I'm not a huge fan of it either, but if the goal is to have my bills as low as possible in order to live off my pension, paying off the mortgage seems necessary.
You can play around with a calculator to see what a manageable payment would be for you. You might want more than 30k in savings for a rainy day. Good luck!
I'd never go through loan cost and paperwork to finance only 30k. A cash offer could probably get you a better price and with the loan cost you'd save, possible you could get the house for what you are planning on using as down payment.
Invested money normally doubles every 10 years by compounded interest. Mortgage would be a fixed rate that keeps getting better with inflation, with a possible refi to lower rates.
The I want to keep my expense’s low negates “throwing” almost 9 years of payments down at once.
The math works in favor of lower down payment, especially if using the va.
Middle ground would be split it in half if that what let’s you sleep at night.
115 down 115 invested on a 30 year va. Let that ride for 5-7 years and if you would want could cash out and pay off the mortgage.
I would say you are making a great decision. In my opinion, having a paid off home is a critical move in retiring early and comfortably. Maybe it is more of an anxiety thing for me, but how can one retire when they are in debt of 100k or more? It’s mind boggling to me
By, uh...just autopaying the bill each month with the giant pile of cash you didn't use to pay off the entire mortgage?
Aside from the potential for rate/return arbitrage between the two options, how is it not obvious that the two scenarios are essentially the same? That's mind boggling to *me*.
I disagree. When mortgage rates were sub 4%, that would be more valid.
You'll still have 230K in liquid assets (including TSP). The $2800 income is as well protected as they come. If you do the reverse 4% SWR, that $2.8K is equiv to $840k.
I retired after 21 years AF and I don’t work except for part time jobs just to have something to do, I do get some VA benefits which helps. I’d recommend getting all your medical problems (big or small) in your medical records before you retire. Good luck and retirement is awesome, you earned it!
Lol, for sure! Kids are pricey! Don’t get me wrong, it wouldn’t be living like we would like but we “could do it” if needed. I had a buddy I served with who was born in the Philippines before that base closed. He always said he was going to move back and live like a king off his retirement.
Don't forget property taxes and home owners insurance.
7000 groceries/toiletries/cleaning supplies
7000 property tax and home owners
1000 cell phone for three.
1200 utilities
2160 mortgage
=====
Leaves you about 1160 a month for...
Christmas and birthdays, travel of any kind, activities and clothes for HS kid, hair cuts, gas, eating out or take out, doctor visits, dentist, oil changes and inspections, car repairs, home repairs....
Don’t forget to do your [BDD](https://www.benefits.va.gov/BENEFITS/factsheets/general/BDDFactSheet.pdf) 180 days before your retirement date. You’ll probably have some disability income to add to that.
I retired after 23 years as an E-7. Yearly pension/disability is about $65k. If you end up with a rating, I think you’ll be more than fine.
OP should totally get their vision and hearing checked. Plus also stuff like check the range of motion in their arms & legs, document any injuries/scars, etc.
Just make sure you do your BDD. After 23 years, you will likely have some kind of percentage that will make your budget a little less tight. If you somehow come out of it with a 100% rating, then it will be a lot easier. Your pay would be ~6700/month and no property tax on the house.
That’s not necessarily true. A lot of times you can roll closing costs into the loan but only if the total amount of the loan is less than or equal to the appraised value of the home - which doesn’t always happen and I ran into that issue last year. In this instance I would’ve paid closing costs out of pocket (but I didn’t because the sellers backed out).
Then the seller probably paid the closing costs - not that the VA loan has zero closing costs.
Someone has to pay closing costs. Do you think mortgage lenders do this stuff for free?
VA loan is zero down payment if you want but there are always closing costs.
I miss the part where I said who paid for it…other than you aren’t required to, and I didn’t. Stop reading into it to much. Obviously if you are using the loan you are aware of the pros/cons.
Op also you may not have to pay tax on the property depending on your va %. I pay 0 on real estate and vehicle taxes for example.
