Military Family Next Steps/Financial Advice

[thiennguyen]

I am a veteran, separated after 6 years of service, in 2021. Wife is AD Air Force, currently been in a little over 4 years. She is an E-5 but will be an O-1E in the summer of 2025. At time of commissioning she'll be over 5 years with a 4-5yr commitment to the AF. She plans to stay in and retire.

Income:

(30M) $100k Salary (Engineering) + $36k Untaxed (VA)

(28F) $68k RMC + $30k Untaxed (Child Support)

- 2023 was our first year filing jointly and our AGI was 124k

- She is a TX resident so we both pay no state taxes for the foreseeable future.

Spending:

We take home approximately $13k monthly and spend around $10k, including current investment and debt payments. Our finances have just stabilized over the last 6 months or so, after paying for a wedding out of pocket. Home renovation spending is pretty erratic from month to month. We have a monthly $3k surplus that is just going in our HYSA until I figure out a better spending plan with it.

Joint SoFi Checking/Savings Account:

- $42,197 (4.6% APR)

Taxable Brokerage Accounts:

- $59,230

- [Imgur](

https://imgur.com/sAalJi2

)

- Contribute $250/month

Retirement Accounts:

$30k Roth TSP (>70% invested in C fund)

- Contribute 15% base pay (+5% match)

$71k Roth IRA (Self-Directed)

- Currently rolling over my old TSP account, waiting for rollover check to settle

$8k Traditional IRA (Self-Directed)

- Currently rolling over my old TSP account, waiting for rollover check to settle

$39k Roth 401k (76% S&P 500 Index, 24% Company Stock)

- Contribute 8% salary (+11% company match) *8% provides highest company match possible*

- Company match is deposited as lumpsum yearly, in company stock, then must wait 1 year before I can exchange stock for S&P 500.

Crypto:

$7k (BTC,ADA,CRO,NEXO)

- Do not buy anymore, leftover from dabbling in 2021.

- ADA & CRO are staked.

Non-Cash Assets:

~$350k House

~$17k Car (Paid-off)

~$17k Truck (Paid-off)

Debts:

$286k principle left on mortgage @ 2.25% interest rate

- 27 years left, I do not make extra payments.

$3k installment debt

- All 0% interest, no reason to pay-off early...

Additional Info:

- We have a 5 year old daughter, and a baby boy due in July! Plan on having potentially one more child after.

- We maximize credit card rewards including MLA benefits. This heavily subsidizes our travel for the next 15 years or so.

- We each spend relatively frugally, but both splurge every once and awhile on our different things.

- I spend a pretty substantial amount of money fixing up the house DIY and hiring contractors. The plan is to turn it into a rental next year, when we move.

- We will be moving next year, on military orders, most likely to either Las Vegas, San Antonio or Destin, FL area. Will most likely be renting for the next 10-15 years.

- Neither of us are into the FIRE lifestyle. I am very conscious about saving for retirement but also we would both like to hit a certain envisioned lifestyle in the near future.

- My wife currently want to fully retire after finishing 20 years of service in the AF.

Short-Term Goals:

- Finish fixing up house, and rent out for small profit. Probably need to put another $30k into the house to make it ready to rent, a little less if I do more work myself.

- Sell/Trade-in one vehicle and purchase a slightly used SUV for around $40k.

- Start 529 plan for both children and contribute $200 a month or so.

- Max out Roth IRA yearly.

- Consolidate investment portfolio. I have a few poor and redundant investments.

- Secure federal GS-13 job in the next 5 years.

Long-Term Goals:

- Wife retires in about 20 years with VA compensation and military pension.

- Buy forever home in approximately 15-20 years. In today's money, I think we envision a $750k home as the ideal home, living in a moderate cost of living area. Kansas City or San Antonio.

- I can retire at 65 years old. Hopefully with a government pension. Will most likely still work in some fashion, but minimally.

- Kids will be able to play club sports and have reliable vehicles when of age.

- Kid's 529 plans will have at least $35k which is the allowable amount they can rollover into an IRA, if they choose.

- I expect my salary to be $150k-$200k during peak working years, potentially more with inflation. Realistically my wife will retire at the O-4 or O-5 range.

