Medically Retired at Age 30 [Saving for Retirement - 100% Disabled Vet]

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huskywarrior
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Medically Retired at Age 30 [Saving for Retirement - 100% Disabled Vet]

Post by huskywarrior » Thu May 03, 2018 2:25 am

So I have had the worst luck over the last few years and am being medically retired from the military in a few months. I just got my VA ratings and am rated 100% P&T which is about $3,000/month tax free. I'll get a few hundred dollars a month from the Army because it was combat related and I don't believe that is tax free. What do I do to set myself up for success? My plan is to go to school using the GI Bill and my parents are letting my stay with them while I am going to school.

I have $100,000 in retirement savings, $40,000 in a taxable / cash brokerage account and about $20,000 in liquid savings. I have zero debt to include credit cards or student loans. I figure if I save all my money during school I could buy a house outright when I finally get a post school job or I could invest it. I don't want to be the stereotypical veteran that gets out and buys a truck or something with their cash. I want to be financially stable and secure. What would you recommend that I do with the cash?

huskywarrior
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Saving for Retirement - 100% Disabled Vet

Post by huskywarrior » Thu May 03, 2018 2:35 am

[Thread merged into here, see below. --admin LadyGeek]

I'm going to be medically retired at the age of 31 and I have no idea what to do with the money that I'm going to receive from the VA (about $3,000/month). When I get out, I'll go to school using the GI Bill and have minimal expenses. I have $100K in retirement savings, $40K in mutual funds and $20K in liquid cash. I know I need to save the money, but how much should I keep in cash vs investing? What should I put the investment money into?

Next year when I don't have any earned income, how can I save for retirement? I'm single so I don't have access to a spousal IRA. Could I setup a company and pay myself via a solo 401k plan?

I am lost, and clueless. I don't want to squander this opportunity.

AlohaJoe
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Re: Medically Retired at Age 30

Post by AlohaJoe » Thu May 03, 2018 2:36 am

I would invest it in a broadly diversified portfolio of index funds. I wouldn't plan on buying a house at the moment. But a lot of people would be fine just keeping it in cash because they sleep better at night with large cash reserves.

If you're going back to school then are essentially starting a career from scratch. That's usually a bad time to think about buying a house because it ties you to a geographic location when -- for your career -- you need the most flexibility.

jalbert
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Re: Medically Retired at Age 30

Post by jalbert » Thu May 03, 2018 3:19 am

Sorry to hear of your involuntary medical retirement. Your personal sacrifice in experiencing a combat injury is not unnoticed.

I would recommend thinking of your brokerage account and retirerment account together as one retirement portfolio. With a disability income and GI bill you should not need more than $20K as an emergency fund. If you are able to live on the income you are receiving, you can invest the portfolio aggressively for retirement. You likely want to hold stock index funds in the taxable account and stock index funds and a suitable bond fund in the retirement account.
Risk is not a guarantor of return.

student
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Re: Medically Retired at Age 30

Post by student » Thu May 03, 2018 5:39 am

Thank you for your service.

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Tamarind
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Re: Saving for Retirement - 100% Disabled Vet

Post by Tamarind » Thu May 03, 2018 5:47 am

How safe is the stream of funds from the VA? How long do you expect it to continue? Are there checkpoints where that amount might be changed or stopped? Does it adjust for inflation?

At the moment you're essentially retired with a pension, just earlier than you expected. So make sure you understand the characteristics of your pension first.

If your income exceeds your needs, and it sounds like it does right now, make sure your cash cushion will cover 3-6 months of expenses including your expected out of pocket for medical care. Then invest the rest. I'd suggest starting by adding to your brokerage account since you don't have earned income. You have a lot of time to finish school and pursue future income opportunities that could give you tax-advantaged space. The brokerage money can always help you fund tax-advantaged contributions later or serve as seed money for a business of your own.

Focus on transition, school, and your health first as those are most important for your long term success.

What is your brokerage money currently invested in? I'm guessing your retirement savings are in TSP?

If you have earned income this year, definitely max out tax-advantaged contributions while you can.

