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This is Part 2 of my interview with BG Michael J. Meese, USA, Ret., Ph. D as we discuss Financial Independence for members of the Military. Click here for Part 1.
OK, so my next question is what you said about deployments. How often do armed forces members move around?
They usually move around, minimum, every 3 years, although frequently more often than that. In my 32 years in the Army I moved 17 times. And it is not uncommon for them to deploy about a third of the time, but that varies substantially based on specialty. So my son, who graduated from West Point 2012 spent 9 months in Afghanistan in 2014, and then 6 months in Eastern Europe because of the Russian threat to the Ukraine. So for the first 4 years in the Army he was deployed 15 months.
So on the topic of moving around, a big part of Millennial Revolution’s message is that there is no such thing as stability, so buying a house doesn’t make sense anymore. I’d imagine that this is even more of an issue for the military. If you move around every 3 years, does it make more sense to rent or do people actually buy when they move in and sell when they move out?
Typically, people rent and sometimes there are government quarters available so they don’t even have to do that. For me, in 32 years of being in the Army, I bought a house once at Ford Hood, Texas, owned it for 2 years, and I was able to sell it by owner and made a LITTLE bit of money on it. And I only bought it because I thought I’d be there a longer than 2 years. Turns out I wasn’t. So I’m with you.
Now there are some military people that buy a home at their first duty station, then rent it out when they go to another duty station they buy a home and then rent that out. They have property all over the nation and become these expert property renters. But that, in my view, is a high risk strategy. You’ve gotta have the wherewithal and the funds to be able to do that.
Yeah, and I’d imagine that if the person messes up your house you’re not there to prevent it or fix it, right?
Yeah, exactly. You’ve either got to have a really good property manager or know someone in the neighbourhood to keep an eye on that home. Now, on the other hand you may be renting out to someone else in the military you know and trust, so that could be an option.
Though that being said, think of all your friends. How many of them would you trust with your property? Maybe half?
OK I’m gonna leave that question dangling. I’ve got a question about the spouses. So if every 3 years they have to pick up and move. Obviously the military member’s career goes with them but what happens with the spouse? Do they have to quit their job and find a new one every time? I’d imagine that would make it hard for a spouse to make a career of their own.
It is. It is. But it’s a little easier today, there are more options like you who can have a career over the Internet, having things where you can work out of your homes. Also, as an example, my daughter-in-law got a teaching degree from Colorado and we’re all really proud of that, and in almost every military base there’s children and there’s a need for teachers.
In the United States we try to have cross-state credentialing for military spouses. That way if she got a teaching degree in Colorado she can get a teaching job in Georgia. Similarly my daughter who married a military guy decided to switch her degree to recreational therapy so she can help fulfill some of these health care needs that the military has.
So I think it’s appropriate that because a military spouse does have to move around, some of the retirement compensation is meant to take into account that the spouse likely wasn’t able to advance in their career as much as they could have.
Hmm, interesting. So the spouses that are the most successful nowadays are the ones that emphasize mobile Internet-based work, or servicing the needs of military bases.
Clever. I like that. And again, that’s a nice segue into my next question about retirement compensation. How does the pension system work? And how does the Thrift Savings Plan (TSP) interact with that?
Good question! Under the current system, military members can voluntarily participate in the TSP, which is set up for federal workers, and is a basic account where you can invest your funds in 6 different Index funds (or Lifestyle funds that are a combination of them). These are run by the federal government and are very low-cost way to invest money. So for anybody that has funds to contribute towards retirement, the TSP is a very very good thing.
With regards to military pensions, the pension has historically what they call “golden handcuffs.” You don’t get any retirement pay until you’ve served 20 years. And at 20 years you get 50% of your final salary. If you serve longer than 20 years, it goes up to 75% at 30 years. So it’s a generous pension.
Hey, you guys certainly deserve it. Actually, it’s kinda funny. We keep hearing all this talk on the news that “If the government were in charge of stuff it would suck. Only private corporations and the free market can do a good job.” But in this case, the government appears to be doing the exact right thing for you guys, which is using low-cost Index funds, while in the private sector they just try to shovel people into crappy mutual funds to line their own pockets.
