Military Retirement & Financial Independence

Marine Corps offers early retirement

Posted on May 28, 2012 by Doug Nordman

Let me interrupt Memorial Day with some late-breaking news: Stars and Stripes reported last week that the Marine Corps will be offering a 15-year retirement.

The program is expected to begin this fall for Marines and officers, but the actual program details and start date haven’t been released yet.

Both the Marines and the Army experienced the greatest growth over the last decade, and both services are expected to bear the brunt of the personnel drawdown. The Marines are expected to reduce their strength by at least 5000 per year for the next four years, a total reduction of nearly 10%. Although some of this additional attrition will be handled through voluntary early discharges and selected officer retirements, an early retirement program will be part of the reduction.

The finances of the 15-year retirement are expected to be similar to the Navy program, which is taken from a DoD instruction. For those eligible for a High-Three retirement, the service multiplier will remain 2.5% per year of service. However that total will be reduced by one percent for each year of service less than 20. (One percent, not a percentage point.) This means that a Marine with 15 years of service would receive a pension of 36.625% of the average of their highest 36 months of pay.

Actual reduction factor calculations are done in units of months instead of years, and the resulting reduction factor is taken from a table in the DoD instruction. Any fraction of a month of service for a reduction is rounded up before subtracting the result from 20 years of service, which results in slightly more retirement pay. For example, a Marine with 16 years and 10 days of service would have a reduction factor of only three years and 11 months, or 47 months short of 20 years. The reduction factor applied to the pension would be .96083 instead of 0.96, and their pension service multiplier would be

(16 years * 0.025) * 0.96083 = 38.433%.

The 1990s TERA program offered some additional benefits that aren’t included in the 21^st-century version. There is no credit for entering public service after retiring from the military, so there’s no recomputation of retired pay later in life. TERA retirees will continue to be eligible for the Survivor Benefit Plan, but SBP will still be based on the lower pension amount instead of a 20-year figure.

Like the 1990s TERA program, Marines will have to apply for this 15-year retirement program. Servicemembers in critical skills or in specialties with personnel shortages may not be approved for early retirement. Once the program is offered, though, the quotas will fill up quickly. If you think there’s any possibility that you’ll be interested in the program, then calculate your pension amount now and review your finances. You want to be able to apply immediately when the program is announced.

When the 1990s TERA program was announced, some Navy officers were required to retire. O-4s who had failed to promote to O-5 had been “continued on active duty until eligible for retirement”. Before TERA, it was understood that this would allow them to serve up to 20 years. When TERA was announced, though, these officers were informed that they were now considered eligible for retirement. If you’re a Marine officer who’s failed to select for promotion but been continued on active duty until 20 years of service, it’s possible that you’ll be required to retire under TERA. Plan for being retired sometime during 2013, estimate your pension, and review your finances.

Even if continued officers are not required to retire, you may want to consider whether serving out another tour is a good idea. Those questions are discussed in an earlier post: “Retire at 17 years of service or 20?“

Marines who have already accepted a Career Status Bonus (the REDUX retirement option) have an even harsher reduction to their pensions. Their service multiple is reduced by an additional percentage point (not just a percentage, but a percentage point) for every year that they’ve served less than 30 years. In the case of the 16-year Marine, that would mean that their service multiplier started at 40% (= 2.5% x 16 years) but would be reduced by an additional 14 percentage points to only 26%. (Another sample calculation is included in the TERA retired pay computation instruction linked above and also linked at the end of this post.) Even worse, a REDUX retirement means that the pension’s annual COLA is reduced a percentage point below the High Three pension’s annual COLA. The REDUX pension is “reset” at age 62 to the amount of a High Three pension, but the COLA reduction continues throughout a retiree’s life.

DoD is allowing CSB/REDUX retirees to keep the bonus. Of course DoD is “saving” far more from the reduced pension & COLA than they’re “losing” in the $30K amount of the bonus, so they can certainly afford to be generous. The CSB/REDUX system has always been a bad financial decision for the vast majority of retirees, and for TERA retirees it’s even worse.

