- My Forums
- Tiger Rant
- LSU Recruiting
- SEC Rant
- Saints Talk
- Pelicans Talk
- More Sports Board
- Winter Olympics
- Fantasy Sports
- Golf Board
- Soccer Board
- O-T Lounge
- Tech Board
- Home/Garden Board
- Outdoor Board
- Health/Fitness Board
- Movie/TV Board
- Book Board
- Music Board
- Political Talk
- Money Talk
- Fark Board
- Gaming Board
- Travel Board
- Food/Drink Board
- Ticket Exchange
- TD Help Board
Customize My Forums- View All Forums
- Show Left Links
- Topic Sort Options
- Trending Topics
- Recent Topics
- Active Topics
Started By
Message
What to do with military retirement pay?
Posted on 7/31/22 at 6:45 pm
Posted on 7/31/22 at 6:45 pm
I officially retire on 1 October and will not rely on my retirement income at all. So every penny of it (roughly $60K) will be invested somewhere.
My plan is max out 401K since new company matches 6%. Max out IRA. But then what would y’all recommend? I mean, that’s about $32.5K (including wife’s IRA) so there’s more to play with. I’m up for advice.
My plan is max out 401K since new company matches 6%. Max out IRA. But then what would y’all recommend? I mean, that’s about $32.5K (including wife’s IRA) so there’s more to play with. I’m up for advice.
This post was edited on 7/31/22 at 6:46 pm
5
Posted on 7/31/22 at 7:12 pm to AFtigerFan
Brokerage account to bridge you to the retirement accounts later in life at 59.5
Real estate if you want to really diversify
Congrats you're well on your way to retiring early (from any work) and really enjoying life over rhe next decade or or two for sure.
Thanks for your service as well. 20(+) years in the military is always a big sacrifice that shouldn't go unnoticed.
Real estate if you want to really diversify
Congrats you're well on your way to retiring early (from any work) and really enjoying life over rhe next decade or or two for sure.
Thanks for your service as well. 20(+) years in the military is always a big sacrifice that shouldn't go unnoticed.
This post was edited on 7/31/22 at 7:46 pm
Posted on 7/31/22 at 7:19 pm to thunderbird1100
Thanks, I definitely feel blessed to be in this situation. I’ll see a roughly 10% reduction in pay based off new income and old income. But the new income source doesn’t require me to pay into SSI, so it’s almost a wash.
I’ll look into brokerage accounts. Not sure we want to get into real estate at this point, but I’ll probably look into it also. Wouldn’t hurt to educate myself.
I’ll look into brokerage accounts. Not sure we want to get into real estate at this point, but I’ll probably look into it also. Wouldn’t hurt to educate myself.
Posted on 7/31/22 at 7:49 pm to AFtigerFan
A low cost Variable Annuity is another tax deferred instrument. Check Fidelity and Schwab.
Posted on 7/31/22 at 7:59 pm to AFtigerFan
Yeah you could go the route of dividend investing in a brokerage account to build up some nice dividends to retire on which are taxed lower than capital gains. Probably 15% for you instead of your ordinary income tax rate, guessing 22-24% otherwise.
Funds like SCHD are pretty good as diverse dividend funds. Then you can also pick some stable dividend paying companies yourself.
Funds like SCHD are pretty good as diverse dividend funds. Then you can also pick some stable dividend paying companies yourself.
Posted on 8/1/22 at 4:46 am to thunderbird1100
quote:
20(+) years in the military is always a big sacrifice that shouldn't go unnoticed.
Congrats and agree on the 20+ i made 5 years and that was enough
Also agree on the dividend approach. Dividend payers have done well thru this rough patch. Mine have done well and most have increased their payout and will increase their future payouts.This post was edited on 8/1/22 at 4:50 am
Posted on 8/1/22 at 5:54 am to thunderbird1100
quote:
Funds like SCHD are pretty good as diverse dividend funds
Agree
Posted on 8/1/22 at 6:24 am to AFtigerFan
Taxable brokerage with a low cost provider like Vanguard, Schwab or Fidelity. I'd just put most of it in index funds (ETFs are better in taxable).
