I didn’t join the Army to become a multi-millionaire, but I think it might actually happen. The idea of using military service to achieve financial independence is not exactly a well worn path*. Imagine asking 10 people “what’s the most likely financial impact of enlisting into the military?” I’d wager that less than 1 will reply “you’re going to need more bedrooms to store all those pillow cases full of money.”
The financial outcomes most associated with military enlistment typically skew more towards 84 month truck loans, layaway tattoos, and nights at the club attempting to woo future ex-spouses.
I’m still not sure what was most attractive to me about military service. It was likely somewhere between the opportunities available, and that said opportunities didn’t requiring a college education.
During high school I was not indifferent or neutral on the idea of post-secondary education. The very notion of extending my academic sentence an additional four years nauseated me. I was anti-college to the core and not shy about expressing my antipathy to anyone nice enough to inquire. I felt sorry for the college bound. High school seemed so intense for them with all the studying and test preparation and they hadn’t even graduated yet. It sounds silly now, but my commitment to reducing my options to the narrow aperture of military service became extreme.
Commitment to Ignorance
I refused to take any classes in high school that fell into the “college prep” track of courses. I refused to take the pre-SAT, let alone the real thing. My peers diligently studied and racked up activities for their college applications. I instead focused on devising innovative ways to work as close to a full time job as possible. Not doing a single school activity or an ounce more than minimum passing academic standards really frees up your schedule. My first job was at a local agricultural supply store in my rural Pennsylvania hometown. Eventually I moved on to a local grocery store, then followed a friend into the exciting world of big box electronics at the now defunct Circuit City chain.
I remember having an interest in the military from as early as seventh grade. My father served in the United States Navy in the 1970’s. The idea of getting out of my small town and pursuing my interest in law enforcement without college sounded idyllic. I enlisted in the Army because they were able to guarantee me the career field I was seeking (Military Police). I’ll likely write a future post breaking down the pros and cons the various US Armed Forces, but for now, I’ll just say that the Army was the best fit for me.
Between graduating from initial military training and shipping out to my first duty station (Germany), my mother encouraged me to sit down with a financial planner from her church. She invested with this planner for years and wanted to make sure I was starting life on the best financial footing. I am forever indebted (not literally) to my mother for this advice. The planner I met with was a good and decent man who took the time to ensure that I truly understood the magic of compound interest.
“If you start saving just $200 a month now, you could have over a million dollars by age 65!”-Financial Planner Guy
My first tattoo is an enduring testament to me not always listening to my parents. I wish I would have listened to their counsel about that tattoo in the same way I actually did listen to them about retirement savings.
Better Than Nothing
I started a Roth IRA with that planner from my mother’s church. He placed me in some moderate cost, actively managed American Funds. I now know that I was not invested optimally, but I solved the hardest part of the equation. I got started, and did so early!
From that initial meeting with a planner in 2002 until about 2006, I contributed small, but regular amounts into my American Funds Roth IRA. I avoided contributing to the excellent Thrift Savings Plan (TSP) available to federal employees and the military. At that time, there was not a Roth TSP option. Moreover, I was pretty sure I would be leaving the military following my initial five year term. I felt as though it would just be easier to keep my money in an IRA separate from my military employment.
Shattering my Blissful Ignorance
During those first years, I knew that I was invested in the stock market, but not a lot more than that. My wife and I married and had our first child in late 2005. That was likely the impetus for me to learn more about those statements showing up in the mail every month. It was a slow process for me at the start. I did not truly gain an understanding of the power of low cost, index investing until I came across Clark Howard and The Money Guy Show. Podcasts have always been my medium of choice for deepening my understanding of the personal finance space.
I don’t think Mr. Howard gets the credit he deserves as one of the FIRE (Financial Independence Retire Early) movement’s OG’s. He urges America daily to “save more, spend less, and avoid getting ripped off.” He’s been making that battle cry since before the FIRE movement even had a name. Paula Pant conducted two excellent interviews (ep# 47 and ep# 158) with Mr. Howard on her Afford Anything show. She made great strides towards recognizing him for his contributions. Mr. Howard armed me the knowledge to sniff out bad deals, scams, and how to optimally consume when I had to be a consumer.
Bryan Preston is a fee only financial planner who, way back in 2006, started one of the first significant personal finance podcasts titled The Money Guy Show. Upon discovering his podcast, I binged. I dove deep and fed on the rich personal financial content he consistently produced. Mr. Preston has since expanded his show to include a co-host and a popular video version of the show. One of Mr. Preston’s consistent tag lines is that his show “goes beyond common sense.” Mr. Preston provided my first exposure to ideas that were counter-intuitive or unknown to me. Most notably, he showed me the value of investing through a down market, the need to reduce investment expenses, and the power of index funds.
The Second Coming Of Bogle
In 2007 I was five years into both my military and investing career. More importantly, by the start of 2007 I was 12 months into my second financial education courtesy of Clark Howard and Bryan Preston. That year between 2006 and 2007 was by far the most important (financially) of my life so far. In that time, I learned enough to become angry. I felt betrayed that this trusted family planner made his living charging all of us fees on every transaction. I guess that I must have intellectually known he was getting paid for his work somehow. It wasn’t until I learned about expense ratios, sales loads, and 12b-1 fees that I understood the depth of his beak wetting.
I eventually calmed down and had a pleasant phone call with the planner. I expressed gratitude for him selling me on the power of compounding while he also sold me his loaded funds. Bryan Preston and Clark Howard empowered me to have the confidence that I could do this (investing) on my own. I had the reigns and could steer myself towards an enjoyable retirement (still 40+ years away in my mind at this time).