Questions/Concerns:

- How much should we be saving for retirement? I can't imagine maxing my 401k and her TSP yearly... I feel that would limit our currently lifestyle which doesn't feel very luxurious. I plan to maximize employer matches and max out my IRA...

- Will I regret renting out our current house? The interest rate is amazing, but it's old, and rather large (limited potential renting pool). I'm concerned we may have some headaches for the first few years.

- Are financial planners worth it? I worry they offer cookie cutter services or they charge way more than I'm able to justify.

- What should I do with my taxable brokerage accounts? Would it be stupid to start selling-off and putting into an IRA? Should I stop contributing and just let it grow for a potential forever-home down payment? Pay for our next car in cash?

- We expect to be in the 22-24% tax bracket most likely. Should I be trying to put anymore money in Traditional IRA or just focus on Roth from here on out.

- Recommended mix for self-directed IRA investments? Trying to stay pretty aggressive for the next 20 years, but keeping most expense ratio low. Mostly just index funds.

- My wife keeps our daughter's child support payments from her biological dad in a separate bank account. I don't get involved with that stuff too much, but I'd like to direct her in what to do with it as I'm sure it's a rather large lumpsum at this point, making basically no interest. So far my only advice is start a 529 plan and get it into a HYSA as fast as possible. Not sure if an IRA or a mutual fund is appropriate for this kind of money.

I know this is a lot of info, some is totally unnecessary and irrelevant for this sub. Feel free to offer advice in one or two aspects or share things that have worked for you. Just looking for advice on how to manage our growing assets efficiently. I know we need to start pumping up our retirement savings for sure.

 

[cristiano316]

@thiennguyen You have a lot of questions, so I’ll just answer a couple I have experience with and offer an opinion or two.

1) I hate being a landlord. No PM takes care of your house like you hope and the margins aren’t great if you’re holding onto it. Idk when you bought, but after putting 20% of the rent aside for maintenance, the margins get pretty razor thin. If I didn’t plan on moving back to my rental at some point, I would’ve sold it a year ago. If you’re about to drop 30k into the house to get it rental ready, I doubt you’ll see a return on that for the next 10 years (unless you’re doing a short term).

2) financial planners definitely have their place. A lot of people are very comfortable with their finances, but it can be useful to have someone check them over, as long as they are a one-time fee advisor. I think they’re extremely helpful for couples who aren’t on the same page with finances. They can help shape short, intermediate, and long term goals and what you’ll need to get there

3) retirement savings is difficult to say. It seems like you got quite a bit from disability and if your wife retires with an officer pension, you will be in a comfortable spot. That being said, the more you save, the more you can afford in the future.

Just remember that the pension and everything are a great idea for your wife now, but medical and life changes happen. If you put all your eggs in the pension basket, you can end up in a bind.

Ex: I saw someone who wanted to live in one spot in the whole country so his special needs son could be closer to a particular specialist

Another had mental health stuff pop up after a few deployments and never wanted to fly again

Another had a heart attack in his 20s and found out he had a birth defect that went unnoticed until then. He was out in

 

[thiennguyen]

@cristiano316 I appreciate the reply. The rent vs. sell thing is my biggest internal debate right now. It sounds like if everything goes perfect, I make $100 a month and gain more equity in an appreciating asset. If things go less than perfect I'm operating at a loss for awhile, which I could stomach for a year or two. I'm also worried about the state of the US housing market.

I think I'm gonna try to be as frugal as possible with the last few upgrades and reassess in about a year, and actually get some local housing expert advice and crunch the numbers fully. I put a ton of work and money into the house, and I'm sure I'll never see a 2.25% interest rate again...

 

[kiwisalad]

@thiennguyen I'm not familiar with the real estate market where you live, but at this point, you have about $64K in equity on a $350K house. If you sell at the price you think it's worth (which is not guaranteed), you'll have closing costs, realtor commissions, and other associated expenses that will have to go into selling. You could wind up gaining essentially nothing from it, or you could wind up making tens of thousands. It's also possible that it doesn't sell at the price you want, forcing you to sell at a loss or rent anyway.

I wouldn't count on making money from your house in a sale until you know more about the market. If you rent it, I would advise you to focus on taking care of the house first before you extract any profit.