TERA was a popular force-shaping tool during the 1990s. Ultimately, however, the 15-year retirement program was regarded as less successful than anticipated. Annual TERA retirements only made up about 0.5% of each year’s average 10% reduction. Most of the drawdown was achieved by voluntary separations (nearly 12 times higher than TERA) and reduced recruiting. Meanwhile TERA is much more expensive. Separations were a one-time lump-sum payment, but TERA pensions will be paid out for decades of inflation-fighting COLAs and survivor benefits.

I’ll keep an eye on the media for the formal TERA announcement, but if you’re an active-duty Marine then I’d appreciate a link to the actual message or instruction when it’s released.

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Posted in Finances, Military | Tagged early retirement, financial independence, Marine, military, military retirement, pension, PostAWeek, TERA, United States Marine | Leave a comment

Retire at 17 years of service or 20?

Posted on May 24, 2012 by Doug Nordman

I read another good question on a Linkedin group:

I am a Marine O-4 who has been passed for promotion and is looking for some advice on early retirement. I will have 17 years of active duty by the time I am eligible for the early retirement next year. I am a pilot with experience in operations and safety. I will also be close to completion on my MBA, DAU Level II acquisition certified and Lean Six Sigma Green Belt. Do I make the jump or stick it out?

This is the first mention I’ve seen of the Marines using the early retirement program. Congress has authorized it for this year’s defense budget, but the services can use the program at their own discretion. Please leave a comment if you’ve seen any message or other information, especially if you can link to an announcement.

Money is not the only question here. “Quality of life” is still as much of an issue as the finances. Servicemembers who aren’t being promoted but who can’t retire yet might end up being sent wherever the assignment officer has a hot-fill billet. If you’re not approved to retire then your only “negotiating option” is to resign from active duty for the Reserves. That might evade the assignment issue, but even if you’re financially independent then you’re still giving up over $500K of potential O-4 active-duty retirement income before the Reserve pension kicks in. If you’re not financially independent then it’s hard to find a bridge career which will make up for that loss. It’s also very difficult to convince yourself that “It’s only money!”

Unfortunately, staying on active duty and grimly clenching your jaw to get through those years is risking your physical, emotional, and mental health. The stress fatigue can lead to respiratory infections, elevated blood pressure, higher cholesterol, and other unhealthy conditions. Being separated from family is another set of problems. Even retirees who stuck it out for 20 would advise taking care of your health before taking care of your pension.

If you’re offered a good assignment then you might be able to convince the chain of command that you should stay there until 20. Yet even at the best duty station you’re still trading some quality of life for the prospect of future financial security.

Financially, the conventional wisdom is that retiring before 20 years of service is a significant pension cut. Or is it? The “good” news is that retiring at 17 would avoid gutting out three years for a few more percent on a pension. A 17-year pension would work out to just under 40% of High Three base pay instead of 50%. An O-4 High Three pension at 20 years is just over $41K/year*, and an O-4 TERA High Three pension at 17 years would be just under $34K/year. Yes, a 17-year TERA pension is nearly a 20% reduction from the 20-year retirement. However it’s a difference of only $7225/year. Is it worth the extra $7K/year (and three years of salary) to push for three more years of active duty? Why not take the retirement and avoid a potential hardship tour?

* (Starting that $41,167/year High Three pension in 2012 is also 1% higher than my current $40,788 Final Pay pension that has received a decade of COLAs.)

In my opinion, servicemembers can be made to suffer an inferiority complex. The military’s constant pressure to train and promote (which is good) can lead to a zero-defects mentality (not so good). High-quality personnel can be made to feel as if they’re barely capable of serving in their current rank, let alone be promoted, and in a drawdown everyone is struggling to stay competitive. When one mistake can kill a promising career, you learn to play it safe and avoid big risks or unknowns. We’re also constantly reminded of veterans encountering high unemployment in a vicious job market, and even Linkedin can leave the impression that the job search is a dangerous jungle filled with predators and pitfalls. As difficult as military service may be, it still seems a lot “safer” than the risky unknown of trying to find a civilian job.

