Military officer planning full retirement at 45 need advice?

There are so many variables to consider, especially at such a young age. I would recommend you schedule some time with a certified financial planner (look for one at http://www.cfpnet.org). It might cost you a couple hundred dollars, but for a decision this big, you should get some expert advice.

Some answers they will want to know (think about these ahead of time):

1. Are you supporting just yourself, or do you have a spouse/children to care for? 2. What kind of retirement do you want – stay at home and putter around, travel the world, something in between? 3. What kind of house will you live in, what area of the world, and if you want to own a house will it be paid in full? 4. Are you all done with major life expenditures (children through college, weddings, houses, etc.) or if not, what do you anticipate those being and when? 5. What sources of income will you have and when will they start (military pension, social security, part time job, IRA/retirement plan, non-retirement investment accounts). 6. Do you need/want to leave an inheritance to anyone, or is it ok to plan to spend down all your assets during your lifetime. 7. What will you have for health care in retirement (VA? Private medical insurance?) 8. How much income will you need per month, and what do you think it wil be in the future due to inflation. 9. Do you have an estate plan and legal documents that protect you in the event you are incapcitated or die – that is, a will, power of attorney, advance medical directive?

Before you choose investments, it will help to start with a vision of how retirement will look. Typically, the CFP planner will want to be able to put things in a short summary such as: Jim, age 20, wants to retire at 45. His wife, Jane, age 19, works and contributes to a 401k plan. Jim and Jane believe they will live until age 85, and they would like an income equivalent to $ 45,000 a year in today’s dollars. He will be covered for medical care through the Veteran’s Administration, and his wife, Jane, will also have this coverage.

At your age, I would put the most you can into the TSP (401k equivalent) and if you can spare more money for savings above that amount, open a ROTH Ira account with up to $ 5,000 a year. Both of these allow tax deferred/tax free growth, and if you leave them alone will grow substantially over time. Look into a term called “asset allocation” which is a strategy to spread your investments out over several different categories to reduce risk.

Congratulations for thinking so far into the future and planning. There is a great book that changed my life and made it possible for me to retire in my 40′s called “your money or your life” by Joe Dominguez and Amy Robin. While I disagree with their advice on investing (I think they are too conservative) the way they approach budgeting, cost control, and planning for your future is great.

Good luck and thank you for your service. Hope your tours of duty are safe.

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