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Matrix  
#1 Posted : Thursday, August 22, 2019 9:38:40 AM(UTC)
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I'm a 30 year old GS-12 and have been giving serious thought to the idea of retirement, perhaps 45. I'm a veteran and would have retired in 7 years. Being federal now, I have another 27. It seems like I could use my TSP to ride out the 12 years until I start collecting a pension. I could also even convert that to an annuity, which to my knowledge, does not get the 10% penalty.

Is it unrealistic to live 12 years, with everything already paid off (home, cars, credit cards) out of a TSP?

What would you do in my situation?
10years2retire  
#2 Posted : Thursday, August 22, 2019 10:38:24 AM(UTC)
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Originally Posted by: Matrix Go to Quoted Post
I'm a 30 year old GS-12 and have been giving serious thought to the idea of retirement, perhaps 45. I'm a veteran and would have retired in 7 years. Being federal now, I have another 27. It seems like I could use my TSP to ride out the 12 years until I start collecting a pension. I could also even convert that to an annuity, which to my knowledge, does not get the 10% penalty.

Is it unrealistic to live 12 years, with everything already paid off (home, cars, credit cards) out of a TSP?

What would you do in my situation?


Rather then staying home being bored and using up your TSP before you have to, you should get an English teaching job in a 3rd world country like Thailand, Vietnam or China (look for English teaching job groups on Facebook) that will at least cover you cost of living over there until it's really time to retire.
frankgonzalez  
#3 Posted : Thursday, August 22, 2019 10:49:48 AM(UTC)
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Originally Posted by: Matrix Go to Quoted Post
I'm a 30 year old GS-12 and have been giving serious thought to the idea of retirement, perhaps 45. I'm a veteran and would have retired in 7 years. Being federal now, I have another 27. It seems like I could use my TSP to ride out the 12 years until I start collecting a pension. I could also even convert that to an annuity, which to my knowledge, does not get the 10% penalty.

Is it unrealistic to live 12 years, with everything already paid off (home, cars, credit cards) out of a TSP?

What would you do in my situation?
1st...if you would have retired from the military in 7 years..you would not likely be "retired"...simply you would have had your retired pay to help offset the fact you started your civilian career later than others. While I could have taken my military retired pay and lived in some parts of the US and not worked, I don't want to live in the places that I could afford to do that, and the quality of life would have been poor, IMO. So...I'm looking at another 10 years or so until I can retire a second time. I like what I do and my agency, and the potential of another promotion or two isn't unrealistic, so have no issues with working until then. Of course, in my agency we have some folks still working in their 80s because they love the mission!

Based on I'm guessing you are in a series which has a mandatory retirement age like LEO or ATC based on the age you are estimating you have to retire. I'm not certain you can collect those retirements at that mandatory retirement age unless you are working to that point. You may find you can't collect until you are 62 (which would be way longer than the 12 years you imagine living on your TSP.

The you add in the fact TSP is supposed to be part of the retirement along with Social Security (by the way...you don't get the Supplement until 62 unless you retire directly from service, IIRC., so you may find the lower amount you would get from your federal pension won't be enough to live on, especially after you blow your TSP in the meantime.

That said...if you have another career you are wanting to go into, find something that will pay your bills without dipping into the TSP, and then the Federal pension will simply be a bonus later on when you can collect it.

Trust me...retirement with limited income is no fun. I considered it, and realized I enjoy doing too many things that require money (concerts, shows, fine dining, travel), and even finding ways to minimize costs (ie I find plenty of free or low cost tickets to shows, but there is still food and drink costs when you go, or parking, etc. There are always some costs, and if your income is very limited, you will find yourself unable to really participate in things..or very limited in what you can do.

