Looking for a Little Financial Advice

[Achilles]

http://i96.photobucket.com/albums/l179/reynoldo_2006/calculator.jpg

$320,000 to live on over the course of 20 years isn't much better.

Correct me if I'm wrong but don't most officers who retire after 20 years go on to get another job in the private sector? Also what you're not factoring in is even if you stop contributing to the TSP at 45 you won't withdrawal until you're 65 unless you want to face steep withdrawal penalties. So you'll have another 20 years of compounded interest in which that money will rapidly grow.

 

[Spekkio]

Correct me if I'm wrong but don't most officers who retire after 20 years go on to get another job in the private sector?

Yes, and I would too. But then I'd still be working and would not have a need for a 401k at the time to live off of.

Point is, a tsp/401k plan doesn't seem like something that's really going to make a huge difference -- at least not as big as I would personally like.

 

[Morgan81]

I'm going to suggest something that some may or may not agree with but I've found to be very helpful. Get a financial adviser. I pay a guy from Ameriprise $600 a year to deal with everything money-wise for me and it has helped me out and made me relax knowing that I have retirement accounts, house accounts, emergency accounts and toy accounts; none of which are massive, but for an O-1 in his late 20s with a substantial amount of student loan debt are respectable. In other words, he saves or makes me my $600 back in actual earnings and in sweat-equity.
I know some are going to say it's a rip off and you don't need it, but for someone who doesn't know the ins and outs of hardly any money matters, it's given me a lot of breathing room.

 

[jt71582]

I think it's a great idea if you're willing to drop the money to do it. I totally think it's worth 600 a year to have that extra peace of mind. My dad will do it for me for free, but he wants "a ride in a hornet." I'll get right on that, Dad.

 

[rhinoh82]

Point is, a tsp/401k plan doesn't seem like something that's really going to make a huge difference -- at least not as big as I would personally like.

Well then I hope your as good of an investor as Warren Buffett. Because as 401k plans go, private or otherwise, the TSP is about as good as it gets.

While we're on the subject of finance. I own a house and I'm shipping off to OCS on 14 September. I currently have it on the market, but say it doesn't sell between now and when I graduate OCS. Does the Navy do the geo-bachelor thing? I remember in the Corps we had a few geo-bachelors that lived in the barracks. They collected BAH that went to their mortgage payments where their families were, but they also were allowed to reside in the barracks. At one time the SgtMaj threatened to kick all of them out due to overcrowding, but this never happened. Anyway, my question is would I be able to make similar arrangements in P'cola until I was able to sell my house in Charleston?

 

[picklesuit]

Uhhh...ok. I guess you have part of that statement right...you will be working on it plenty and it will probably be cheap.

Again, a '96 Ford truck. I paid 2200 out the door, and have put less than $500 into it (mostly a water pump, brakes, and 2 tires) but did all of the maintenance and upkeep myself, i.e. new gaskets in the thermostat housing, flush and fill my own radiator, replacing belts and the occasional pulley (gotta love that salt air).

All cars eventually need work, when that time comes, I would rather do it myself than pay someone $65 an hour to do it for me.

Mid '90s cars/trucks are easy to come by, don't cost much, and are still easy to fix. Why buy some zippy Mitsubishi that you can't readily find parts for and can't work on?

 

[Morgan81]

Why buy some zippy Mitsubishi that you can't readily find parts for and can't work on?

... because you'll never need them. I drive a Civic and abused it before OCS, putting 110 miles a day at a minimum. The thing is a champ, sips gas, goes months (now that I drive 10 miles a day) between oil changes and when I do need service costs about $40 a pop. If working on your car is your thing and you enjoy it, more power to you, but it isn't for me so I don't ever want to do it. It's 100% stock outside of a portable XM reciever but I do know that there are just as many parts for Japanese cars out there as there are for American rides if you want to work on them.
My first car was an Oldsmobile followed by a Dodge Dakota. Working on the car started as fun for me, but when you need to do said work on your way to somewhere when you didn't plan on it, the fun stops.

