by Scott R. Tucker

April 14, 2020

can you live off military retirement

Retirement for Veterans

How do you feel about your retirement accounts right now, in 2020? Many Veterans are asking us; Can You Live Off Military Retirement given the current economic circumstances?  We believe that now is the ideal time to regain control of your retirement savings, protect them from future market crashes, and position those accounts to avoid ALL future taxes.  

If you are like most veterans, for the past ten years or so you have probably been under the impression that your retirement account was doing great. The economy has been great, your balance has been growing... and then, suddenly, it tanked. People are starting to realize that the economy was not all it was cracked up to be. You may be wondering how bad it’s going to get. 

I remember what it was like in 2008. People were in the same state of shock and confusion. Business were failing, and in came the government with a big bailout and very quickly the economy kind of reconnected, and people got back to work. They also continued to invest in their 401(k)s and save for retirement. The bailout kept things nice and happy for a while, but inevitably there was going to be a correction. The bigger picture of what’s really going on is that an unstable situation just keeps getting pushed down the road, so it shouldn’t come as a surprise that any large-scale event that disrupts our normal daily lives is going to show us, once again, the cracks in our financial foundation.

Popular economic theory tells us that if you look back at all the crashes throughout history, there's always a rebound. Yeah there's always a rebound. But that rebound doesn’t mean everyone with money invested in the market recovers. Millions of baby boomers are already in retirement and living off retirement mindset of their retirement savings, and this is where a lot of the wealth in our country has been concentrated. This recent market correction represents a tremendous amount of lost wealth. The stock market is a long game; most of that population probably won’t live long enough to regain what they have lost, so they aren’t going to have a lot of confidence to reinvest what they do have back in the market. For the economy to “recover,” prices really need to come down to a point at which more people feel confident and begin investing again. So, where's this transfer of wealth gonna come from? The government, who's just printing more money out of thin air. They're putting money back into the economy somehow, and who's paying for that? 


The Future – meaning future taxes.

Right now, taxes are at all-time lows. So they’re gonna go up at some point, specifically in 2026 when the Trump tax cuts expire. So much of the money in this country is in tax-deferred retirement accounts like TSP or a 401K, which is a very dangerous bubble to be in. And yet, we are continually led to believe that effective financial planning means we should save for retirement in a retirement account, and that's kind of it. But is that always the right advice for everybody?

I say it’s not always the right advice and that veteran retirement accounts are not for everybody.

If you have been saving for retirement, it's not that you've done anything wrong. What it’s really about is, have you asked yourself: what am I really doing with this money? Is it only meant for me to live off of after I turn 60, or is it really meant for me to live?



What The Purpose Of Your Veteran Retirement Accounts?

Too many veterans have given so much to this country in return for so little. They feel unrewarded. They have sacrificed years of their time in service to their country – putting family, friends, and their personal dreams and passions on hold. They have waited out that time, only to come out the other end to find that the civilian economy isn’t all it’s cracked up to be. They have done everything they have been counseled to do – they have opted their money into all the “right” plans, they have translated their military skills into civilian resumes, bought a suit and gone to job fairs, and for what? For most, it’s so that they can slog along for another twenty years or so in a safe corporate job for which they have no passion, bereft of the sense of mission and purpose that they felt in the military, immersed in frustration, asking themselves why they have to wait so damn long to live the life they want to live, to be the person they want to be, the person they know they really are?

If this rings true to you, if you are one of these veterans, then why are you still waiting, when you can repurpose your assets to create more mobile sources of income over the long term?

Let’s talk about assets for a minute. What are your assets? There are financial assets, of course, but not all assets are financial. Your knowledge, your experience, your network – these are all assets that can be leveraged to create income. Sometimes that means having a job but working from home for flexibility instead of commuting Monday to Friday every week. The job you have to commute for might pay more, but that kind of lifestyle costs more, too, in money and time. Maybe when you figure in the amount of time you are spending in the commuting job, the paycheck either way isn’t that different; the question is, which lifestyle would you rather have? 

A lot of the retirement mindset is based around getting a salaried job. Once you get the salaried job, you get benefits and all that. You can work from home with a salaried job and still be tied into the system that way. But once you have done this and you understand the skill set, it quickly becomes clear, “Man, I could do this independently, and eventually become self-employed.” If you're really paying attention, and you want that kind of lifestyle, that's what your salaried job's gonna lead to, and at that point, the whole idea of this retirement planning model can go out the window. A lot of people stay stuck to it because they think that's the main tax benefit. But the ones who truly become autonomous start thinking about their money as just a resource for more wealth creation, which is really more time creation. Then retirement doesn't have to be defined as anything anymore, not with all the flexibility and control you can have in your life.


