PSA - things I should have done....

[RedFive]

They also made us take a mandatory training trying to entice people to go into BRS with phony data that assumed your TSP would grow by 7% annually for 20 straight years with no economic downturns.

They also try to scare the shit out of everyone in TGPS/TAPS to entice them to stay in. One my NC's even said TGPS was a retainment/recruitment tool. ?

 

[Gatordev]

I think the 4-year additional commitment to transfer the Post-9/11 GI Bill to a family member is dumb. It should be transferable whenever you want. You can give your after-tax salary to a loved one at any time - why not this benefit?

Some clarification... There is no additional requirement for transferring the Post-9/11 GI Bill. The VA has no such requirement. However... the Navy has made it a requirement.

 

[Meyerkord]

They also made us take a mandatory training trying to entice people to go into BRS with phony data that assumed your TSP would grow by 7% annually for 20 straight years with no economic downturns.

I’m in the 20-or-bust club.

That 7% is just an average over many years of data. It already takes into account the ups and downs. Yes, the market is pretty volatile year-by-year, but if you bought in 1950 and averaged out your gains, 7% is pretty accurate. Obviously the past doesn’t predict the future, but it’s a place to start.

 

[Spekkio]

This is the flawed thinking that causes people to make the less financially-wise decision, if I'm understanding what you are saying correctly. Comparing $2000 in mortgage to a $2200 rent payment and saying that owning costs $2400 less per year misses so much of the picture.

Slap on a modest $2000 in property taxes you'll pay for for that property taxes, and you are already basically back to even. (I know you mentioned taxes in your specific case, but I include it in the list for the sake of accuracy for anyone else considering the math.)

Property tax is always rolled into the mortgage as an escrow. You're making up false numbers here. Renting a 3 or 4 BR single family usually means you're paying someone else's mortgage payments, including property taxes, plus some on the top to actually give them income.

more stuff...

Here's what you're missing: the money I've paid towards my mortgage principal can be recouped. And interest rates are so low that a mortgage on good credit is almost equal to inflation, so this is as close to a 'free loan' (0% APR purchases on cars notwithstanding) as you can get on an asset that you can reasonably expect to appreciate with inflation if you take care of it.

The money I pay in rent, however, is money flushed down the toilet. It's gone, forever.

DIY home improvement projects usually net positive cash value on resale. Yea, if you are going to hire a contractor for every little thing it gets expensive. Also gotta learn how to replace toilets, vanities, repair appliances, etc. Good thing it's the 21st century and YouTube exists. Most of these repairs take 1-2 hours and would run over $300 to have someone else do it. The larger projects can run thousands but taking a weekend to do arts and crafts yourself pays off and personally is rewarding.

Which is why it takes somewhere between 5-7 years to break even with all the other stuff you mentioned. There are several online calculators to help with this decision.

 

[Spekkio]

That 7% is just an average over many years of data. It already takes into account the ups and downs. Yes, the market is pretty volatile year-by-year, but if you bought in 1950 and averaged out your gains, 7% is pretty accurate. Obviously the past doesn’t predict the future, but it’s a place to start.

The 7% becomes BS because I haven't seen a single reputable financial advisor tell a 55+ year old to leave the majority of his retirement allocations in the stock market, and that's assuming a retirement age of 70.

 

[HAL Pilot]

The 7% becomes BS because I haven't seen a single reputable financial advisor tell a 55+ year old to leave the majority of his retirement allocations in the stock market, and that's assuming a retirement age of 70.

Well I’m 58 and my finial advisor is personally rated in the top 10 in Texas and top 30 nation wide (as an individual not a corporation). I was only able to become a client as a personal favor to a 45+ year friend that’s a client of his. I didn’t come anywhere near his normal client’s required minimum initial investment.

I’ve been with him since 2010. I’ve averaged 13% per year since that time. All his forecasts and plans for my retirement are based on 7% annually and that includes paying his fees. I’m up about 6% so far yearbook date with the pandemic so I should easily break the 7% again before the end of the year. But I’m so far ahead of his plan for my retirement that I could lose 7% for the year and still be well ahead. His plans are conservative but his results always beat his plans

The majority of my money with him is in the stock market. A small percentage are in bond type investments.