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Watty
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Re: Medically Retired at Age 30

Post by Watty » Thu May 03, 2018 6:16 am

jalbert wrote:
Thu May 03, 2018 3:19 am
If you are able to live on the income you are receiving, you can invest the portfolio aggressively for retirement.
There really is not enough information to know if that is a good idea or not. For example we don't even know how old he or she is. There are a lot of other factors that are unknowable like how well the OP will do in school and what sort of job they will have after school. Being overly aggressive now with the stock market still near an all time high and all the weird stuff that is going on might not be a good idea for a disabled vet.

A lot of the money will be needed in five(?) or so years when the OP is ready to buy a house so that money would be invested a lot less aggressively too. Once he or she finishes school it will be more clear with how aggressively the money should be invested.

As to how to invest the money I would look at the Lifestrategy funds to see what asset allocation they use

https://investor.vanguard.com/mutual-fu ... estrategy/#/

For money that will be earmarked for buying a house some day the conservative growth fund would be a reasonable choice but a few years before your are ready to buy the house you would want to gradually shift the money to be even more conservative than that.

For other money that will likely be used for retirement the moderate growth fund would be a reasonable choice for now. It is a bit more conservative than a target date fund but until the OP finishes school and has a job being conservative would be appropriate since it is not certain that they will work in a traditional job until they are 65.

Life strategy funds are often not a great choice in a taxable account because they are not real tax efficient. While the OP is in school and while they have an entry level job after school they will be in a low tax bracket so being in a high tax bracket will not be a concern for a number of years.

If the OP is comfortable with investing in a few index funds and rebalancing it themself they could have a three fund portfolio for the money in their taxable account that mimics a life strategy fund. That would be a bit more tax efficient which might help a bit in the long run.

https://www.bogleheads.org/wiki/Three-fund_portfolio

Note: The life strategy funds use four funds like this example.

https://investor.vanguard.com/mutual-fu ... dings/0914

The fourth fund is an international bond fund. There are a lot of people that have misgivings about international bonds and do not invest in them. There is not a real consensus on these boards about if they are a good idea or not. Personally I use target date funds which include an international bond index fund but not including them in a three fund portfolio would be fine too.
huskywarrior wrote:
Thu May 03, 2018 2:25 am
I have $100,000 in retirement savings......


While you are in school you should do Roth conversions each December when you can do them in a low tax bracket. You will also need to be careful to check to see if having that taxable income would have any impact on any income based things like financial aid.
huskywarrior wrote:
Thu May 03, 2018 2:25 am
What do I do to set myself up for success?
Here is a link to the getting started wiki.

https://www.bogleheads.org/wiki/Getting_started

The book "The Bogleheads Guide to Investing" is also a good starting point.

https://www.amazon.com/s/?search-alias= ... Bogleheads

One of the authors who is one of the founders of this board recently published a book on a three fund portfolio. I have not read that one yet but that could also be worth reading and it is also on that list.
Last edited by Watty on Thu May 03, 2018 6:28 am, edited 1 time in total.

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Alexa9
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Re: Medically Retired at Age 30

Post by Alexa9 » Thu May 03, 2018 6:26 am

I would get an apartment or rent a small house until you're sure what you want to do / where you want to live. If you get a wife and want kids, then I'd consider a home. Living with parents might get old quickly although certainly a good financial move. Think hard about what you want to do for a career.

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celia
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Re: Saving for Retirement - 100% Disabled Vet

Post by celia » Thu May 03, 2018 12:58 pm

You also need to think about if you need secondary medical insurance for issues that occur that are not related to the disability obtained when you were serving. For example, if you are in a car accident, I doubt the VA will cover expenses due to that. If you should be traveling and not be near a VA center, and you got sick or hurt, how would you pay the unknown costs?

Depending on where you live, there may be an ACA plan that you qualify for. Or, obtaining private insurance is relatively cheap at your age. They can no longer ask health questions and refuse to offer the insurance. (Besides, if you lucky in the future, you may likely never need to file a claim on your private insurance. But if you are unlucky and have new medical needs, insurance is a must.)