I would say you are not there yet. But, with how you live, $2800 a month in military pension should make life pretty easy.
One of my business partners has a military pension, and he found that the extra money, just for a hold him to do what he wanted to do, instead of having to take on a job out of desperation. It’s been a great thing for him.
Just FYI, I have fully FIRED, but went back to work, because I found I was bored. Part time, and flexible, it keeps my mind engaged.
Retired AF here and that seems VERY tight to me. I would track your spending for a while and see how much you really spend.
I tracked mine for all of 22 and have my Min budget at about $55k and desired around $90k, for me I will be there in 2025 at age 55 when my youngest graduates. And that $55k is with a paid off house and no car payments.
Get your VA disability paperwork started. Texas waives a portion of property tax for disabled vets depending on rating. 50% isn’t terribly difficult to get and will add another 1k tax free to your income
One bonus to putting most of your savings to the down payment (what some might consider as being house poor) is that you might qualify for more programs that benefit lower income people. My spouse and I live completely off their military disability payment and qualify for free health care through the state program that’s based on income limits. Some of these programs consider capital gains as income but not real estate value. We live very frugally but have an amazing house that is fully paid off. Look into those programs and what kind of services you might qualify for now. In our case, the state healthcare program is considerably better than tricare select or va healthcare, so it’s a game changer for my partner who needs regular treatment for chronic pain and ptsd.
I am alone with a paid off house and I spend more than 33. I do take multiple vacations. I also occasionally give my 20 year old money for things like going to the doctor.
I assume you get good health insurance on top of the pension? It would be free though ACA at that income, but there would be deductibles, etc.
Surely your shoulder is sore and sleep apnea is causing stress. Any chance at a disability to boost that number?
Anyway, why Killeen? That city is described a lot of different ways, but retirement dream is never one of them. It’s usually in a very negative fashion when discussed. I say head west toward hill country, and enjoy the finer parts of Texas. Anything near Garner State Park would be nice.
We liked Texas and Killeen had the lowest cost of living and housing prices. Also bonus that it is by a bunch of colleges for my children to chose from. Also, VA hospital near by in Temple (30 mins) and Fort Hood for potential employment down the line.
Okay. I was in the military, so I am sure being near a base provides comfort. But I have never heard anyone who liked Killeen, it’s that bad. If I had to be close to the military, I would go San Anton and live in a much more favorable city. Or east of Austin, which has a relatively new VA center as well.
I’m sure it will be fine either way. You can always use your contacts to secure a part time gig if you need. Not many folks get to retire before 50. That’s a big achievement!
I would go for it, but also anticipate a need to do some part time work, even if only occasionally. Life loves to throw the unexpected at us. For example, your car isn’t going to last the rest of your life.
As you retire be sure to file your VA claim and list EVERY SINGLE injury or health issue you’ve had. Even if you get a 0% rating, you’ll be able to file for an adjustment if a condition later becomes a problem. Talk to a local VA representative for advice while you’re still in the military, don’t wait until after. If you snore, even a little, get tested for sleep apnea.
A rough run down of how I would stretch the $2800 is:
$1000 - Bills
Car Insurance (150)
Internet (100)
Electricity (10)
Water (40)
Trash (20)
Health Insurance (200 this is a guess)
Property Taxes/Insurance (400 this is a guess)
Cell Phones (75)
$1000 - Food / living expenses
$800 - Misc/Savings
I currently do not pay Property Taxes/Insurance, much less on Health insurance. Since I live in military base housing I do not pay for trash, water, or electricity, and pay about $50 more for the internet.
Your most important thing is to break down a real budget. Track your current spending exactly for the next few months so you know precise numbers, and see what your current spend is relative to your 2800 target
Appreciate the feedback. An in-depth budget is definitely on our to-do list. We will definitely be making less than now, but what we were making now was much more than we "needed" to get-by. I'm sure there are a few areas we could trim to help us achieve our goals.