 

[Jim123]

If you look back all the way to the late 1940s then average inflation is just a touch under 4%, year to year anything from slightly negative to as high as the mid-teens. The mid-1980s until look like an aberration in all that data since the last time we had double digit inflation was 1981, and the highest since then has been only 5-6% here and there. Makes you wonder what's in store during the next 10-20 years, doesn't it?

I can't remember if the 7% figure was for real growth, adjusted for inflation, or if it's simple growth. Bueller...?

 

[Meyerkord]

The 7% becomes BS because I haven't seen a single reputable financial advisor tell a 55+ year old to leave the majority of his retirement allocations in the stock market, and that's assuming a retirement age of 70.

The 7% doesn’t become BS because it doesn’t match up with your age or willingness to take risks. Your initial argument was about TSP performance during a 20 year military career. That leaves plenty of time to ride the next wave up and reallocate.

 

[HAL Pilot]

I can't remember if the 7% figure was for real growth, adjusted for inflation, or if it's simple growth. Bueller...?

The 7% percent my financial advisor uses is just growth of your money but then he gives you a table that has what your projected money is per year both in today’s dollars and adjusted for historic inflation.

The table includes a set planned monthly withdrawal after your retirement. But the withdrawal figure also takes in account other retirement income you have. In my case, he plans on me having $20,000/month “income”. He has figured out my monthly projected military retirement and social security income and figured I’ll need about $14,000/month from my investments. Everything is in both today’s dollars and adjusted for historical inflation and military/social security yearly increases. So the $20,000/month “income” is also adjusted for inflation. He also includes large planned expenses. For instance I have a planned $600,000 one time expense in 2027 (first year of my retirement) for a retirement house purchase in addition to my planned monthly withdrawal.

At 7% growth, I’m projected to be increasing the value of my investments yearly with the growth exceeding my withdrawals until my death or 120 years old whichever comes first.

My 13% annual average return is based on average risk portfolio. If I had him investing at moderate or high risk, I’d have a higher annual average return. But average risk more than meets my future needs.

 

[Sonog]

They also made us take a mandatory training trying to entice people to go into BRS with phony data that assumed your TSP would grow by 7% annually for 20 straight years with no economic downturns.

I’m in the 20-or-bust club.

7% is a pretty reasonable assumption of growth. The S&P 500 has averaged close to 10% over the past 30 years. This includes economic downturns.

 

[RedFive]

Financial Stuff

Wow, sounds legit. If I ever get to a big boy airline I'm going to need someone like that!

 

[DanMa1156]

7% is a pretty reasonable assumption of growth. The S&P 500 has averaged close to 10% over the past 30 years. This includes economic downturns.

From 1915-2015 - which means it includes the Great Depression and Great Recesssion, it would have netted ~11.8% when dividends were reinvested. 7% is a pretty conservative go to number most financial advisors will start with. Not targeting you - just saying for the wider audience as some people think 7% is an incredulous number. It's not.

 

[DanMa1156]

To convince people to stay in, duh.

Which it specifically states when you sign up, "this is a retention tool." If you gave it away for family members immediately, I'd bet you have a higher take rate; making it a benefit of extended service, the government now gets something out of the deal.

I read an article they are changing it, but I think it should have been from the beginning is that it can be transferable to unborn children. I work with several women who want children after their Navy careers (20+ years), but are reasonably disgruntled that they can't (couldn't?) transfer it.

 

[DanMa1156]

'Getting' 1% is a misnomer. The pay system automatically deducts 1% unless the SVM adjusts it.

Match doesn't kick in until 2 years of service. There's a bonus kicker at 12 years to make up the difference and serve as a retention tool.

Given two people who invest the same % of income into TSP and retire at 20 years O5, the blended system is a pay cut of about $500,000 in 2018 dollars towards retirement.

This is incorrect. The pay system automatically deducts 3% into an age-appropriate L fund and gets a 1% auto match after 60 days of service (so, boot camp?). That match isn't vested until 2 years of service, at which point the remaining 4% match can kick in.

 

[HAL Pilot]

Wow, sounds legit. If I ever get to a big boy airline I'm going to need someone like that!

I won’t have fuck you money but I’ll be comfortable.