Making the Switch
I opened Vanguard Roth IRA’s for my both my wife and I. It was a bit scary at the time. I was moving our $15,000 in retirement savings based on a year’s worth of podcasts. I was choosing podcasts and outside information over the trusted local source for guidance. My family writ large epitomizes thrift. I come from generations of frugal people who know the value of every dollar. Saving for emergencies is easy at the local bank. My family understands saving for retirement in principle. The mechanics of how and what to invest in however is wizardry best left to a professional.
From that pivotal moment in 2007 on, we began to max out (most years…) Roth IRA’s for both my wife and I. We invested in a Vanguard Target Retirement Fund and marked ourselves down as damn near savvy!
Many people are aware that military personnel earn a defined benefit pension upon retiring after at least 20 years service. I always saved as though I would never receive a pension, mostly because I didn’t plan to serve that long.
The Army was supposed to be my method of bypassing the college requirement to enter the civilian workforce. It wasn’t supposed to be my one and only career.
As it turns out, life happens. Circumstances emerge (that I’m sure I’ll go back and recount in future posts) that sometimes detour the best laid plans. The concise version is that my wife and I started a family earlier than we would have planned. The Army provided the steady paycheck, excellent benefits, and familiarity that were the constants in our life of variables. I extended my enlistment, and then again, and then again one more time.
Back to School
Throughout the changes in my family’s life, my position on higher education softened considerably. At first, I just want to be prepared for my planned exit(s) from the military. As my years of completed service accumulated, my pursuit of a college degree intensified to a fever pitch. I realized that if I was going to make the Army a career, and possibly draw a pension for the rest of my life, I needed to do what it took to increase my pension potential.
After completing my bachelor’s degree while still on active duty, I was accepted into the Army’s Officer Candidate School. Officer Candidate School takes enlisted servicemembers with college degrees and transforms them into commissioned officers. For those not familiar with the US military, the effect of this career move was an immediate 40% pay raise.
After becoming an officer, I continued my trajectory of maxing out Roth IRA’s for both my wife and I. I still did not utilize the Thrift Savings Plan because all of my calculations showed that by 59 ½, our IRA’s plus my military pension would meet our needs. I didn’t want to “over save.” This was based on the conventional retirement calculator wisdom that you should plan to need 80% of your pre-retirement income throughout retirement.
Fear of Leaving the Army’s Loving Embrace
As I moved within four years of pension eligibility, I started stressing out regularly as to what my next career would be. The best advice I found seemed to point squarely at LinkedIn as a starting point. The first thing I did was to build a sizable profile with 4,000+ connections. I created a professional blog series interviewing veterans who recently transitioned to the civilian workforce. I chatted with family and friends regularly about what type of opportunities I might be interested in once I retired from the military. Everyone has to dosomething after the military….right?
Then, I came across the FIRE movement as we now know it in 2019. BOOM goes the dynamite.
If I made a couple tweaks for my remaining 3 or 4 years of military service, I wouldn’t have to work for money again!
Started From the Bottom Now We’re Here
At the time I came back out of the FIRE-sphere rabbit hole, our finances looked about like this.
-About $200k in Roth IRAs
-No debt other than the mortgage on our rental property
-About to sell a rental property with $100k plus of equity
-About $50k in 529 Plans
-Over 50% of net pay is currently disposable (we are currently stationed overseas and use a lot of our extra money for traveling around Asia and other unique experiences)
-Upon military retirement, we’ll draw an annual pension of about $40k net
Hold up, wait a minute. From what I recently learned at the end of the internet in the FIRE section, it takes about $1,000,000 invested in equities to safely generate $40k a year in income.
I’ve got that coming (knock on wood) to me in an inflation adjusted pension in about 3 ½ years. So the US Army is effectively MAKING ME A MILLIONAIRE! Talk about an awakening. My exposure to the FIRE movement has truly been my third financial education and I am deeply grateful to all the pioneers who helped the rest of us understand it.
The Game Plan
We are wrapping up our time overseas shortly and will need to move one more time (back to the US) for my final Army assignment. The game plan we’ve mapped out to maximize the opportunities ahead of us so far looks like this:
-Drive down our expenses as low as possible.
-Max out Roth IRA’s and my Roth TSP for each of my remaining 3 or so years remaining in the Army.
-Use part of the proceeds from the sale of our rental property to buy a couple (or hopefully just one depending on location) of reasonably priced used cars upon our return to the states.
-Sock away the remainder of the rental property proceeds and each additional dollar we can pry loose from the clutches of consumerism to paying off a house in our yet to be determined retirement location before I retire.
Beginning With the End in Mind
The end that we’ve got in mind is starting our “retirement” with a paid for house, car(s), about $450k in Roth accounts, and a lifestyle that is totally supportable on my $40k annual pension.
The Army is already planning to make me a millionaire upon retirement at age 39. Depending on market performance, our Roth savings will hopefully crest the million dollar mark within about 10 years of my military retirement. I’m not sure what exactly I’ll choose to do after the Army, but the absence of pressure to choose something based upon a requisite amount of money is intoxicating. That to me is the key underlying principle of the FIRE movement. Financial Independence gives one the opportunity, but not requirement to Retire Early from paid work. We should really look at adding an underscore or something in that acronym to show the correct emphasis. FI_re …..?
I’ve chosen to use actual amounts in this post and will likely do so again moving forward. My intent with this site is to demonstrate the reality of this “green collar” path to financial independence. My “green collar” path is a way, but definitely not the way. I hope you’ll follow along and share with me your your unusual paths to achieving independence, financial and otherwise.
*The road is well documented thanks to the efforts of bloggers such as Doug Nordman, just not well traveled.