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




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 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!


Related articles:
Military retirement spending: how much will I need?
Retiring on multiple streams of income
Retiring without a military pension
Tailor your investments to your military pay and your pension
How many years does it take to become financially independent?
Military pension inflation protection
Asset allocation considerations for a military pension
TSP annuity options

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WHAT I DO: I help you reach financial independence. For free. I retired in 2002 after 20 years in the Navy's submarine force. I wrote "The Military Guide to Financial Independence and Retirement" to share the stories of over 50 other financially independent servicemembers, veterans, and families. All of my writing revenue is donated to military-friendly charities.

  1. […] Problems with retirement calculators Is the 4% “safe” withdrawal rate really safe? Retirement planning: “Just tell me what to do!” How much cash in a retirement […]

  2. […] Steve Vernon is back with another article on three ways to raise your retirement income. This time he points out that most retirement planners treat inflation as a fixed (and perpetual) cost of retirement, but the reality is somewhat different. Many expenses in retirement will rise with inflation (utilities, food, fuel) but many others will not (electronics, Internet access, clothing). He suggests that Social Security plus an inflation-adjusted annuity can cover the basic retirement expenses, while the rest of a retiree’s spending can come from investments that aren’t necessarily indexed to inflation. Even an immediate fixed annuity starts out with payments that are 50% higher than an inflation-adjusted annuity, which covers a lot more discretionary spending early in retirement. […]

  3. Reply
    Wade Pfau May 23, 2012 at 9:05 PM

    Good job! Now the trick is to get this information to people at the right time, when they are ready and willing to read it.

    • Reply
      Doug Nordman May 24, 2012 at 8:14 PM

      Thanks, Wade, you’re right. For most I think it’ll happen only in a financial advisor’s office. For many, only when they’re frustrated with their advisor and looking for a new one.

      For military, though, it could happen at a local family support center or during their transition assistance programs.

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