A Rarely Considered, but Logical Application of Insurance 

So, now the question is, “Okay, so I've got these government qualified retirement accounts. They made some money in the market these last years, but going forward, I realize that I don't understand the market. It seems like a risky way to invest, but that's the only place to get growth, right?” Yes, that's true. But the cool thing is, there are actually these strategies that give you the option to invest in the market without actually putting your money at risk. With a certain kind of financial vehicle, you are actually getting insurance on your stock market investment. 

This gets really interesting. Think about insurance for a moment. Insurance costs money. But the purpose of insurance is to protect yourself from a devastating financial loss, right? If you total your car, without insurance, maybe you’re out $40,000. If your house burns to the ground, without insurance, you’re out hundreds of thousands of dollars. If you are unfortunate enough to end up with a really serious health condition, treatment can quickly run into hundreds of thousands of dollars. You carry insurance against all of these things. And yet – how much money did you lose in the most recent stock market crash? Tens of thousands? Hundreds of thousands? How much did retired baby boomers just lose? Why wouldn’t you insure yourself against that kind of devastating financial loss, too, if you know that it’s an option?

It is.

Not only that, but the car crash, the house fire, and the devastating illness may never happen; in fact, the odds are that they won’t. But another stock market crash will absolutely happen. The question is, will you be ready when it does? 

The financial vehicle I am talking about is actually an insurance on a stock market investment. It works because you make a deal with the insurance company that goes like this: if the market loses money, you've got insurance on it, so you don't lose anything. But when the market is up, you only get 80% of the upside of the market. That’s the price of the insurance, and it’s a pretty good trade off: 80% of the upside for zero percent on the downside. These insurance companies are simply putting insurances on your investment. And while anybody can do this using options or futures contracts, the best people who are doing it are insurance companies with a very, very long-term plan. They make money, and so do you. This kind of financial vehicle works for the insurance company because they are making 2% off the top of whatever your money earns in the market, and it works for you because it allows you to participate in the market’s growth periods without the risk of losing money during its inevitable corrections. 


From Retirement to Revelation

Now you can take your veteran retirement accounts and lock in your profits with a guarantee that you're not going to lose any more money. But take this one step further. Do you want to keep this money set aside as “retirement only” dollars and use this vehicle just to protect yourself from a future tax hike situation (because the money that goes into these plans is not tax-deferred), or do you want to restructure how you are using your retirement dollars, and maybe liquefy some or all of it within a shorter time period while tax rates are low, and you can repurpose it for better tax advantages, better liquidity, and better growth opportunities without risks?

These financial vehicles start to open up your options for what your retirement dollars are really about, versus the I’ve-just-got-to-keep-saving-away mindset that says you’ll get a 7% rate of return if you keep 70% stocks and 30% bonds in a lifecycle fund, and it'll just work out on its own. You’re probably paying somebody one and a half percent on your money. For what? You don't know. They give you a graph every year, and it's just nonsense. When it comes to the market, there are so many variables, nobody knows anything. There's no real value in retirement planning, it's really just a gamble ─ a massive gamble ─ and everybody takes it. Everybody falls for it, and this just perpetuates the system. The big millionaires are the ones who move markets. Your little retirement account is nothing. But pooled together, all the little retirement accounts keep everything looking nice and hunky dory until a bubble bursts. The vast majority of people are just going to keep following along, and keep their retirement dollars invested, and then just be screwed when they eventually lose out. 

But the smart people are gonna say, “Cool. That was a nice ride.” They’re going to learn things, like the strategies we teach, and they’re going to take their money off the table. They are going to recognize that they have resources and assets and they are going to move forward with a mindset that for them, the next decade is about financial control, meaning they don’t lose money.


Us VetWealth Retirement Rescue


Can You Live Off Military Retirement: Answered

Veterans, don't lose your resources! Understand the value of what you have going for you. That means, how do you position your assets so that they benefit you? Maybe you have a pension, maybe you have a disability payment, maybe you have savings, maybe your greatest asset is your knowledge and skill set; how you can repurpose that asset into a positive cash flow? 

If your asset is sharing knowledge or a skill that you have, and people pay you for it, is that “retirement?” Why are we defining retirement as not getting up and going to a job anymore? Why do we think of retirement as an end? The retirement system we have today and that so many of us are locked into is basically saying, “You're done. Shut up old man, old lady.” And what a shame that we treat our older generations that way, when they have so much to teach us. 

What is your number one priority in life right now, today? Where does retirement sit on that list? If you’re a younger person, it’s probably pretty low. And so the question is, alright, so if you're working 40 hours a week, add another 20 hours or so a week for commutes and lunches and all that extra work, and say you're saving 20% of your income towards retirement. That means that the dollars you are saving amounts to socking away roughly 15 hours a week into some little magical bubble that you intend to reclaim at some point in the future. That seems like a pretty big trade-off, all things considered. If you took those extra 15 hours a week right now and maybe built a skill set, you could build a business around those skills and then turn it into a significant income stream. Which is the better use of that 15 hours a week? Well, duh, it's the business, it's not focusing on saving and then going into shock when the stock market crashes. 

