hopefully your post-military life employer is matching a percentage of your savings up to a certain percentage of your salary. The upside to a 401k is that you don’t pay taxes on it now. The downside is that you will pay taxes on it later — hopefully when you retiree and are in a lower tax bracket. Here’s what we want you to know: you cannot afford to save nothing if your employer is matching. They’re giving you money. Even $50 a paycheck plus a 50 percent employer match adds up to $1950 per year.

Social Security may be obnoxious now, but it’s a pretty good deal. We have no room for a debate on the health of this program in this small post. You should do the research and educate yourself. You may be pleasantly surprised, or not, if you were planning on drawing SS at 62-years-old. We suggest when you retire, you find a job that you can do for a long time and keep it until they lock the door and tell you not to come back.

Social Security is based on your earnings over a 35-year period. If you work fewer than 35 years, you will be credited with zeros and your new civilian job is a good chance to replace those low earnings you had at the beginning of your career. Log onto the Social Security website to determine what your earnings will be based on current rates. If you draw your Social Security at age 62, you will get approximately 66 percent of your full age 67 retirement benefit.  If you can wait until you’re 70, it will be 132 percent.  And remember, the longer you work, the larger the benefit for both you and your spouse.

The three of us aren’t ready to hang it up yet. We’re proud of our contributions and to our surprise, still have plenty of energy. Work really does keep us young.

And no one ever tells you that.

 

We are three military retirees who were enlisted our entire careers. We are now government contractors based in Northern Virginia.

Photo courtesy of CheapFullCoverageAutoInsurance.com via the Creative Commons license.

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  • Silence Dogood

    Excellent advise. If I could do my career again here are the changes I would make. Do not keep up with the Jones!!! Time passes by so make the most of the money you earn. Get a Roth IRA and start putting money in it. Whatever you can do do it! Buy a used car. You can save thousands and drive a great car with all the features you need not want. Pay cash for what you need. If you don’t have the cash then save for it. Credit kills peaches. It gets away from you in a hurry. If you plan on only staying a base for minimum time why buy a house? Most folks break when the most. TSP should of been for me. Why not make a bit off your hard earned cash. It’s easy to sign up and it comes right out of your check. Shop for sale items. TVs and game consoles are big buck. You can even get them used. Oh yeah. With the IRA, be a dollar cost averager. Meaning when the price per share drops, yes you lose a bit but you are now buying more shares at a cheaper price. When the market goes up then beyond you just made a pocket full of cash. Use the resources on the base to get free sound financial advise. I remember officer and enlisted a like get out of an IRA because the market tanked. Yeah they knew what the were doing. Live a frugal but healthy like and stay out of debt. You can come out of the service with a lot of cash if you can just say no to stupid purchases. Think before you buy. Retirement may seem far off but it’s not. It’s your money, why not have a pile when you get out. I do and I was enlisted. Bam!

  • Silence Dogood

    Excellent advise. If I could do my career again here are the changes I would make. Do not keep up with the Jones!!! Time passes by so make the most of the money you earn. Get a Roth IRA and start putting money in it. Whatever you can do do it! Buy a used car. You can save thousands and drive a great car with all the features you need not want. Pay cash for what you need. If you don’t have the cash then save for it. Credit kills peaches. It gets away from you in a hurry. If you plan on only staying a base for minimum time why buy a house? Most folks break when the most. TSP should of been for me. Why not make a bit off your hard earned cash. It’s easy to sign up and it comes right out of your check. Shop for sale items. TVs and game consoles are big buck. You can even get them used. Oh yeah. With the IRA, be a dollar cost averager. Meaning when the price per share drops, yes you lose a bit but you are now buying more shares at a cheaper price. When the market goes up then beyond you just made a pocket full of cash. Use the resources on the base to get free sound financial advise. I remember officer and enlisted a like get out of an IRA because the market tanked. Yeah they knew what the were doing. Live a frugal but healthy like and stay out of debt. You can come out of the service with a lot of cash if you can just say no to stupid purchases.

  • Heather

    In our neighborhood we live in a sea of BMW’s, Lexus’, and Volvo’s. Young (early 30’s) senior officers with very young kids who are livin’ the dream. Until they aren’t. What I mean is we are the ‘grandparents’ on the block, mid 40’s, grown kids and we drive 8 and 9 year old cars. I admit it took us years to realize that brand new shiny SUV or luxury car really doesn’t mean squat. We got rid of the notion that what we drive or how expensive our clothes are means we are truly successful. Nowadays, we vacation nicely a couple times a year, pay cash for everything (we do not have any major credit cards), have 0 debt, and when my husband retires at 26 years in the Army we will have a decent nest egg. We have talked about him pushing it to 30 and the great possibility of not working, though, we may push it out a few years. We lost my husbands father at 74 last year, he had just retired 8 months prior. Perfect health his whole life, exercised daily, had a home gym etc. But cancer does not discriminate. So, we are not going to wait that long to fulfill our retirement dreams. We have a first retirement plan and a second retirement we really want to take advantage. Just in reverse order. We want to enjoy life, not keep waiting on it. It’s really all about making priorities now. Instead of that $50 grand car payment, put that away each month in either TSP or an IRA. Shop for clothes at The Gap instead of Anne Taylor, etc. It’s ok to splurge at times, say on that really cute tote, or an extra fun vacation, but make sound financial decisions now to reap the benefits later.

  • NavyVet90

    Ours is a similar story. My DH retired an E-7, I served 12 years, then civilian jobs. Here are our secrets to successful senior years. Live below your means. Pay yourself first; 10% of every paycheck to mutual funds and Roth IRAs and an emergency savings account, if you don’t see it, you don’t miss it. Dollar cost averaging works! Max out your employer matched SEP/IRA every year. Brown bag lunches and smart shopping. Pay off your credit card balance every month – no finance charges. Pay bills as soon as they arrive. If you don’t have the cash, don’t buy it. Big ticket items; home, car loan; make extra payments and pay off early. Our credit score is in the 800’s for best interest rates. We’ve watched our investments grow over the years and now we live mortgage free in a nice, safe retirement community. We have enough income and savings to last until we kick the bucket. These years are the best of my life.

    • M Meier

      Use “same-as-cash” financing too! If you can swing it, put more than 10% into savings, retirement, etc. – try for at least 20%, more if you can, even if its only for a month every now and then.

  • M Meier

    SBP is a waste! You can get a decent term life insurance policy that costs less and will pay out more money. Its only possibly a good idea if you have children who are young and will be the beneficiaries. He/She cannot get the money back if the survivor dies first – so in that case you’ve wasted a BUNCH of money.

    Always do a ROTH IRA or 401(k), not a traditional.

    PLAN, PLAN, PLAN and SAVE, SAVE, SAVE starting early!!!

    • NavyVet90

      I agree! We had a financial planner at the time my dh retired and he didn’t take the SBP either. We put that same money into life insurance plans for both of us, so either one of us can die first and the other one will get a big lump sum.

  • jackie battles

    I have noticed all the comments from all who previously, and as the father of a female SSGT. I have come to notice that nothing has changed. People like us stayed in. I have lost my brother after he served over 20.Dom Rep and Viet Nam plus PTSD. I have lost my First cousin 101st 100% disabled after Agent Orange and no disability until I showed him how to get his benefits. In 83 as we were graduating from ANCOC the E7 list came out, and not one Viet Nam vet was on the list. That is when I became aware of the political correctness. I served 5 more years and got out. As an E7