You can be more aggressive in allocation with little or no need for bonds because of the inflation adjusted pension.
Ignore the dividend advice it will generate additional taxes while you continue to work. Nothing wrong with selling and realizing long term capital gains when you eventually sell. You will pay tax on dividends whether you reinvest or spend the $. Further, taxable assets get passed on at stepped up basis and your heirs will never pay tax so why pay tax.on dividends you dont even need along the way? Additionally, with $60k pension (probably less taxable with VA disability offset) you have plenty of room to take gains in the zero long term capital gains bracket once you stop working second career.
Dont buy an annuity. You already have an inflation adjusted pension for stable retirement income and annuities are fee heavy.
Research SBP, it may be best to self insure or take out term policy. SBP is expensive for what you get unless in poor health, spouse is much younger etc...
You can be more aggressive in allocation with little or no need for bonds because of the inflation adjusted pension.
Ignore the dividend advice it will generate additional taxes while you continue to work. Nothing wrong with selling and realizing long term capital gains when you eventually sell. You will pay tax on dividends whether you reinvest or spend the $. Further, taxable assets get passed on at stepped up basis and your heirs will never pay tax so why pay tax.on dividends you dont even need along the way? Additionally, with $60k pension (probably less taxable with VA disability offset) you have plenty of room to take gains in the zero long term capital gains bracket once you stop working second career.
Dont buy an annuity. You already have an inflation adjusted pension for stable retirement income and annuities are fee heavy.
Research SBP, it may be best to self insure or take out term policy. SBP is expensive for what you get unless in poor health, spouse is much younger etc...
This post was edited on 8/1/22 at 6:45 am
Posted on 8/1/22 at 6:39 am to thunderbird1100
quote:
dividends to retire on which are taxed lower than capital gains. Probably 15% for you instead of your ordinary income tax rate, guessing 22-24% otherwise.
Wrong, unless you're comparing qualified dividends to short term capital gains.
Qualified dividends are taxed same as long term capital gains.
Ordinary dividends are taxed at regular income rate.
Dividends will cost OP more in taxes because instead of deferring LTCG until selling he will realize dividend income every year. OP will have substantially larger income soon with 2nd career and pension than afterwards w only pension and mix of retirement account withdrawals and LTCG pkus tax free basis.
The infatuation with dividends on here always surprises me. You are locking in tax liability, investing in typically slower growth companies, and trusting your investment to a buisiness that thinks the best use of capital isnt growing the business.
This post was edited on 8/1/22 at 6:47 am
Posted on 8/1/22 at 7:56 am to TorchtheFlyingTiger
quote:
unless you're comparing qualified dividends to short term capital gains.
This
The problem with single stock buying is hardly anyone can buy and hold without dabbling and creating themselves some short-term gains in the process (Along with selling at bottoms due to panic) which is taxed at ordinary rates. If someone has the discipline to buy and hold then yes it can work to your benefit, the problem is the majority of people cant get around themselves to do this, especially in a brokerage account vs. retirement account.
The nice part about dividend investing is if you buy the bigger funds like SCHD it's easy to set it and forget it and re-invest dividends till you need them. In his case he has the income no problem to cover the tax burden at 15%. It's also done really really well compared to probably 90%+ people buying single stocks and even the s&P 500 (VOO/SPY). It's also less volatile than the S&P 500 and other growth stock investing which people tend to get antsy over. For example in the last year it's actually up 0.4%, compared to S&P 500 being down over 6%. In the YTD period it's down just 7% vs. S&P down twice that. It has similar or better returns than S%P 500 over last 5 and 10 years as well.