If you're a little bit older, and you're nearing retirement, and you have built up your assets, and you're at a time where there's a lot of fluctuation or volatility, do you still have the kinds of options I’m talking about? Your generation reached adulthood and established careers and families before the Internet age. For that generation, saving made sense, and so that's where their assets are now. You still have a choice to protect what you have invested in the markets, and you should, specifically because you're going to need to rely on it more, and sooner, than the younger crowd. And maybe building new skill sets and building a business and all that kind of stuff isn't what you want to do. Maybe you want to live off of your retirement accounts. And so now it becomes very, very important that your accounts not lose value. You don't have to gamble on the stock market and on the future. You can take advantage of tax mitigation and start to protect more of what you have, so that you can give yourself a pay raise in retirement.


Envision Your Future, Realize Your Vision

Ultimately, saving, growing, and protecting your money isn’t about “retirement.” Regardless of how you see your life unfolding and what you want for your future, the question is, how do you actually fund yourself and your lifestyle without taking major or unnecessary risks, especially given the uncertainties that lie ahead?

People are living longer. The baby boomers are living longer. They're going to need to guarantee that they can live on their assets. The strategies that they've been taught were all about accumulating wealth. This makes sense, especially taking into account that the financial advisors teach accumulation of wealth because they get paid a percentage of the wealth their clients accumulate. They don't get paid when you're taking your money out of your accounts. At US VetWealth, we recognize that if you're really focused on the end goal here, which is to maximize the return on your investment, then the smartest thing to do is to not accumulate and protect that asset just so you can pass it on when you die; the smartest thing to do is to use it while you are still living in some way that is meaningful to you, and then enslave that wealth so that it creates more wealth, and we have strategies that can do both. 

The typical military financial planning approach only did one thing. It was only about growing wealth and passing it on to your heirs and maybe living off of a little stipend of it. With the modern strategies, you get a lot more flexibility in how you access that wealth, which means that you also have the option to leverage it for more abundance than was previously possible, or that was previously only available when an estate passed. This paradigm shift allows for a redefinition of retirement, even for people who are a little further along in life or nearing what would be considered a traditional retirement age.

Do you want to be the 60-year-old just sitting around on the front porch knitting? Just constantly wondering to yourself. "Can you live off military retirement? I'm sorry, but that just doesn't happen anymore. And anyway, I’m betting that’s NOT who want to be. You're too deep for that kind of life. You already know the Internet. You're going to develop a passion. And so you should! Share your knowledge and implement, like that podcasting West Point grad. We met a guy who started a podcast as a millennial kid, and now he's having a blast, going around and sharing that stuff. I recently met a lady in her mid-50s who basically thought she was done growing and developing. She didn’t know what to do. Now she’s taken the bull by the horns and decided that she just needs to get out there and build the skill sets she needs in order to make her dreams happen. There's no timeframe on when you can or can't start. That's why our strategy is for people with a specific kind of mindset. It's not about where you're at in your career, or how old you are, or any of that. It’s about this: do you want to spend the rest of your life in the identity that you have today, or do you want to finally achieve the identity you have always wanted to have?

For people who want to keep growing, the journey doesn’t stop. That's the fun part. We want to be here for you on your journey, so you don’t have to be freaked out financially; so you don’t get caught up thinking you have to “work” longer. We want to empower you to start to actually make some real choices and leverage what you've done financially and what resources you have. If you know there are certain resources that you need and you don’t have them, we want to help you get them. We want to support you as you start getting serious about finding what you want because just spending your time to do a job that you don't like doesn't make you happy.

Traditionally, options for what to do with money that is tied up in a retirement savings plan were limited. You could keep your money there, or you could take it out, and lose possibly up to 40% of it to taxes and penalties. Today, you have the option to take full control over your resources, both now and later. You can rollover your savings from one account to another, and once we develop a strategy for what you're trying to do and how you want to repurpose your accounts, your retirement-focused dollars, or other savings and investment accounts, we can design a financial strategy specifically for YOUR needs. It can really be that simple.

Can you live off military retirement?  That's entirely up to you. Book a Discovery Call to see if you qualify.

About the author 

Scott R. Tucker

Scott R. Tucker is an author, speaker and the founder of US VetWealth, a lifestyle and financial consulting brand that helps service members go from paychecks and government benefits to wealth and liberty. He likes to say, "I Help The 1% Who Serve Our Country Become The 1% Who Influence It." A West Point graduate, serial world traveler, military financial expert, and entrepreneur, Scott brings valuable experience and insight to those who have sacrificed so much in service to our country. He's the Rosie Network's #1 Fan and a passionate supporter of the Veterans Cannabis Project.

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