No-one goes into the civil service to get rich...but the retirement package allows most of us to be comfortable in our retirement!
You should have voted Cthulu...the greatest of all Evils
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guruebby on 8/22/2019(UTC)
someoldguy  
#4 Posted : Thursday, August 22, 2019 11:54:14 AM(UTC)
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Check out finance.yahoo.com they often run articles on the unexpected downside of early retirement... like in your 40s.

Bottom line, even if you have all the money you need, you still have to find something to do.
DISCLAIMER: You read it on an open internet forum :)
roger.d  
#5 Posted : Thursday, August 22, 2019 11:56:01 AM(UTC)
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Originally Posted by: Matrix Go to Quoted Post
I'm a 30 year old GS-12 and have been giving serious thought to the idea of retirement, perhaps 45. I'm a veteran and would have retired in 7 years. Being federal now, I have another 27. It seems like I could use my TSP to ride out the 12 years until I start collecting a pension. I could also even convert that to an annuity, which to my knowledge, does not get the 10% penalty.

Is it unrealistic to live 12 years, with everything already paid off (home, cars, credit cards) out of a TSP?

What would you do in my situation?



Can you do it? Depends on how much you have saved. And what your expenses are.

You may want to read some discussions on FIRE

Financial
Independence
Retire
Early
Learn to discipline yourself, so someone else doesn't have to
Endless Summer  
#6 Posted : Thursday, August 22, 2019 12:29:23 PM(UTC)
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Here's my story, for whatever it may be worth.

After working eight years in a job that was killing me day by day, I realized I'd had enough. I had some cash saved and knew it would last me over a year while I played the stock market to bring in just a little spending money.

I quit the job after yet another fight with my control freak boss. I was 42 years old. For the first 9 months or so it was pretty sweet, a genuine "endless summer" where every day was Saturday. I traveled, studied, did volunteer work or whatever. But I realized the one thing nobody ever talks about concerning retirement is that no matter what you love to do, you've got to fill 16 hours a day. I ended up returning to the working world but with a much healthier attitude.

The other issue with retiring early is that all of your friends still have jobs and obligations. I'd call someone and say "Let's do something tomorrow" and they'd point out that tomorrow was Tuesday and they had a job to go to.

The FIRE part is easy, I pass people with cardboard signs every day at stoplights who did that. The trick is quality of life. Maybe the answer for you is a complete change. New career, new city...

Good luck
Matrix  
#7 Posted : Thursday, August 22, 2019 1:19:40 PM(UTC)
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You all make excellent points, let me elaborate further and gather more options/opinions from y'all.

I'm in a regular career series. The MRA retirement for anyone my age is 57, if you'll have 30 years of federal service. Given I entered federal service at 17, I would have 40 years. Now if I left at 45, I'd have 26, so the minimum is 60. Or I can still elect 57, but have a 25% reduce (5% per year under 62).

Of course, there's that one in a million chance I'd get offered a RIF with early retirement, and then obviously the choice is simple to retire and get immediate retirement.

It was mentioned "retirement with limited income". That's a very valid concern. But do I want to live "very comfortably" at 57, or relax a bit at 45. After all, there's not many expenses sitting in a boat on the lake. You are right, I probably won't be fine dining and traveling the world. But I will be young (relatively), and able to do anything I want non-monetary such as the outdoors, lake, pool, beaches, etc. Most of the nation do not have a pension to look forward to, or the foresight /opportunity to invest heavily.

However, as mentioned, at 57/60 I'll start my pension. If I did take an annuity...I'd have that for life, plus my pension, plus social security. It seems then my "retirement" really kicks in financially.

Having to fill 16 hours/day is the least of my worries. There are movies, beaches, boating, outdoor stuff, technology, etc. Heck I'll sit in my pajamas and watch Law & Order SVU Season 52!