Yet that safety can be a trap. Aviators with these skills are quickly employed. If you chose to retire at 17 with those skills (and with a smaller pension) then you’d immediately find a job and start your bridge career in a new avocation that makes you feel challenged and fulfilled. Would you feel the same if you tried to hang tough for three more years of active duty? You’re the only one who can determine the “right” answer to that question, but I’m pretty sure that you’re going to be pelted with civilian or civil-service employment offers.

I think the real value of a military retirement comes from its inflation-fighting COLA and cheap healthcare. (It’s not easily done with TIPS, I bonds, or annuities.) TERA’s 20% reduction in the amount of the military pension– just $7K/year– is easily made up by a civilian paycheck. The safety net of financial independence is to have some “guaranteed” income from reliable sources (military pension, Social Security, TSP annuity) and some control over expenses (Tricare and Tricare For Life). These are the biggest financial challenges faced by people retiring in their 40s and 50s, and the discussion board at Early-Retirement.org has tools and advice to help solve those challenges. You can save up the rest of your retirement funds from your civilian paycheck, and your financial independence might be closer than you think.

Personally, I applied for the 1990s TERA three times but ended up being continued on active duty to 20. Luckily my retirement assignment was a great billet (I’d made myself very valuable to the training community) and I worked with great people. Even so I would have happily retired for a smaller pension, a few years of a part-time job, and more family time. Staying on active duty was a major physical/emotional stress, and retirement was an immediate improvement in my health.

In retrospect I’m really glad that I didn’t learn how to surf until I’d retired, because I’m not sure I would have been able to make the right decisions every day about work versus surf…

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Posted in Finances, Military | Tagged active duty, early retirement, financial independence, LinkedIn, military, military retirement, PostAWeek, retirement, Tricare | 6 Comments

Retirement planning: “Just tell me what to do!”

Posted on May 23, 2012 by Doug Nordman

Thanks to my spouse, we’ve always been do-it-yourself investors. We had no debt when we got married in 1986 and we lived a fairly frugal life, so we started investing right away. She already knew the basics from her family, and my Dad gave me a “how to” guide. After that it was all reading and research, and I gobbled it up. When the time came to plan exactly how we’d fund our retirement, I was ready.

Retirement-planning resources have improved tremendously during the last generation, and today’s DIY retirement planner has more tools than a 1980s investment firm. Websites, blogs, and books make the reading easier than ever. Competition among investment firms has dropped expenses by at least an order of magnitude. Personal computers, spreadsheet software, and screening tools have greatly simplified the process of figuring out where you want to invest and what you want to buy.

However the choices have also expanded by several orders of magnitude, and the answers aren’t always very clear. If you’re hard-wired for a certain style of investing, or if you find a book or a website that really resonates with you, then you’re all set. You can make a choice that’s probably “good enough” to get you to a successful retirement, and all you have to do is follow through. Jack Bogle’s books and the posters at Bogleheads.org are famous for their simple “stay the course” approach to retirement planning and their process for making it happen.

If you want to learn everything about investing and retirement planning before you start, well, my condolences. The trap of “paralysis by analysis” is easier than ever. One of my retirement goals was find my “investing style”, and after a decade of reading & discussion I’ve come almost full circle. I’m much smarter, and I’m much more likely to stick to a plan, but if I’d waited 10 years to get started then we’d still be at least another 10 years away from financial independence. Starting early gives you more time for compounding to work its magic, and delaying to craft the “perfect plan” could significantly extend your working years.

Luckily the military has trained us to make decisions without waiting for all the data. We’ve all seen that a “perfect plan” is the enemy of “good enough”. We’ve all learned that plans have to change and grow with the situation, and that it’s usually better to make a reasonably prompt decision than to wait for more info. Surprisingly, the military can make us better retirement planners!

Unfortunately servicemembers face another set of challenges: time and priorities. You have to make the time to figure out your plan, even if it’s only a few hours of reading and a few more hours of discussion every year. It also has to be a priority, and some are more interested than others.

Regardless of your retirement planning, you should still try to maximize your TSP and IRA contributions. After that, try to save more funds in taxable accounts.

