Author Topic: Looking for some feedback if I'm screwing up  (Read 2076 times)

gunlaysat

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Looking for some feedback if I'm screwing up
« on: July 28, 2021, 03:12:51 PM »
Hello all!

I am a little more than half way (12 yrs down) to completing a 20 year career in the military where I'll begin to earn a pension. While I imagine I'll keep earning an income following military retirement, it will definitely be on my own terms and in something that is a passion project. We plan to spend a lot of our time traveling and being present parents. Given that, my planning factors assume I will have no W2 income starting 8 years from now. I'm married with no children and my wife and I are fortunate enough to earn around $250,000 a year. I am looking for your overall thoughts and a review of my progress thus far to ensure I'm on the right track. My ultimate goals are stated below in the questions/comments section.

Debt: Only debt is mortgages. Primary residence - $565,000 owed at 2.25% located in San Diego, CA. Home value is $850k. Investment property in Austin, TX with $170,000 owed at 3.375%. Home value is $400k. Currently clear about $500/month on the investment property after all expenses that I dump back in to pay it down quicker.

Tax Rate: 24% Federal, 0% State

Age: 34

Current retirement assets:
Total Portfolio Size: $660,000. Of this, roughly $265k is in the TSP C/S funds at 80/20%, $125k in a Roth Target Retirement (2050) Vanguard fund, and $270k in VASGX (taxable).

Other assets: I am likely to inherit another home from my parents when they pass (probably 10-15 years away). Its current value is $800,000 and is also in Austin, TX (a rapidly appreciating area). It is already paid off.


Contributions

New annual Contributions
$19,500 annually to TSP (max)
$6,000 annually to Roth IRA (max)
$28,000 annually to taxable account
$800/month extra towards primary residence mortgage.
$950/month extra towards investment property mortgage.

Questions/Comments:
1. I know it's a bit vague, but would you recommend any portfolio changes at this point? I hope I'm in the right funds but am open to repositioning if you all see something that can improve. I've recently come aware of the tax disadvantages of VASGX and am considering putting all future taxable contributions and dividends into VTSAX/VTIAX with 80/20 split.

2. Our goal is to earn around $150k/200k a year passively in retirement. My pension will be roughly $72k/year in today's dollars and a compound interest calculator tells me my portfolio will be around $1.8M which would give another $70k/year at 4% withdrawal rate. Also anticipate paying off the investment property which currently rents from $1900/month and most (maybe all?) of the primary residence by retirement.  Those two paid off would yield $40-50k/year in rent combined. I am unsure if I would sell or rent (or maybe move in to?) the inherited property once I took ownership.

3. How should I position myself to begin withdrawal earlier than the penalty free age (looking to retire around age 43) and minimize penalties? Should I just eat the penalty's to access the funds?

4. We anticipate retiring to an area with a decent cost of living and good weather . Phoenix, AZ and Austin, TX are our top two choices right now. Buying or building the retirement home is an anticipated cost. 

I understand this is definitely a first world set of problems to have but I appreciate everyone's input. Please critique away!  Thank you!

gocurrycracker

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Re: Looking for some feedback if I'm screwing up
« Reply #1 on: July 30, 2021, 02:02:45 AM »
Congrats, you appear to be in good shape.

I'd probably stop paying extra toward either mortgage and put the rest in the taxable portfolio. 2.25% is less than the current inflation rate. Even the 3.375% is lower than inflation after your tax deduction.

You can access the retirement funds penalty-free through:
Roth conversion ladder
SEPP
All Roth contributions
Borrow home equity

Plus you have $600k available now (+ future contributions/growth) to fund you from age 42 - 59.5, just use that.

If you stop paying down the mortgage you will have more $ with no access restrictions. The payments will be smaller in 10 years.

At $200k/year you don't really need to worry about a retirement place with decent cost of living. San Diego has nice weather, I'd stay there.