 

[kiwisalad]

@thiennguyen Congrats on the baby on the way! Overall, I'd say you're in pretty good shape for where you are. You have goals and methods to work towards them, and you're not making any big mistakes that I can see. I'll address your questions in bold below.

- How much should we be saving for retirement? I can't imagine maxing my 401k and her TSP yearly... I feel that would limit our currently lifestyle which doesn't feel very luxurious. I plan to maximize employer matches and max out my IRA...

If you want to go hard on having the most secure retirement you can reasonably achieve, you could take the triad approach: having enough in pensions, retirement account assets, and rental property that you could fund your retirement from any of those sources. Your current income is $125K per year. Re-creating that with a sustainable 4% per year withdrawal requires about $3.125M in retirement savings. You'd probably need to have 4+ rental houses paid off to generate that kind of income from rentals.

If you trust pensions and social security, you might not need any retirement savings at all. I wouldn't recommend that, but I know lots of people in the military who take that approach.

A reasonable middle ground goal might be to save enough so that your rental house + your retirement asset income can recreate your $125K combined income. That might drop the necessary retirement savings to $2.5M by the time you're 65.

- Will I regret renting out our current house? The interest rate is amazing, but it's old, and rather large (limited potential renting pool). I'm concerned we may have some headaches for the first few years.

That depends on the tenants you get. You need to be very careful with how you pick 'em, and you need a good rental agreement. I wouldn't plan on making a profit from that place for a while. Instead, plan on reinvesting profits into long-term maintenance, repairs, and upgrades (all of which are tax-deductible; if you're not itemizing deductions, you probably should once you start renting the house).

- Are financial planners worth it? I worry they offer cookie cutter services or they charge way more than I'm able to justify.

No. If you want financial advice, go to your base's community service center and talk with the advisors there. If you want to invest, get some accounts with Schwab, Vanguard, Fidelity, or some such and buy assets yourself. Consider S&P 500-tracking funds with very low maintenance costs, a money market account, and maybe one or two other things like bonds/CDs once interest rates drop again.

Most Financial advisors aren't worth your money. They charge you for stuff you can do yourself for free, and they hardly ever outperform the market. The only financial advisors I might recommend would be a financial advisor who gets paid by the hour to provide advice without trying to sell you anything, and even then, I'd sooner read some books and watch some good finance-focused shows than shell out hundreds of bucks an hour to get someone's opinion. Oh, and don't ever do business with First Command.

- What should I do with my taxable brokerage accounts? Would it be stupid to start selling-off and putting into an IRA? Should I stop contributing and just let it grow for a potential forever-home down payment? Pay for our next car in cash?

I would try to keep enough in taxable brokerage accounts to cover your expected major expenses that aren't covered in tax-advantaged retirement/529 accounts: cars, house down payments, emergency fund, et cetera. Right now, your goals include $30K for the house, $40K for cars, and you have $60K on hand in your brokerage account. You should also have about $50-60K in emergency savings, and in case you want to buy your forever house before retirement, you'll need $150K by then to make a 20% down payment. I would consolidate your taxable assets there (including your savings account if you're getting under 5%) and keep growing it until you hit $250K-300K, then leave it until/unless your goals change.

- We expect to be in the 22-24% tax bracket most likely. Should I be trying to put anymore money in Traditional IRA or just focus on Roth from here on out.

I'd say go Roth all the way until you hit peak income near retirement, and then maybe shift to traditional. Unless you diverge from your current trajectory, you have a good chance of making substantially more in retirement per year than you do now. Additionally, if you're bumping up against maximum contributions, putting them in via Roth allows you to effectively shelter more long-term value than traditional.

If your circumstances change, such that you expect to be making far less in retirement than your current salary, then traditional IRA/TSP becomes more viable.

Keep in mind that all matching TSP contributions are always traditional, so you'll always have at least some traditional going on as long as you're getting the match.

- Recommended mix for self-directed IRA investments? Trying to stay pretty aggressive for the next 20 years, but keeping most expense ratio low. Mostly just index funds.