Even if you feel capable of planning your retirement withdrawals, you’ll always wonder if you’re missing something or should be doing it differently. Self-confidence can wither in the face of a bear market. Although servicemembers have the skills to be DIY investors, many just don’t care to tackle the task. A financial advisor is another option, yet finding a trusted advisor (who knows the special issues of military clients) is an entire other post.

Hence the title of this post: “Just tell me what to do!”

Steve Vernon is an actuary, not a CPA or a CFP. However he’s written four books on retirement planning and he’s helped large companies design and manage their retirement plans. He’s also a behavioral-finance researcher, so he’s keenly aware of how investors fail to carry out their plans. He’s heard plenty of elders wishing they’d started investing earlier. He’s published on the CBS Moneywatch site, which is clogged with ads and other distractions, but Vernon’s four articles are largely text with links to more details. Stick with it– this is good information.

Keep in mind that this is simple advice. Because it’s simple, it’s not always applicable to every retiree. It’s “one size fits almost everybody”, and it’s not tailored for your personal situation. This is the bare minimum advice you need to get started on your financial independence. Once you’ve started this process then you should take the time to read, learn, and tailor it to your situation.

If you’re a DIY investor then I recommend that you just stop reading here. Seriously. You’ll disagree with almost everything Vernon suggests, because you know a less-expensive way to do it. You’d be absolutely right, but you’d be missing the point. This plan is for people who don’t care about the details, who don’t want to do more of their own work to save on expenses, and who… just want to be told what to do.

Vernon’s plan sets up several streams of income (“paychecks“) to last you the rest of your life. They’ll come from Social Security, pensions (military or civilian, if you have either), the Thrift Savings Plan or other 401(k) plans, and employment.

His advice from his first column is:

Delay Social Security as long as you can.
If you’re offered a pension or a lump sum, take the pension.
Delay taking payments from your pension as long as you can.
Take the survivor benefits plan that’s offered with the pension.

Some readers are already snorting and thinking “Delaying Social Security doesn’t make sense if you’re a physically disabled veteran!” You’re right. However we’re just telling you what to do with your retirement planning, and most veterans will need the “longevity risk” insurance that comes from Social Security. Vernon offers simple advice and, as the decision point arrives, it has to be tailored to your situation. But to get started, a retirement plan needs longevity insurance to avoid running out of money.

His next column suggests a strategy for IRAs and the Thrift Savings Plan:

The earliest you’ll plan to start withdrawals is age 59½.
Set aside an emergency fund for medical expenses or home/car repairs.
Put half of the rest in a managed payout fund.
Put the other half in an immediate annuity (the TSP offers a great selection).

The next two columns dig into the details of managed payout funds and annuities. From Vernon’s third column, a “managed payout fund” refers to Vanguard’s Managed Payout Funds or Fidelity’s Income Replacement Funds. These funds invest in conservative stocks & bonds. Every month they pay out the dividends and a portion of the principal at a minimum level expected to last the rest of your life. There are no annuity guarantees in managed payout funds, but unlike an annuity if you die early then there’s still money for your heirs. Of course a managed payout fund is a much simpler “Just tell me what to do” option, yet you’ll still pay extra fees for the service & convenience. Another option would be low-cost index funds where you withdraw 3-4% per year until age 70, when your withdrawals from your conventional IRA will start using the IRS Required Minimum Distribution tables. Roth IRA withdrawals can continue at 3-4% annually.

Vernon’s fourth column suggests ways to buy an immediate annuity and what options to consider. I’ll make this even simpler: buy your annuity with your TSP account, and consider buying a survivor option with your TSP annuity. If your TSP account isn’t big enough, then use some of your IRA to buy a second immediate annuity from another company.

That’s it. Vernon doesn’t discuss what to do before age 59½ because he doesn’t expect that you’ll be retired until your 60s. Frankly, if you’re not a DIY investor then you’ll probably have a hard time feeling secure with retiring sooner.

When you start your retirement, you’ll have “paychecks” coming from an annuity and from the managed payout fund. You may have pension payments from the military and your bridge-career employer. You’re also looking ahead to Social Security.