One perk I'm seeing at the moment is many career fields, mine included, is already at 50% virtual teleworking. That could easily climb. That would likely be more encouraging to sit at home on meetings and e-mails versus the commute and sitting in a stuffy office.
smithandjones  
#8 Posted : Thursday, August 22, 2019 3:21:29 PM(UTC)

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At 39 I quit my job and decided I wanted to travel. Turns out, it was much cheaper and easier to do than anyone in the working world will lead you to believe. And I do not relate to those who can’t think of things to do in their free time. Give me a break and explore the world, volunteer, open your mind and broaden your horizons. My wife and I ended up traveling and volunteering for 7 years before I finally decided to join a startup agency and help build it. During that time we lived in Mexican beach villages, on islands in Belize, volunteered all over Alaska, explored indigenous Indian islands, and so much more.

The biggest concern is health insurance. If you have that covered the rest is a breeze. Working is incredibly expensive. I know many won’t understand that but you can save a ton when you have the time to think about how you spend money.

And you don’t have to truly retire, you can do other work you love part time or go back to work if you decide the time is right. I’ve been back for almost 8 years now.
postalvet  
#9 Posted : Thursday, August 22, 2019 4:34:31 PM(UTC)
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Originally Posted by: Matrix Go to Quoted Post
I'm a 30 year old GS-12 and have been giving serious thought to the idea of retirement, perhaps 45. I'm a veteran and would have retired in 7 years. Being federal now, I have another 27. It seems like I could use my TSP to ride out the 12 years until I start collecting a pension. I could also even convert that to an annuity, which to my knowledge, does not get the 10% penalty.

Is it unrealistic to live 12 years, with everything already paid off (home, cars, credit cards) out of a TSP?

What would you do in my situation?


are you sure you can even collect a pension after 12 years.
and what would you get? 2 dollars a month?
Postal employee (retired) 38 yrs who helps even if some do not believe me! I was a Steward, officer & trouble maker. Just Sayin'
TheRealOrange  
#10 Posted : Friday, August 23, 2019 3:06:08 AM(UTC)
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Originally Posted by: Matrix Go to Quoted Post
I'm in a regular career series. The MRA retirement for anyone my age is 57, if you'll have 30 years of federal service. Given I entered federal service at 17, I would have 40 years. Now if I left at 45, I'd have 26, so the minimum is 60. Or I can still elect 57, but have a 25% reduce (5% per year under 62).

Since you will be leaving federal service well before your MRA, you will technically be resigning and later getting a deferred retirement where your annuity would start with 26 years service at age 57 (age reduction applies) or 60 (no age reduction). You don't mention health insurance, but you will need to find coverage after you resign, and if you receive a deferred annuity, you will not be eligible to continue any health benefits or life insurance coverage you had while employed. You also will not be eligible for the retiree annuity supplement. Finally, if you are married when your annuity begins, it will be computed with a reduction to provide a maximum survivor annuity (50 percent of your unreduced annuity) for your spouse. You can elect to provide a partial survivor annuity (25 percent of your unreduced annuity) or no survivor annuity at all, but your spouse would have to consent. Best of luck to you.
Endless Summer  
#11 Posted : Friday, August 23, 2019 3:43:31 AM(UTC)
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Originally Posted by: smithandjones Go to Quoted Post
At 39 I quit my job and decided I wanted to travel. Turns out, it was much cheaper and easier to do than anyone in the working world will lead you to believe. And I do not relate to those who can’t think of things to do in their free time. Give me a break and explore the world, volunteer, open your mind and broaden your horizons. My wife and I ended up traveling and volunteering for 7 years before I finally decided to join a startup agency and help build it. During that time we lived in Mexican beach villages, on islands in Belize, volunteered all over Alaska, explored indigenous Indian islands, and so much more.

The biggest concern is health insurance. If you have that covered the rest is a breeze. Working is incredibly expensive. I know many won’t understand that but you can save a ton when you have the time to think about how you spend money.

And you don’t have to truly retire, you can do other work you love part time or go back to work if you decide the time is right. I’ve been back for almost 8 years now.