At your present stage, I'd put it all into low-maintenance S&P 500 index funds and the C fund on the TSP (with maybe 10% S and I). Right now, keeping emergency/low risk savings in a good money market fund makes sense, but you might want to consider putting some money into I-bonds at TreasuryDirect, as the fixed rate at 1.3% is higher than at any point since 2007, and it might help to lock that in for 30 years. I bonds that you've held for over a year can effectively serve as an emergency fund.

- My wife keeps our daughter's child support payments from her biological dad in a separate bank account. I don't get involved with that stuff too much, but I'd like to direct her in what to do with it as I'm sure it's a rather large lumpsum at this point, making basically no interest. So far my only advice is start a 529 plan and get it into a HYSA as fast as possible. Not sure if an IRA or a mutual fund is appropriate for this kind of money.

Unless she spends it right away, she should absolutely put that money to work in assets. A money market fund is a decent low-risk option, as is an I-bond. f you're saving for college or other longer-term expenses, I'd put it in an S&P 500-tracking mutual fund for good long-term growth.

Some tweaks you might want to consider:

+It sounds like you're not working for the government right now. You might want to rollover your TSP into a Roth IRA for more control; I've heard you can also get lower maintenance costs in IRAs than TSP, depending on what assets you buy (S&P 500 funds can be slightly less costly than the C fund).

+Consider starting those 529 accounts as early as possible after your kids are born. The 529-Roth IRA rollover requires accounts to be at least 15 years old. You could start making contributions to their Roths this way when they're in high school.

+You mentioned getting a government pension, but you seem to be privately employed right now. If you do work as a government civilian employee, make sure you buy back your 6 years into the FERS system when you do that.

+Have lots of kids and teach them to be as responsible with their finances as you are. America needs more people like you.

 

[thiennguyen]

@kiwisalad I really appreciate you reading and putting the time in to answer everything. A lot of this helps reassure or redirect some of my planning.

Thanks for helping out a former Nuke!

 

[abidingpatri0t]

@thiennguyen You could talk to an advisor at https://hellonectarine.com for $150. 1 hour with a Certified Financial Planner could do you wonders. Fee only financial advice with no upsell, commissions, or other bullshit.

 

[thiennguyen]

@abidingpatri0t I've never heard of that website. Looking at it now, that's exactly the kind of thing I'd be interested to try. Just a consultation where I can bombard them with questions with no strings attached.

Appreciate it

 

[thiennguyen]

Yeah I reached out to Military OneSource about state taxes a few months ago, and honestly it felt like I was directing them to everything and teaching them things. It was a legit tax professional, but there's no way they can know every situation. I'm no tax expert but I'd already done loads of research and just needed some reassurance to get a tax professional blessing before I pissed-off the IRS.

I was the "Command Financial Specialist" at my last command, before separating. The base financial people taught the class for the certification. It seemed that they were more based on how to manage the bad situations and leveraging all the resources the military has to get them out of debt or terrible habits.

If I remember correctly, they didn't really get into investing, other than recommending you do it.

I was always confident on doing things myself, but in the span of 4 years, I separated, full-time work and school, bought a house, got married, had kids. Navigating civilian careers, while also knowing that I'll be moving around as a military spouse, stressing about making sure I also get a job that pays at least the same. Now it's not just my money, it's my family's money, so I don't want to be doing anything stupid with it. My wife has no interest in finance, and usually can't remember her TSP password. So I'm left to anonymous advice on Reddit which is sometimes the best tbh.

I actually setup an appointment on the Nectarine site, figure it's worth a try for $150. The CFP is ex-military so he hopeful understands a little more than the rest. Hoping an hour is enough to get into the weeds on some stuff.

 

[kiwisalad]

@thiennguyen I would go to MilitaryOneSource and your local base's community service center first. They're free. They tend to specialize in helping people who've made far dumber choices with their money than you have, but a lot of them can be quite helpful to people like you too, and the price is right.

 

[abidingpatri0t]

@thiennguyen I know the founder Jeremy personally, he runs the @personalfinanceclub Instagram and is a straight shooter.

There's a few guys/gals on Nectarine that specialize in military topics.

Like someone else mentioned below, maybe start with free on base resources or Military One Source, but the fact you wrote so much might mean you've already exceeded their capacity to assist.