Vernon’s advice breaks down into three categories for military veterans.

If you have a military pension, TSP, IRA(s), and no other bridge-career retirement funds:

Build up your emergency fund before you retire from the military.
Your spouse should take the maximum Survivor Benefit Plan.
Delay Social Security as long as you can.
Delay TSP & IRA withdrawals until age 59½.
Put your IRA in a managed payout fund, start withdrawals at 3-4%, and later take required minimum withdrawals.
Buy an immediate annuity with your TSP.

If you feel that you have enough inflation protection and longevity insurance from your military pension and Social Security, you could consider not buying those features with your TSP annuity.

Your military pension and your savings may cover your expenses until you start TSP/IRA withdrawals, but you may need more income from part-time employment or even a full-time job.

If you have a military pension, TSP, IRA(s), and a 401(k) or a pension from a bridge career:

Your spouse should take the maximum Survivor Benefit Plan.
Build up your emergency fund before you stop working.
Delay Social Security as long as you can.
If your civilian retirement funds are offered as a pension or a lump sum, then take the pension.
Delay taking payments from your civilian pension as long as you can.
Delay TSP & IRA withdrawals until age 59½.
Put your IRA in a managed payout fund, start withdrawals at 3-4%, and later take required minimum withdrawals.
Buy an immediate annuity with your TSP.

If you feel that you have enough inflation protection and longevity insurance from your military pension and Social Security, you could consider not buying those features with your TSP annuity. You could also consider not using the inflation protection and survivor benefits of your civilian pension.

If you have no military pension, with a TSP & IRA(s), and a 401(k) or a pension from bridge career: this is Vernon’s default advice.

By this point, you’re probably thinking “Sheesh, Nords, I could do better than this.” You’re right. As Vernon suggests, now you’ve just been told what to do. You can consider this your default retirement plan, the version 1.0 that you’ll use if you don’t learn a better way. Now you can read and learn about retirement asset allocation and safe withdrawal rates to build your own retirement plan. The resources are here in these related posts and in the Recommended Reading list!

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Posted in Finances | Tagged early retirement, financial independence, military, military retirement, PostAWeek, Retirement planning | 2 Comments

WordAds from WordPress

Posted on May 21, 2012 by Doug Nordman

If you visit this blog every Monday, Wednesday, & Thursday for the usual posts, then you missed a “bonus” Friday-night post. Scroll back one and take a look at “Welcome to WordAds!“

If you’re subscribed through an RSS reader then you’ve already seen that news.

WordPress apparently used to run Google’s AdSense on their WordPress.com (free hosting) blogs for several years, although I doubt the ads got past browser ad blockers. I’ve never seen an ad on this blog, and I’ve never had a reader comment about any blog ads. WordPress stopped running AdSense last fall.

WordAds has been around for nearly six months, and I don’t know if I’ve ever seen one of their ads either. Part of the problem is that bloggers (me included) tend to spend their time on their blog editors & control panels, and we spend a little time proofreading our blog posts on the actual blog page, but we rarely log out of our blog and then come back to read it anonymously. A (very) few bloggers actually pay WordPress a small fee to remove all ads from their blogs. I haven’t bothered paying the fee– I can’t tell whether any of you readers have seen an ad here, and you probably don’t care.

I like to write, but I missed out on most of the growth of the blogging industry. I migrated from old-school dial-up bulletin boards to discussion boards and I found plenty of source material there. By the time blogging really caught on, I’d already started writing the book and wasn’t interested in blogging. When we were finally done with the editing and ready to start the marketing, blogging’s “Wild West” days had started to settle down. Search-engine manipulation has nearly been stamped out, and blog advertising has largely been absorbed by corporate aggregators. WordPress claims that over 50,000 blogs are started every DAY on their site alone, although I doubt that more than 50 of them survive the first year.