I'm using this more as a retirement vessel he's less likely to touch than a growth vessel most people cant stand the highs and lows and do, well, stupid things with them. IF you got the discipline, then great, but if not, a fund like SCHD really isnt a bad alternative whatsoever.
This post was edited on 8/1/22 at 7:59 am
Posted on 8/1/22 at 8:23 am to thunderbird1100
That relative lack of volatility is an interesting angle. I'll take a closer look. Still question the tax drag of additional dividends over the years vs a buy and hold strategy index ETFs w lower dividend yield. With a large income plus pension I'd assume panic selling isnt such a concern. We can agree, either beats trying to pick winners and losers and realizing short term or long term gains/losses with every trade along the way.
Posted on 8/1/22 at 8:30 am to TorchtheFlyingTiger
I’m with you on the tax issues with dividends. The amount of people who fail to quantify the tax impact of their investments is nauseating. I buy funds like SCHD and DGRO all the time, but it’s part of a more comprehensive approach than simply drooling over yield.
Posted on 8/1/22 at 8:58 am to TorchtheFlyingTiger
Yield on SCHD isnt high at all, it's basically been between 2.5-3.5% the past 5 years sans a short >4% yield when things got crazy in 2020. You can really almost look at it more like a growth vessel that just happened to be in a bunch of dividend companies since the growth of it has been as good or better than the S&P 500 over the last 5-10 years with less volatility than it.
Posted on 8/1/22 at 9:02 am to AFtigerFan
As long as inflation is high, you could put $20k into I-bonds currently yielding 9+% as close to no risk as you can get. Just cant access it for 1 year.
Posted on 8/1/22 at 9:24 am to AFtigerFan
quote:
Not sure we want to get into real estate at this point, but I’ll probably look into it also.
You may not want to actually own/operate rental property since that's nearly a full-time job. I would suggest as part of your brokerage account looking into Real Estate Investment Trusts (REIT's, pronounced "reet"). Many of them are paying fairly good amounts (I own some preferred stock issued by Public Storage which pays around 5% currently; some real estate areas are iffy but we still seem to want to buy and hoard stuff so the self-storage market is still active).
Posted on 8/1/22 at 11:29 am to Skippy1013
quote:
A low cost Variable Annuity
No
No
No
Posted on 8/1/22 at 12:28 pm to AFtigerFan
Hookers and blow?
Congrats on the 20.
Congrats on the 20.
Posted on 8/1/22 at 1:51 pm to TheOcean
quote:That would end up costing me half... bad financial decision
Hookers and blow?
Posted on 8/1/22 at 3:28 pm to TorchtheFlyingTiger
quote:
Ordinary dividends are taxed at regular income rate.
Dividends will cost OP more in taxes because instead of deferring LTCG until selling he will realize dividend income every year. OP will have substantially larger income soon with 2nd career and pension than afterwards w only pension and mix of retirement account withdrawals and LTCG pkus tax free basis.
The infatuation with dividends on here always surprises me. You are locking in tax liability, investing in typically slower growth companies, and trusting your investment to a buisiness that thinks the best use of capital isnt growing the business.
Meh, those of us who early retired and knew the tax treatment of all their holdings up to their retirement and and remain current with tax code don't have an issue. Dividend holdings in Roth are tax free, and if one knows how to manage their taxable holdings they can come in close to zero on taxation of dividends. For an example almost 98% of my dividends on 2021 1040 filing were qualified and zero tax. When fixed income was paying shite then dividends make even more sense, plus if someone was smart and built up tax loss carry forwards through the years things become even more manageable. One size does not fit all, especially with multiple 7's or more in taxable brokerages, Roths, and TIRAs, etc. I'm not infatuated with dividends, although they serve a useful purpose for me, and due to placement my holdings as a whole are very tax efficient. YMMV.
Posted on 8/1/22 at 8:42 pm to tirebiter
Why not just retire , outright.
Page 1 of 2
Popular
Back to top
Follow TigerDroppings for LSU Football News