My experience was similar. I lived on very little money during my sabbatical. I got rid of my car, didn't need to get anywhere quickly anymore, I cooked all my own meals since I now had time and didn't need to grab something on the run, I found cheap entertainment.

Travel can be very cheap, as was mentioned above. You won't be travelling like you did when you were on vacation, staying in hotels and eating out in restaurants every meal, buying expensive knick-knacks. Instead, you'll be living in a foreign place much like the locals do. A head of lettuce in a grocery store in Italy does not necessarily cost more than a head of lettuce in a supermarket in Orlando. I've rented apartments all across Europe that cost me less for a month than I would have spent for a week in a hotel.

My comment about filling the day was aimed at the guy who loves golf and thinks when he retires it will be great because he'll play golf every day, all day. I just caution folk to have a wide range of interests to pursue.

As with the poster above, I came out of the experience with a much healthier view of the importance of work/life balance.

If you are single, or if your spouse is on-board with the idea, do it! Even if it's not permanent, it will be a valuable experience. You can always jump back in, but it will be on your terms.
TheRealOrange  
#12 Posted : Friday, August 23, 2019 3:58:44 AM(UTC)
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Originally Posted by: Matrix Go to Quoted Post
I'm a 30 year old GS-12 and have been giving serious thought to the idea of retirement, perhaps 45.

The OP currently is 30 years old and looking to "retire" at 45, so it's not like this is an immediate concern. ;-) The key part of the current plan seems to be a recognition that the TSP will need to be maxed out, since that will be the primary source of income for 12 (age 57) to 15 (age 60) years, and Social Security will not be available until age 62 at the earliest. All of this assumes a "normal" life and employment progression and no significant negative changes, like a massive market drop that affects the TSP balance. A lot can (and will) happen over the next 15 years before the OP reaches age 45. I like long range planning, and did it myself, but a lot happened in my life from age 30 to age 50 that substantially changed my retirement plans. I intend to retire in a couple years, but . . . life happens. :-)
GWPDA  
#13 Posted : Friday, August 23, 2019 6:07:45 AM(UTC)
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I've retired twice so far - hoping that the next time sticks. I'm hoping too that my TSP isn't gutted before then - watching it drain, day by day. Noting as well that Social Security has once again been put at risk, this time by overwhelming deficits and proposed payroll cuts. And of course, while I doubt my agency will turn into one where one is told to move or be fired, there are always lots of other possibilities - not all of them predictible. YMMV
Matrix  
#14 Posted : Friday, August 23, 2019 6:32:19 AM(UTC)
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Quote:
are you sure you can even collect a pension after 12 years.
and what would you get? 2 dollars a month?


I'm not sure if you're being serious or facetious, but yes it's called deferred retirement. $2/month? I'd be at around 25%+ of my career high-three. Which even if I never got promoted, my salary would be approaching $100,000. I have no doubts on career progression beyond my current grade in the next 15 years to make that even higher.

Certainly as stated, this isn't an immediate concern, but I think it's healthy to see thoughts from others, especially those that have retired early.

Based on just my current contributions, which I'll likely increase, puts me above $500,000 in the TSP at 45, at a modest growth of 5%. If I own my home and vehicles, that's a lot of money for the basics (food, entertainment, utility bills, etc.).











thanks 1 user thanked Matrix for this useful post.
Endless Summer on 8/23/2019(UTC)
postalvet  
#15 Posted : Friday, August 23, 2019 6:51:37 AM(UTC)
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Originally Posted by: Matrix Go to Quoted Post
Quote:
are you sure you can even collect a pension after 12 years.
and what would you get? 2 dollars a month?


I'm not sure if you're being serious or facetious, but yes it's called deferred retirement. $2/month? I'd be at around 25%+ of my career high-three. Which even if I never got promoted, my salary would be approaching $100,000. I have no doubts on career progression beyond my current grade in the next 15 years to make that even higher.