The blogging gold rush may be subsiding but I still like to write, and WordPress works very hard to make writing fun. (Where were you guys during my high-school English classes?!?) When you put up a post, their control panel rewards you with a congratulatory message and suggests other goals. Their statistics package breaks down your site’s traffic by time and by post, and you can see what keywords & websites are bringing your readers. WordPress runs “PostADay” and “PostAWeek” support groups with badges and suggestions and ideas from other bloggers. Their support forums are great. Their Zemanta plugin will helpfully suggest images and related links to go with your post, and you hardly ever have to edit HTML or muck around in the formatting. You can run a blog devoted just to your own photos or videos, and you can even blog from a smartphone. Everybody can blog!

WordPress has so many fascinating levers & buttons, and so many interesting blogging topics to explore, that it’s easy to forget why the heck you’re blogging in the first place: to answer questions, to sell books, and to send money to military charities.

Answering reader questions

I get a lot of reader questions. (Thanks!) This is my favorite part of the whole project, and I don’t think I’ll ever run out of that material. There’s always something in the news about military retirement or benefits, and I still read about financial independence. I enjoy the challenge of presenting the same topic in so many different ways (from “beginner” to “total geek”) that eventually everyone finds something to pique their interest. I can do that no matter where the blog is hosted, and no matter who’s running the ads. I can also do it without the restrictions found on discussion boards, although a popular blog eventually turns into its own discussion board.

Selling books

Blogging helps publicize the book, but I have no clue how many book copies the blog sells. I can’t track how many of you click on the link at the top of the sidebar, and the publisher’s website doesn’t track how many of you come there from this blog. I can’t use this blog to tinker with different types of ads or their location or any other parameters. I can’t tell how book sales change when I blog about a particular topic or when a pile of readers visit from a guest post or a media interview. I’d get a little more data if I took the blog out to its own host, but even then I’d just be splashing around in the shorebreak. The heavy lifting comes from the publisher, the distributor, and Amazon putting the book in front of the eyeballs of book buyers.

I could ramp up my marketing with speaking engagements, book tours, and book signings. I’ve done a little of that, and about the only part I enjoy is… the part where I get to sit down with people and answer their questions. I spent plenty of my military career talking in front of a crowd, and now I’ve done a few book signings. Ironically the book signings go best when I bring my laptop and write blog posts between customers. (When you’re banging away on a keyboard, the passing crowds get curious and stop to chat.) I haven’t made the time for more of that. I’d rather write, and a good book-signing afternoon requires about five(!) hours of prep for every hour of sitting behind the table. I think I can use that time more productively on the blog– answering reader questions for an audience of millions, not just one at a time.

So a blog is essential to a writer who self-publishes, who does their own marketing, and who sells the book on their site. In my case, though, the blog is a sideshow to the publisher’s marketing efforts. The real purpose for this blog is answering questions, and I think it’ll be that way as long as I’m using a publisher.

Sending money to military charities

Blogs can make lots of money. That’s the real reason I care about taking the blog to its own host. Earning the money is pretty straightforward, and it works very well. If you’re willing to put in the thoughtful time and the daily effort, and if you’re persistent, then you will make money. If you’re efficient with your time and if you learn how to scale your efforts, then you’ll make lots of money.

I’m a sucker for a challenge, and I’ve enjoyed researching the best ways to make money from a blog. However I’m financially independent, not a starving author, and so the fiscal incentive is not as strong. A beach-bum lifestyle is cheap, and I already have a longboard. Whether I take the blog to its own host today or next month or next year, it’s all the same effect on my income: zero. Sending money to military charities is the right thing to do, and it’s a great publicity hook. Luckily I also have the time to experiment with different ideas, and this gives me even more to write about.

Now I’m (finally!) circling back to WordPress and WordAds.

On Friday I was literally less than 24 hours away from signing up with Bluehost and going to WordPress.ORG. I can’t draw any conclusions about WordPress’ timing of their approval of my WordAds request, but I think this is a one-time opportunity. When I take the blog out to its own host, I lose the chance to see what WordAds can do for us. I still think that Google AdSense and other display ads will make more money than WordPress’ hosted WordAds, but WordPress is worth the attempt. They’ve certainly supported us bloggers everywhere else, and it’s nice to have a chance to see what they can do here. I’d rather be part of the WordAds beginning, when they’re pushing hard and willing to try new ideas, than to circle back in a few years after it’s settled down.