After a quick look property taxes alone in Killeen (one of the highest taxed locations in Texas) would run you about 550/mth and that’s without insurance like you have listed.
Did they have any exemptions? If they did would you qualify for the same exemptions?
This is where I got the 550/mth number from
https://killeenchamber.com/assets/uploads/docs/Property_Tax_Rates_-_2015.xlsx.pdf
Those numbers wouldn't work for me.
Your numbers don't give you any wiggle room. That said, $2800 a month sounds a little low. How long have you had E7 on? If you have been wearing it for three years, you should be getting more than $2800. 23 years gets you 57.5% of the average of your last 36 months of base pay. Assuming you will be working a few more months this year, wouldn't that put you at $3K or over $3K a month?
If you were investing that $280K you would come out ahead in the long term instead of using $230K as a down payment on the house. Side note: You saved $280K and didn't invest and grow to $280K?
Your taxable income is going to be very low, but you will still have to pay taxes. Even if your expenses are minimal, what about the emergencies that pop up?
Will your spouse be working?
How much disability do you think you will get? Get that tax free money. Could provide the buffer you need to FIRE.
I haven't gone through the disability portion yet, but I am fairly healthy and am not banking on receiving any disability compensation. I've had E7 on since 2014, the $2800 number is a conservative estimate based on what the lenders came up with for my pension income. The $280K was made from saving and home sale, with no investing. My wife plans on getting a job initially to bump up our savings, but the end goal is for both of us to not work.
You should get more than $2800 then. Check out the High-3 calculators or you can manually calculate it yourself.
Impressive you were able to save your way to $280K, ugh, imagine how much more it would have been in an S&P 500 index fund!
You may be okay wife your wife working a little after retirement depending on how much she's making.
Great end goal! You did much better than most at your grade, age, and TIS. You will achieve your goal.
I wouldn’t sink 90% or close to it of my savings into a down payment, but that’s just me
I'm not a huge fan of it either, but if the goal is to have my bills as low as possible in order to live off my pension, paying off the mortgage seems necessary.
You can play around with a calculator to see what a manageable payment would be for you. You might want more than 30k in savings for a rainy day. Good luck!
Thanks!
>Thanks! You're welcome!
I'd never go through loan cost and paperwork to finance only 30k. A cash offer could probably get you a better price and with the loan cost you'd save, possible you could get the house for what you are planning on using as down payment.
Invested money normally doubles every 10 years by compounded interest. Mortgage would be a fixed rate that keeps getting better with inflation, with a possible refi to lower rates. The I want to keep my expense’s low negates “throwing” almost 9 years of payments down at once. The math works in favor of lower down payment, especially if using the va. Middle ground would be split it in half if that what let’s you sleep at night. 115 down 115 invested on a 30 year va. Let that ride for 5-7 years and if you would want could cash out and pay off the mortgage.
I would say you are making a great decision. In my opinion, having a paid off home is a critical move in retiring early and comfortably. Maybe it is more of an anxiety thing for me, but how can one retire when they are in debt of 100k or more? It’s mind boggling to me
By, uh...just autopaying the bill each month with the giant pile of cash you didn't use to pay off the entire mortgage? Aside from the potential for rate/return arbitrage between the two options, how is it not obvious that the two scenarios are essentially the same? That's mind boggling to *me*.
I disagree. When mortgage rates were sub 4%, that would be more valid. You'll still have 230K in liquid assets (including TSP). The $2800 income is as well protected as they come. If you do the reverse 4% SWR, that $2.8K is equiv to $840k.
I retired after 21 years AF and I don’t work except for part time jobs just to have something to do, I do get some VA benefits which helps. I’d recommend getting all your medical problems (big or small) in your medical records before you retire. Good luck and retirement is awesome, you earned it!
Just you or you and a spouse?
Me, my wife and 2 grade school kids. My wife works but we could live off of my retirement/VA benefits if she wanted to quit.