Certainly as stated, this isn't an immediate concern, but I think it's healthy to see thoughts from others, especially those that have retired early.

Based on just my current contributions, which I'll likely increase, puts me above $500,000 in the TSP at 45, at a modest growth of 5%. If I own my home and vehicles, that's a lot of money for the basics (food, entertainment, utility bills, etc.).





are you fers or csrs?

better check the rules.

Edited by user Friday, August 23, 2019 6:52:25 AM(UTC)  | Reason: Not specified

Postal employee (retired) 38 yrs who helps even if some do not believe me! I was a Steward, officer & trouble maker. Just Sayin'
TheRealOrange  
#16 Posted : Friday, August 23, 2019 6:59:44 AM(UTC)
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Originally Posted by: Matrix Go to Quoted Post
Quote:
are you sure you can even collect a pension after 12 years.
and what would you get? 2 dollars a month?
Based on just my current contributions, which I'll likely increase, puts me above $500,000 in the TSP at 45, at a modest growth of 5%. If I own my home and vehicles, that's a lot of money for the basics (food, entertainment, utility bills, etc.).

Have you used the TSP Retirement Income Calculator to estimate the future TSP annuity income based on your assumptions? The Single Life Annuity amount with Basic Features, which appears to be the highest of the options, is $2,032 per month for level payments and $1,039 per month to start and $3,390 per month at age 85 for increasing payments based on your age at the start (45), a life expectancy of 85, and a starting TSP balance of $600,000. It's a good tool for planning purposes. Outside an annuity, using the 4% rule and a TSP balance of $600,000 would give you a starting income of $2000 per month. Obviously, all of those income amounts are before taxes, if any.
TheRealOrange  
#17 Posted : Friday, August 23, 2019 7:12:16 AM(UTC)
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Originally Posted by: postalvet Go to Quoted Post
Originally Posted by: Matrix Go to Quoted Post
Quote:
are you sure you can even collect a pension after 12 years.
and what would you get? 2 dollars a month?


I'm not sure if you're being serious or facetious, but yes it's called deferred retirement. $2/month? I'd be at around 25%+ of my career high-three. Which even if I never got promoted, my salary would be approaching $100,000. I have no doubts on career progression beyond my current grade in the next 15 years to make that even higher.

Certainly as stated, this isn't an immediate concern, but I think it's healthy to see thoughts from others, especially those that have retired early.

Based on just my current contributions, which I'll likely increase, puts me above $500,000 in the TSP at 45, at a modest growth of 5%. If I own my home and vehicles, that's a lot of money for the basics (food, entertainment, utility bills, etc.).



are you fers or csrs?

better check the rules.

I'm curious, is the stated FERS deferred retirement information incorrect? It appears that if the OP resigns at age 45 and starts a deferred FERS retirement annuity at age 57 (MRA) with 26 years of service and a high-3 of $120,000, his annuity would be $23,400 ($120,000 x .26 = $31,200 - $7,800 age reduction of 25% (5 years under age 62 times 5% per year)). If the OP waits 15 years until age 60 to start the deferred FERS retirement annuity, there would be no age reduction, so the annuity would be the full $31,200. Is that not correct?
Endless Summer  
#18 Posted : Friday, August 23, 2019 7:41:25 AM(UTC)
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Originally Posted by: TheRealOrange Go to Quoted Post
Originally Posted by: Matrix Go to Quoted Post
Quote:
are you sure you can even collect a pension after 12 years.
and what would you get? 2 dollars a month?
Based on just my current contributions, which I'll likely increase, puts me above $500,000 in the TSP at 45, at a modest growth of 5%. If I own my home and vehicles, that's a lot of money for the basics (food, entertainment, utility bills, etc.).