WordAds terms & services

WordPress certainly approved my WordAds application at an awkward time, but this is a great opportunity. The WordAds terms of service are pretty clear. When I parse the text, one big difference from Google AdSense is that WordAds doesn’t try to tell you what you can do with your share of the profits. AdSense does not allow bloggers to advertise that they’re sending the money to charity, because (*gasp*) people might click on the ads for the wrong reasons. WordPress doesn’t seem to care whether or not I advertise that the blog revenue is going to charity. Points to WordPress for this one.

WordAds is also a diversified stream of revenue. Google AdSense has been known to kick out a few very popular bloggers for “violating the terms of service”, although it’s not clear what terms were violated. It’s very difficult to reach a human being at Google to help figure out what went wrong, let alone appeal the decision. WordPress is certainly much more accessible about user support. More points to WordPress.

If I start with WordAds now, I’ll be a “valued customer” to help them grow the program. It’s possible that WordAds could someday be available as a plugin (instead of strictly on WordPress.com) which would allow self-hosted blogs to display WordAds. There’s actually some benefit to hanging around with WordPress now in hopes of eventually carrying WordAds to a self-hosted blog.

Some parts of my expansion plan for the blog can continue on their own schedule. I’ll have to see what I can do. Unfortunately the Thesis theme doesn’t appear to be supported on WordPress.com, so that upgrade will have to wait until the blog is on its own host. Also unfortunately, WordPress still won’t allow other forms of advertising. I’m probably stomping on thin ice if I’m trying to sell e-books or do other e-commerce on WordPress.com.

WordAds may be fairly straightforward to set up, but Federated Media needs to step up their game a little. I doubt that this blog has the traffic (this month) to make more than a few bucks a month from WordAds. WordPress would rather focus on blogs that have 100x my traffic. However I think that one of the reasons this blog was approved for WordAds is because it straddles a couple of very lucrative niches: military and personal finance. All we need now are ads targeted to military and personal finance.

Here’s the complete list of Federated’s ad categories. Bloggers are asked to pick five:

Anime (Yeah, that made their top 35. Go figure.)
Arts and hobbies
Automotive
Business & finance
Communication
Dating
* Education & employment
Entertainment
* Family & Home
Food & drink
Gadgets
Games
Green
Health
Local
* Men
Mom & baby
Music
News & Reference
News political
* Outdoor & recreation
Pets & animals
Photography
Photos & videos
Real Estate
Shopping
Social networking
Sports
Technology
Travel
* Young Adult

The asterisks mark my choices, but of course that’s not much of a choice, is it? Seriously, Federated? That’s the best you can do? What about categories like “Military”, “Military spouse”, “Military families”, “investing”, “financial independence”, and “retirement”?!? Where are the ads from MOAA, NFCU, PenFed, and all the other military supporters? What about USAA, Vanguard, Fidelity Investments, and all the other brokerages? Military.com? Military Times? How about financial advisors who want to take care of servicemembers & veterans? Heck, I’d even make fun of entertain advertising from annuity companies. And while roughly 85% of the military is male, there are millions more military spouses of servicemembers & veterans. Nearly all of them are women, and darn near every one of them has to make the decisions that advertisers would dearly love to influence.

WordPress’ WordAds lead responded quickly to my questions:

A lot of bloggers want to pick the ads. I’m afraid, however, that online advertising today doesn’t work that way. WordPress.com is a top 10 global site and for the most part we don’t get to pick ads, rather the advertisers pick us. We do have a process where we pick ad partners and we have screened out a number whose quality standards are not up to our standards. We can block offensive ads but currently it’s not possible for us to give each blogger the ability to pick ads. In the US and Europe for the most part we run broad brand campaigns as they pay better than contextual ads. Rest of world we tend to run ads that are contextual to your site.

Fair enough. Hundreds of thousands of bloggers must have been approved for WordAds by now, and it’s a challenge to tailor each ad to each blog. Yet Federated is still missing the targeted military demographic, and it’s one that could be quite profitable if the blog was on its own host with its own advertising.