I think that’s a pretty accurate observation.
And with the 401(k)’s, there’s a limit to how early you can withdraw. Does the TSP have a similar limit?
Yes, the TSP is a qualified retirement account, so you can’t start withdrawing until 59.5, and if you do there’s a 10% penalty. And you have to start withdrawing at 70.5, and there’s a required minimum distribution (RMD). So if you’re saving for a house or graduate school a TSP may not make as much sense.
But could you roll a TSP into a Traditional IRA and implement a 5-year Roth IRA conversion ladder?
That I’m not sure. (Any military members in our readers who can confirm whether a TSP is compatible with a 5-year Roth IRA conversion Ladder?)
And finally, one question that I’ve been dying to ask is that of our military readers who write to us, literally ALL of them have as part of their retirement a plan to build a bunker or a cabin in the middle of the woods and stock it with guns and canned food, “just in case?”
Why is that?!? Do you guys know something that we don’t? Should we be building a bunker in the woods as well?
Uh…no, I don’t have a bunker. I don’t have any more cans than my wife has in our pantry. So I’m not aware that’s a thing that military people do.
All I can say is, there’s nothing special I know, and I’m not building a bunker any time soon.
OK that’s good to know. I don’t want to be dying in an apocalyptic hellfire.
From talking to some of them it seems like the perspective they have from operating in these warzones like Iraq or Afghanistan is that here in civilian life we take for granted that there probably won’t be enemy tanks rolling up the National Mall but they’ve actually seen it happen! So they have this belief that our nice comfy peacefulness is actually a lot more precarious than we think. One of them sent me a book (which I did NOT read because it’s too alarming) about how we are all only 72 hours after having food supply lines cut off from descending into a zombie apocalypse situation.
Right, right, there’s also a book out there about what would happen if an EMP pulse hit the United States and destroyed our electronic infrastructure. But the truth is, our infrastructure (electronic and otherwise) is so interconnected like a spider’s web in North America that if something like that were to happen the system would kind of repair itself rather than collapse completely like a house of cards.
Right, the Internet was specifically designed by DARPA to be a de-centralized network to survive a nuclear attack from the Soviet Union, right?
Right, so that’s why I don’t have a bunker.
OK, so that makes us feel a lot better. If you’re not worried, I’m not worried.
Right, I’m not too worried.
Well, there you have it. Pensions, danger pay, and nuclear apocalypses. It’s a trifecta we strive for with every interview here on Millennial-Revolution.com. I would like to extend a big THANK YOU to BG Michael J. Meese, USA, Ret., Ph. D. for taking the time to talk to us and open us up to a whole new world of personal finance that we normally don’t get exposed to.
Once again, he is the COO of the American Armed Forces Mutual Aid Association, and if you’re in the Armed Forces check them out because they have a TON of great information for you.
Thoughts? Feelings? Let’s hear about it in the comments below.
BG Michael J. Meese, USA, Ret., PhD is a retired Army Brigadier General and is the Chief Operating Officer of the American Armed Forces Mutual Aid Association (AAFMAA).
Mike joined AAFMAA as Chief Operating Officer in 2013. He retired from the United States Army as a Brigadier General having concluded his 32-year career as the Professor and Head of the Department of Social Sciences at the U.S. Military Academy.
At West Point, he taught economics and national security courses and was the Director of the Economics program. He has written numerous articles and two books: the Armed Forces Guide to Personal Financial Planning and American National Security. He has served in a variety of strategic political-military positions including deployments to Afghanistan, Iraq, and Bosnia for a total of 31 months and was the Executive Director of the Secretary of the Army’s Transition Team in 2005 and the co-director of the Department of Defense Panel on Commercialization. He is a graduate of the National War College, U.S. Military Academy, and earned his Ph.D., MPA and an M.A. from Princeton University.