Have you used the TSP Retirement Income Calculator to estimate the future TSP annuity income based on your assumptions? The Single Life Annuity amount with Basic Features, which appears to be the highest of the options, is $2,032 per month for level payments and $1,039 per month to start and $3,390 per month at age 85 for increasing payments based on your age at the start (45), a life expectancy of 85, and a starting TSP balance of $600,000. It's a good tool for planning purposes. Outside an annuity, using the 4% rule and a TSP balance of $600,000 would give you a starting income of $2000 per month. Obviously, all of those income amounts are before taxes, if any.


The 4% rule is valid for people who do not want to draw down their principal. If you are not concerned about leaving the money to an heir then you can take whatever % makes you happy. Additionally, after age 70.5 you need to take the required minimum disbursements which may be over 4% anyway.

If you had 500k earning 5% average per year you could take out 10% of the balance each year, this would give you a higher income in the early years when you might want do live a more expensive lifestyle, and still leave you with a modest amount in addition to your SS. Doing this, you would still have almost 200k after 20 years.
Matrix  
#19 Posted : Friday, August 23, 2019 9:55:04 AM(UTC)
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Yes according to my calculations, I would receive the full $31,200 pension upon reaching 60, since I'd have 26 years. So there would be little incentive in collecting at 57 with a 25% lifetime reduction. That's assuming a salary of $120,000 at retirement, which is very realistic.

Option 1) take my entire TSP and completely withdrawal it. I'll spend very conservatively, and put most of it in CD's with my projections in a high-yield checking. Assuming I have 500,000, that would bring me what $12,500/year in extra interest income. I'm not calculating exacts, just ballpark.

Option 2) take my TSP out in monthly payments. According to their calculator, I could request $3,000/month with a 2% rate of return and will last me 16 years. Then I'd have the pension afterwards. Or if the rate of return is higher (say 5%), it would last me 23 years.

I'd find a cheap housing locale, no state taxes (maybe a nice place in Texas and/or Florida) to further my savings.

Thoughts?
Endless Summer  
#20 Posted : Friday, August 23, 2019 10:46:20 AM(UTC)
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Originally Posted by: Matrix Go to Quoted Post
Yes according to my calculations, I would receive the full $31,200 pension upon reaching 60, since I'd have 26 years. So there would be little incentive in collecting at 57 with a 25% lifetime reduction. That's assuming a salary of $120,000 at retirement, which is very realistic.

Option 1) take my entire TSP and completely withdrawal it. I'll spend very conservatively, and put most of it in CD's with my projections in a high-yield checking. Assuming I have 500,000, that would bring me what $12,500/year in extra interest income. I'm not calculating exacts, just ballpark.

Option 2) take my TSP out in monthly payments. According to their calculator, I could request $3,000/month with a 2% rate of return and will last me 16 years. Then I'd have the pension afterwards. Or if the rate of return is higher (say 5%), it would last me 23 years.

I'd find a cheap housing locale, no state taxes (maybe a nice place in Texas and/or Florida) to further my savings.

Thoughts?


It's a personal decision, you haven't mentioned Social Security which you should be able to collect at 62 depending on your year of birth. That should add at least $20k per year if you start collecting at 62. Now, with SS and fed pension you're looking at around 50k pre tax. You won't be eating out of dumpsters, and we're not even talking about the TSP money yet.

Even if 100% of your TSP funds are in a ROTH account you will still pay income tax on the portion that was contributed by your employer. All of the rest is tax free. If your TSP is in a traditional account all of it is treated as income if you withdraw the entire amount.

For these reasons, regardless of whether the money is ROTH or Trad I'd leave it in the TSP. A balance of mostly safe investments with some in higher risk investments should do much better that 2%. Look up "All weather investment portfolio" for an idea on a well balanced portfolio. I'm not selling it, I just stumbled across it and it makes sense. I've backtested it and it seems solid.

If you can average 3% per year on your 500k you'll be able to take out 24k per year. Added to the 50k above you're making ~75k per year before taxes and the TSP money will last a bit more than 30 years.

Low tax states are a good choice as well.

Best of luck
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