WordAds might turn out to generate more revenue than AdSense. I’ll collect the data and we’ll see what happens. I think we can probably collect more ad revenue from other display ads by taking this blog to its own host. But I love a challenge, and this one offers plenty of blogging material. If WordAds is willing to take a chance on this blog, then I’m willing to give them a few months to figure out what they’re doing.

We can always take the blog to its own host later this year. FINCON12 is 6-9 September, and by then I should have plenty of WordAds data to network with other rock-star personal-finance bloggers.

I can still use all the help I can get with the Thesis theme and with WordAds. If you have any experience to share, please post a comment or send me an e-mail!

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Posted in Books & publishing | Tagged early retirement, financial independence, military, military retirement, PostAWeek, WordAds, WordPress | 2 Comments

“Welcome to WordAds!”

Posted on May 18, 2012 by Doug Nordman

That was the subject line of the e-mail I just received this Friday afternoon.

What the…?!?

Howdy!

Thanks for applying to WordAds for your WordPress.com site! You’re part of an exclusive group of sites that have been approved into the WordAds Beta.

WordAds is now live on your site. If there is an issue you can report it by replying to this email, and you can pause the ads.

WordAds is a partnership. On our side, the WordAds team will focus on maximizing your earnings potential. On your side, the more traffic you get, the more you earn.

Please let us know if you have any questions or feedback at this point. We are looking forward to working in partnership with you.

Thanks for flying with WordPress.com.

“Welcome to the exclusive group” indeed. The timing couldn’t be more suspicious auspicious. Call me cynical, but 24 years of military service always makes me wonder why the authorities are being so nice to me.

Last November, WordPress announced that they were introducing WordAds. (The term “AdWords” had already been taken by some other SEO entrepreneur.) I dutifully filled out the WordPress contact form and waited eagerly for Federated Media to respond.

And waited.

And waited…

This is a relatively tiny blog with a niche audience, and Federated is probably targeting blogs with at least 20,000 views per month. I eventually wised up and decided that I wasn’t going to make the cut.

For the last two weeks, I’ve been blogging about leaving WordPress.com for WordPress.ORG. Tomorrow(!) I was going to sign up for Bluehost and pull the trigger on WordPress’ guided transfer service. I couldn’t see any reason to delay, and I was expecting a couple of days of frantic scrambling to finish the transfer and clean up the broken pieces. Might as well do it over the weekend, when the rest of the world is crowding up the surf breaks.

I’ve seen a lot of coincidences in my life, and I’m pretty sure that karma eventually catches up with people. However I try not to ascribe to conspiracy what could be credited to bureaucracy.

It’s taken somebody 171 days to get around to deciding that this blog is ready for WordAds. I don’t know if WordPress has really been paying attention to bloggers using the keyword “Bluehost” or if this is just one of those coincidences.

My initial reaction is that I could make more money carrying out the original self-hosting plan. However I can implement that plan any time. I can’t just hop back & forth between self-hosting and WordAds.

I’m inclined to let WordPress & Federated Media bribe persuade me to stay with WordPress.COM. I’m not in any particular hurry and I can give them a few months to see who clicks.

I’m going to spend the weekend refreshing my memory on the WordAds terms of service and digging through whatever user feedback I can find. This is a beta, and last November Federated Media did not have a military-oriented ad category. Frankly I have no idea what ads you’re going to see, and I don’t know whether we’re going to like it. Please let me know your thoughts, and tell me if you object to an ad.

I’ll follow up this stream of consciousness with a real post at the usual Monday time.

And let’s all have a good weekend!

Posted in Books & publishing | Tagged early retirement, Federated Media, financial independence, military, military retirement, PostAWeek, WordAds, WordPress.com | 1 Comment

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Military Retirement & Financial Independence

Marine Corps offers early retirement

Retire at 17 years of service or 20?

* (Starting that $41,167/year High Three pension in 2012 is also 1% higher than my current $40,788 Final Pay pension that has received a decade of COLAs.)

Retirement planning: “Just tell me what to do!”

Vernon’s advice breaks down into three categories for military veterans.