Money and Waves

After 7 months of my family rarely leaving the house and me really only leaving for work and errands, we decided to take a week away and head to the Outer Banks, NC and rent a house on the water.  First, let me say if you’ve never done it, it’s worth it.  For us, it was about a 6-hour drive but with it being the off-season it is so peaceful.

Anyway, as much as I would love to continue to rub that in, that’s not why I am writing today.  I figured I would pass along a few more lessons learned with this whole retirement thing.  I am now 48 days into my official retirement and the lessons continue.  Today we’re going to talk a little bit about financial planning.

My goal was to have enough money saved up by the time I retired to live a month or two without a paycheck.  Unfortunately, I didn’t get to that point but fortunately, it didn’t come back to bite me in the ass (although it could have).  If you haven’t gone through your pre-retirement brief yet let me fill you in on a few secrets.

First, your final paycheck will not come when you think it will.  My last day on active duty was Aug 31, meaning I should have got my final check that day.  Unfortunately, when DFAS puts you on retirement, they conduct a full audit of your account (you know Uncle Sam wants all of his money).  That audit takes time.  Fortunately, mine was fairly fast because I ended up getting paid just 10 days late on Sept 10th. 

Another thing that they will tell you is that even though you start getting retirement pay the first day of retirement (1 Sept for me), and they pay you at the start of the month, you won’t actually get your first paycheck until a month later, but then they will pay you for your first and second months together.  So for me, I should have gotten my first paycheck Oct 1 to cover both Sept and Oct.

I mention the word SHOULD for a reason.  It is now Oct 18th, and I still haven’t gotten my first retirement check.

When you retire, it’s important to update your W4 with DFAS.  One thing I discovered the hard way last year when I started working a side job teaching was that I changed tax brackets and because both my teaching job and the Army saw me making less than the next bracket, they only deducted for the lower-income bracket.  That bit me in the ass at the end of the year when I had a hefty tax bill (the first time I’ve ever paid). 

So, when I retired, I wanted to update it to reflect that I was working another full-time job so DFAS would deduct my taxes appropriately.  Unfortunately, I screwed up and instead of telling them to withhold just a little bit extra each month, I told them to withhold the full amount of my other job too.  That presented an interesting problem for the system at DFAS because it was trying to withhold more money from my retirement check (to cover taxes on both retirement and my other job) than the total income amount of my retirement.  So what does the system do when it finds itself in this situation.  Fortunately/unfortunately…..nothing.  From the fortunate side, it didn’t send my entire retirement check to the IRS.  It didn’t do anything with it in-fact.  Unfortunately, they don’t alert you either that you screwed up so I only found out when I didn’t get paid on the 1st and started to ask questions.  Three phone calls later and after having to complete a new W4 (this time faxing it because when the system locks your account, you lose all access to it), it is now the 18th and I’m hopeful I’ll be getting paid soon.

The final lesson for the day is your disability check from VA.  If you are rated at under 50% disability by VA, they don’t give you any extra money (on top of your retirement).  Instead, they essentially make whatever disability you would get as a tax-free portion of your retirement.  If you get 50% or more, you get concurrent-receipt, meaning you get your full retirement (fully taxed) and your disability (tax-free).  Again, you start to collect disability your first day of retirement (assuming you are eligible and completed everything required), but VA pays one month in arrears (after you earned it) so I shouldn’t have gotten my first disability check until Oct 1st.  Again, notice I said SHOULD.  What I didn’t count on was the fact that if you get concurrent-receipt, VA does an audit on you with DFAS as well, which delays your first disability check.  I should see it Nov 1, but we’ll see.

So the moral of the story is that I have been retired for 48 days and haven’t seen a dollar of retirement/disability from Uncle Sam.  Fortunately, I was already well into my new job by the time I actually retired which meant that I was getting a regular paycheck there.  If I hadn’t though, I would have been screwed.  I tell all of you this so that you can plan accordingly with your finances.  I don’t know why retirement would be any different when it came to pay getting screwed up since I’ve had to fight with DFAS more than a few times (I am still out about $2k that they owe me from my last deployment 12 years ago).  Ok, time to go enjoy the beach some more.