Jan 15, 2020
Doug Nordman was a submariner in the Navy. He has been retired for over 17 years and has been living a life of financial independence since 2002. He also spends as much time as possible traveling around the world. He and his family will often take trips that revolve around visiting family or going to conferences like FinCon or FI Chautauqua which is based on interesting conversations with interesting people in interesting places.
He is also a financial blogger, author, and podcaster. His blog and his book are called The Military Guide. He is passionate about sharing his knowledge with other service members about how to retire early, be financially independent, invest wisely, navigate complicated benefit structures and get the most out of them, and find the knowledge to make informed decisions. Doug is also a surfer and lives in Hawaii. He is someone who lives the life he wants and helps others to do the same.
We dive deep into this episode and talk about Doug’s journey, and specifics of military retirement. We talk about the TSP program, VA disability, reserve benefits, TAP, and more. All of these topics are huge, but Doug shares enough to help understand what’s out there for you and what you need to learn more about. Doug’s website and book are full of helpful resources, and we also provide helpful links in this episode.
Highlights from Episode 24
[01:12] Doug is living the life that you live after financial independence and after the military. One of the things he is doing now is slow travel.
[02:00] He recently went to FI Chautauqua in Portugal. The theme of it is interesting conversations with interesting people in interesting places.
[02:45] Doug has been retired from the Navy for 17 and 1/2 years. His wife is also retired and they have been financially independent since 2002.
[03:08] They were able to become world travelers when their daughter went to college in 2010.
[03:28] Doug was a submariner in the Navy and he got to Pearl Harbor in 1989 and never saw a reason to leave.
[04:24] His wife retired from the reserves, and the retirement process is more complex than it needs to be.
[05:10] After twenty good years in the reserves, you are allowed to retire. The gray area is the time between when you stop being active in the reserves and when you can collect your pension. The normal age is 60, but there are some earlier options for people who've been on active duty.
[07:11] In the reserves, you can buy TRICARE Reserve Select. In the gray area, you can still get it, but it's more expensive.
[09:31] The VA disability rating is also very confusing. It's ironic that those who are the most in need of the benefits are the least able to get through the process.
[12:15] Going to the dentist in other countries is cheaper and they go when they travel.
[13:23] Only 15% of service members would ever serve long enough for a pension. 85% left the military with only what they put away in their Thrift Savings Plan and their investments.
[13:52] Service members wanted a 401k or something that does matching. This is where the tsp, Blended retirement system, and the 5% match from the Department of Defense started up.
[15:23] The TSP is ran by a contractor for the federal government called BlackRock. The funds mimic the index and other funds.
[16:30] The TSP used to be the world's largest collection of index funds with the lowest expense ratios. Now it has a lot of competition from other funds with lower expense ratios.
[17:18] When choosing between a TSP or another 401k, do the math see who gives you the highest match and has the lowest expense ratio. Usually, the TSP will win.
[18:23] A traditional TSP could give you a tax break by allowing you to put money in before it's taxed. These taxes are only deferred, and you'll have to pay them sooner or later. This is why there can be benefits to a Roth.
[19:16] A Roth TSP can grow tax-free, you can withdraw what you put into it, but you do have to do required distributions.
[20:28] A Roth also passes to your heirs easier.
[21:44] When you get pay increases, you can put away serious money in your Thrift Savings Plan. Eventually, you'll maximize the TSP and your other IRAs. Then you put the rest of your savings in taxable accounts.
[23:15] Index funds are an easy and simple way to stay in the market. Doug also has some angel investments that he's waiting to see how they play out.
[26:21] Doug started out using Excel and then moved on to Quicken to manage his money.
[27:07] He uses the Personal Capital app to track all of this spending.
[28:03] Basis is what you spend on a property when you buy it and possibly the improvements. It's also the cost of selling the property.
[30:04] Have a professional help you when you first purchase your rental property, because if you calculate your basis incorrectly it will affect you for the rest of the life of the property.
[31:19] Doug and his family went to the Naval Academy.
[33:17] The GI bill can be a great tool. Sometimes people don't use it because of lack of knowledge.
[34:12] Doug has been following the financial independence movement since the early 90s.
[35:29] Financial independence can give you a lot of choices and allow you to make a career change if you want.
[40:05] It's easier now to transition out of military service with online services. There is a TAP program that can educate service members and their spouses. Review your VA benefits.
Links and Resources