First-generation everything. My family is basically financially illiterate. I'm doing this all on my own and learning as I go. Please help.
Question: How do I calculate the value of V.A. compensation for retirement purposes?
I (29M) am rated 100% P&T by the Department of Veterans Affairs. I receive ~$4,000/month tax-free. I am trying to value it appropriately for retirement. It adjusts for the cost of living each year, typically matching the Social Security COLA. For simplicity, I assumed I would retire in 30 years.
Practically speaking, how do I value this when considering my retirement? Should it have any impact on my decision to contribute to ROTH/Traditional accounts?
My thoughts:
The monthly compensation is tax-free and has a COLA. Assuming a 3% COLA for the next 30 years, the annual tax-free compensation would become ~$116,000 or ~$9,700/month. Since this is tax-free, I feel like I should treat it as a ROTH withdrawal. Then [would?] the $116K have an equivalent ROTH value of ~$3.8M? If so, should I stop contributing to ROTH accounts and instead switch to Traditional accounts to capitalize on the tax savings?
Background:
- Wife makes $225,000 base + production (occupation: doctor)
- I'm in law school and will make between $80,000-$180,000/year. The variance is because of practice area (i.e. Goverment work or Private Practice)
- Two rental properties, net income (cash flow) ~$25,000/year
- No debt, and I have a full-ride plus a stipend to law school.
- Currently have ~$168,000 in retirement accounts (mix of ROTH & Traditional)
- No debt and I have a full-ride plus a stipend to law school... The variance is because of practice area (i.e. Government work or Private Practice)
- ~$80,000 emergency fund (Cash, HYSA, & Floating Rate Notes)
- ~$15,000 petty cash (to cashflow monthly expenses)
original posted by Some-Geologist1480 to r/personalfinance on Thu, 28 Mar 2024 15:27:26 GMT.