When you get a job, of course, you will want to get a job that offers insurance. If you have dependents, they also need to be covered. Health care is expensive and the unforeseen expensive treatment can appear at any time, not just when you are "old".

aristotelian
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Re: Saving for Retirement - 100% Disabled Vet

Post by aristotelian » Thu May 03, 2018 1:18 pm

Solo 401k would only work if you are actually self employed and earn income from the business. Not sure if that would be possible with disability.

If you have extra money to invest, you can always put it in a taxable brokerage account. Keep in mind that when you are lower income, you do not get as much advantage from saving pre-tax, anyway, and any realized gains on your brokerage account will be tax free if you keep your total taxable income under $38,600.

Any time you have a big change in your finances, take your time and don't do anything rash.

jalbert
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Re: Medically Retired at Age 30

Post by jalbert » Thu May 03, 2018 1:46 pm

For example we don't even know how old he or she is. There are a lot of other factors that are unknowable like how well the OP will do in school and what sort of job they will have after school. Being overly aggressive now with the stock market still near an all time high and all the weird stuff that is going on might not be a good idea for a disabled vet.
Age is 30. My view was predicated on he or she being able to live on the disability income currently. I think inflation over the long-term is a significant risk, so there is merit in thinking long-term in how the assets might be used. Risk tolerance and being able to stay the course if there is a bear market are of course also major factors in the decision.
Last edited by jalbert on Thu May 03, 2018 4:07 pm, edited 1 time in total.
Risk is not a guarantor of return.

quantAndHold
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Re: Medically Retired at Age 30

Post by quantAndHold » Thu May 03, 2018 2:10 pm

Are you capable of working a normal job? I know people who’ve been medically retired from the military, but are still capable of doing an office job, for example. If that’s the case, figure out what you want to do, get whatever education you need, and go forward.

If you can’t work full time, but can still work part time, I think my advice would still be the same, but try to choose a career path where you can set your own work schedule.

One thing I would advise, though. When you’re looking at education opportunities, choose a fully accredited, regular college. Don’t choose a for profit school, or any kind of short technical training “college.” Those kind of schools are just there to take your GI Bill money and not give you anything useful in return.

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Re: Medically Retired at Age 30 [Saving for Retirement - 100% Disabled Vet]

Post by LadyGeek » Thu May 03, 2018 3:49 pm

huskywarrior, Welcome! In order to give appropriate advice, it's best to keep all the information in one spot. I merged your 2nd question back into the first thread. This isn't a big deal, don't worry about it.

If you have any questions, ask them here.

The combined thread is in the Investing - Help with Personal Investments forum (portfolio help).
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

Spirit Rider
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Re: Saving for Retirement - 100% Disabled Vet

Post by Spirit Rider » Thu May 03, 2018 6:00 pm

celia wrote:
Thu May 03, 2018 12:58 pm
You also need to think about if you need secondary medical insurance for issues that occur that are not related to the disability obtained when you were serving. For example, if you are in a car accident, I doubt the VA will cover expenses due to that. If you should be traveling and not be near a VA center, and you got sick or hurt, how would you pay the unknown costs?

Depending on where you live, there may be an ACA plan that you qualify for. Or, obtaining private insurance is relatively cheap at your age. They can no longer ask health questions and refuse to offer the insurance. (Besides, if you lucky in the future, you may likely never need to file a claim on your private insurance. But if you are unlucky and have new medical needs, insurance is a must.)

When you get a job, of course, you will want to get a job that offers insurance. If you have dependents, they also need to be covered. Health care is expensive and the unforeseen expensive treatment can appear at any time, not just when you are "old".
The above is not correct for the OP.

When you are 100% medically disabled the VA pays for all medical care, not just for service connected treatment. As 100% disabled the OP will be priority 1 for medical benefits. A Veteran who is Permanently and Totally disabled(P&T) as the result of a service-connected condition is eligible for emergency treatment of ANY condition. Also, CHAMPVA covers the spouse or widow(er) and dependent children of a permanently and totally disabled veteran due to a service-connected disability.

gclancer
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Re: Medically Retired at Age 30 [Saving for Retirement - 100% Disabled Vet]

Post by gclancer » Thu May 03, 2018 8:30 pm

It sounds like you may be eligible for Combat Related Special Compensation in addition to your VA benefit. CRSC is tax free as well. In order to receive CRSC you have to actually apply for it. More information can be found here: https://www.hrc.army.mil/TAGD/CRSC .