 

[picklesuit]

... because you'll never need them. I drive a Civic and abused it before OCS, putting 110 miles a day at a minimum. The thing is a champ, sips gas, goes months (now that I drive 10 miles a day) between oil changes and when I do need service costs about $40 a pop. If working on your car is your thing and you enjoy it, more power to you, but it isn't for me so I don't ever want to do it. It's 100% stock outside of a portable XM reciever but I do know that there are just as many parts for Japanese cars out there as there are for American rides if you want to work on them.

But Ican't get my big ole' hands in those little engine compartments! I had an '87 Acura Legend for about a year...2 alternators, the electrical system was always jacked, and the brakes went out, all in a damn year! I found parts (even in Iowa) but when I was trying to get that damned alternator in I couldn't fit my hand, the wrench, and the bolts all at once in the little engine space. I'll admit, I loved that car, it had balls, but I like domestic better.

I do have to say if I went foreign, I'd probably go Toyota or Honda.

 

[PropAddict]

Point is, a tsp/401k plan doesn't seem like something that's really going to make a huge difference -- at least not as big as I would personally like.

I thought that, too. Until I checked into Priamry and a LCDR gave us a Check In brief with a PPT about it. All you have to do is put 100% of your Flight Pay into TSP Lifecycle funds for a 20 year year and not touch it until 59.5 and it will be worth $1,000,000. This is using current 2008 flight pay numbers, assumes you retire as an O-4, and assuming Flight Pay doesn't get increased at all over the next 20 years. It also assumes a 10% interest rate, which has historically been sustainable by the TSP.

Now the real magic is if you also kick in 2% of base pay every month. Then you will have $2,000,000 at age 59.5.

Or at least that's what I got out of the brief. If anyone's at Whiting, you can try and snake the brief off the server. It's called something like "The $1,000,000 Question".

 

[Dirty]

Point is, a tsp/401k plan doesn't seem like something that's really going to make a huge difference -- at least not as big as I would personally like.

Your .jpg was nice but you gotta play with the numbers a bit. 10% of 46,000 annual salary is about 200 hundred a paycheck. Garbage in=Garbage out. If you said I could have 320k after 20 years for 200 a paycheck, I'd say your doing pretty good. Up that number a bit and watch the results. Even 250-300 a paycheck will pay huge dividends. Remember the time value of money, and this is pre-tax income so you're earning 1/tax rate off the bat. I.E $800 into TSP a month only 'costs' you about $625 (Also anything with "allowance" in it is non-taxable). Of course, don't put all your retirement eggs in one basket. If I was in P'cola, I'd be buying real estate right now for sure!

 

[m0tbaillie]

Well, since everyone else is asking for financial advice then I will too. Here's my situation.

I'm in BDCP and as it stands now, I have about $7,500 to my name, 10% going to TSP, and another $2,200 from BDCP (after TSP) coming in each month.

When I graduate next May, I will only have $5,200 in loans, which is tiny compared to what some others accrue. I planned on setting up an automatic bill pay for that (even while in OCS) and slapping as much money on it as I can during the 6-month grace period that no interest accrues. I guess it's also good to point out that it's a sub-stafford loan mean no interest begins accruing until 6 months after I graduate.

Now, I've never had a car before, and I want to get one. I'm not sure if I want to buy or lease, because I have no idea where I'll be or whether it'll even be prudent to have a vehicle if my first tour will be sea duty (SWO/IP here not SNA/NFO), but I have it dead set in my mind that I'm not going to be 22 and have never had a car before, so I'm getting one. I'm looking at a Honda Civic Hybrid which, fully loaded is approx. $23,000 and gets 40/45MPG. With gas prices, I feel that it is more than prudent.