TheBogleWay
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Re: Medically Retired at Age 30 [Saving for Retirement - 100% Disabled Vet]

Post by TheBogleWay » Thu May 03, 2018 11:58 pm

Just posting to say thank you for your service and hope you find the right advice here.

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BL
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Re: Medically Retired at Age 30 [Saving for Retirement - 100% Disabled Vet]

Post by BL » Fri May 04, 2018 12:29 am

Don't know if you are using TSP, but I think it is worth keeping it open, or adding to it (Roth) as much as possible if you will still be employed in military for a while. Later you can roll 401k or IRA into it to get the best ER available if you choose. One of their bond funds is unique as well.

If you have work income this year you qualify for setting up a Roth IRA. One of the brokerages such as Vanguard or Fidelity has low-ER index funds and Vanguard has a lot of low-cost managed funds, such as Target Date, Life Strategy, Balanced fund, and others. They are suitable for tax-advantaged accounts and can be used in taxable accounts when your income is low, but not as tax-efficient if you have a decent income after school. If you don't go to school summers, you could earn $5500 each year and put that much into a Roth IRA.

Here is a great little booklet for newer investors:
https://www.etf.com/docs/IfYouCan.pdf

Especially note the last Hurdle #5 which suggests you watch out for insurance, investment and other folks who want your money. If it sounds too good to be true, it probably is! The important thing in your life will be to avoid making the big money mistakes. Don't sign any life insurance or annuity contracts (at least without checking it out here.) There is always someone wanting to get a share of your money.

UTgrad
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Re: Medically Retired at Age 30 [Saving for Retirement - 100% Disabled Vet]

Post by UTgrad » Fri May 18, 2018 9:43 am

I am in the same boat as you, except I am 27. Here are some suggestions that I recommend:

-Apply for SSDI, even if you will be going back to work they will give you a 9 month trial period. But you have a limited time to apply since they go by work you have done in the past few years.

-Figure out what long term annual expenses will be and save 25x that amount, maybe less if you feel comfortable. This is something I think about as well& maybe someone can chime in, but if the (in my case) 3,350+SSDI+Rental property cover your expenses and then some, then how much do you need to save? I'm also interested in hearing responses as to where you could save, since I have found that taxable is pretty much the only option for us.

-Lastly, Find out what your state offers as far as benefits for 100%. I'm in Texas& am exempt from property tax, anyone in Texas can tell you that is HUGE. My wife and kids also got their own VA education benefits and hazelwood and CHAMPVA healthcare benefits which is also a big help no worrying about healthcare at all.

Lifestyle inflation is also a big factor. Try and keep expenses low, while being comfortable. In my case that is 36k more or less. Another factor to think about is taxes. We are in a unique situation where our VA money is not-taxable or even reported. This causes us to be in a low tax bracket, while having enough for expenses. So if I understand correctly, even our brokerage withdrawals won't be taxed because you would be at a low tax bracket.
Last edited by UTgrad on Fri May 18, 2018 10:38 am, edited 1 time in total.

MDCrab
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Re: Medically Retired at Age 30 [Saving for Retirement - 100% Disabled Vet]

Post by MDCrab » Fri May 18, 2018 9:58 am

Living with your parents may save some money, but don't sell your education short. Look around the country and go to the best possible school. The GI Bill is a lottery ticket. They pay your housing, books, and probably 100% tuition. Even many private schools participate in the yellow ribbon program, which makes up the difference between the GI Bill tuition limit and the actual cost of attendance. Many vets waste their GI Bill going to the closest or easiest school. Your combat experience may get you into a college you'd never dream you'd otherwise be qualified for.

UTgrad
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Re: Medically Retired at Age 30 [Saving for Retirement - 100% Disabled Vet]

Post by UTgrad » Sun May 20, 2018 10:52 pm

Money from the GI Bill can help cover education costs, but it has its limits. For example, the Post 9/11 GI Bill only pays up to $21,970.46 per year to attend a private school, but some colleges charge that per semester.

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