So my real question is, what kind of investments would be good to make starting right now with the remainder of the money that I'll be making from BDCP? Obviously I'm not going to pay my car off in full, nor am I going to pay those loans off in full (but I'd like to pay them quickly), so, aside from a Roth IRA (which I was considering opening with USAA) I am willing to make semi-risky investments while I'm still in school and this money from BDCP is, for lack of better terms "play money" (even though I'm looking to invest it, I am in a comfortable spot to take risks as it isn't my only source of income).

Suggestions?

 

[Spekkio]

Now, I've never had a car before, and I want to get one. I'm not sure if I want to buy or lease, because I have no idea where I'll be or whether it'll even be prudent to have a vehicle if my first tour will be sea duty (SWO/IP here not SNA/NFO), but I have it dead set in my mind that I'm not going to be 22 and have never had a car before, so I'm getting one. I'm looking at a Honda Civic Hybrid which, fully loaded is approx. $23,000 and gets 40/45MPG. With gas prices, I feel that it is more than prudent.

I don't know shit about investing, but I did go through getting a car recently when I got into an accident prior to OCS.

First things first: forget the hybrid. Unless you are planning on keeping your Civic for 8+ years (and I highly doubt you're going to want to keep an 8 year old Civic on O-3 pay), you are most likely not going to make the money back on gasoline over a regular car.

Secondly: you should really consider a lease. Why? Well, for starters, you're not going to be driving much on deployment, so mileage isn't a factor for you. Secondly, see above about pay jumping up in the next four years. You will probably want to get something better once you can afford it.

To figure out what works for you, take the lease payments you would be making and find the total cost to have the vehicle. After you have that, you'd either have to keep a more expensive car that you bought longer, or you will have to buy a used car.

Eg: My lease has me paying out $10k over the course of the lease. My options were:

Lease: I took this route because of the above
Buy used: This may be an option for you if you have a bit of cash saved up. Financing a used car is highway robbery, and I didn't have the cash in the bank at the time and needed a ride. Even still, we're talking about keeping a $8-10k car for 3+ years and assuming no abnormal maintenance cost...not very easy to do.
Buy New: I would have had to keep any new car I bought in the same price range as my Mazda for about 8-10 years to equal out the cost of leasing a car.

So my real question is, what kind of investments would be good to make starting right now with the remainder of the money that I'll be making from BDCP? Obviously I'm not going to pay my car off in full, nor am I going to pay those loans off in full (but I'd like to pay them quickly), so, aside from a Roth IRA (which I was considering opening with USAA) I am willing to make semi-risky investments while I'm still in school and this money from BDCP is, for lack of better terms "play money" (even though I'm looking to invest it, I am in a comfortable spot to take risks as it isn't my only source of income).

Suggestions?

Same boat I'm in, and definitely curious about some of this stuff. Nuke BDCP lets you keep BAH while at OCS, which has fattened my checking account quite a bit.

 

[jt71582]

Found my Ensign-mobile

http://charlotte.craigslist.org/car/765172926.html

How would this work for a fresh O-1? At least I can repaint for every squadron I end up in.

 

[CaptainRon]

Call up USAA and ask to talk to one of their free financial advisors.

I called last week and talked to a guy for over an hour and he was very good. He looked at all my money and told me things I could do to improve my situation. He also pointed out that nobody at USAA works on commission, so there is little, if any, conflict of interest.

 

[RockySLP]

Obviously I'm not going to pay my car off in full, nor am I going to pay those loans off in full (but I'd like to pay them quickly), so, aside from a Roth IRA (which I was considering opening with USAA) I am willing to make semi-risky investments

There's almost no reason to open an IRA with a bank, even USAA. I always try to discourage my friends from doing this. I've had one with a regional bank and I've had one with a stock broker. The broker is guaranteed to be better, whether it's Scottrade, Ameritrade, or someone else.

IRAs are just investment "vehicles" -- you can hold whatever you want in them so long as your servicer allows it. Large stock brokers will give you many more options. With a broker you can be safe, semi-risky, or really risky. I can hold any type of equity or derivative in my IRA. USAA, I suspect, will push their in-house mutual funds on you (and their fees are just too high).