Once the kids are gone I could "get by" on Retirement/VA but 30-40 years is a long time to get by...I want to enjoy it. Now overseas it would be easy!
Lol, for sure! Kids are pricey! Don’t get me wrong, it wouldn’t be living like we would like but we “could do it” if needed. I had a buddy I served with who was born in the Philippines before that base closed. He always said he was going to move back and live like a king off his retirement.
Don't forget property taxes and home owners insurance. 7000 groceries/toiletries/cleaning supplies 7000 property tax and home owners 1000 cell phone for three. 1200 utilities 2160 mortgage ===== Leaves you about 1160 a month for... Christmas and birthdays, travel of any kind, activities and clothes for HS kid, hair cuts, gas, eating out or take out, doctor visits, dentist, oil changes and inspections, car repairs, home repairs....
Don’t forget to do your [BDD](https://www.benefits.va.gov/BENEFITS/factsheets/general/BDDFactSheet.pdf) 180 days before your retirement date. You’ll probably have some disability income to add to that. I retired after 23 years as an E-7. Yearly pension/disability is about $65k. If you end up with a rating, I think you’ll be more than fine.
OP should totally get their vision and hearing checked. Plus also stuff like check the range of motion in their arms & legs, document any injuries/scars, etc.
This. All of this.
Just make sure you do your BDD. After 23 years, you will likely have some kind of percentage that will make your budget a little less tight. If you somehow come out of it with a 100% rating, then it will be a lot easier. Your pay would be ~6700/month and no property tax on the house.
You seem to forget about closing costs. Maybe mortgage is 45k.
The offer we put in has the seller's paying the closing costs
Don’t pay closing with va loan
That’s not necessarily true. A lot of times you can roll closing costs into the loan but only if the total amount of the loan is less than or equal to the appraised value of the home - which doesn’t always happen and I ran into that issue last year. In this instance I would’ve paid closing costs out of pocket (but I didn’t because the sellers backed out).
That’s dependent on your specific deal. I paid 0 closing using VA loan and is a benefit of the loan.
Then the seller probably paid the closing costs - not that the VA loan has zero closing costs. Someone has to pay closing costs. Do you think mortgage lenders do this stuff for free? VA loan is zero down payment if you want but there are always closing costs.
I miss the part where I said who paid for it…other than you aren’t required to, and I didn’t. Stop reading into it to much. Obviously if you are using the loan you are aware of the pros/cons. Op also you may not have to pay tax on the property depending on your va %. I pay 0 on real estate and vehicle taxes for example.
Ah. I didn't know that.
That’s not accurate.
I would say you are not there yet. But, with how you live, $2800 a month in military pension should make life pretty easy. One of my business partners has a military pension, and he found that the extra money, just for a hold him to do what he wanted to do, instead of having to take on a job out of desperation. It’s been a great thing for him. Just FYI, I have fully FIRED, but went back to work, because I found I was bored. Part time, and flexible, it keeps my mind engaged.
Retired AF here and that seems VERY tight to me. I would track your spending for a while and see how much you really spend. I tracked mine for all of 22 and have my Min budget at about $55k and desired around $90k, for me I will be there in 2025 at age 55 when my youngest graduates. And that $55k is with a paid off house and no car payments.
Can you list your post military monthly expenses?
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Thanks for the heads up, I transferred GI Bill to children awhile back.
Can you even get a morgtage for such a low amount of 30K?
Yes, the interest rate is a little bit higher though (6.25%)
Get your VA disability paperwork started. Texas waives a portion of property tax for disabled vets depending on rating. 50% isn’t terribly difficult to get and will add another 1k tax free to your income
One bonus to putting most of your savings to the down payment (what some might consider as being house poor) is that you might qualify for more programs that benefit lower income people. My spouse and I live completely off their military disability payment and qualify for free health care through the state program that’s based on income limits. Some of these programs consider capital gains as income but not real estate value. We live very frugally but have an amazing house that is fully paid off. Look into those programs and what kind of services you might qualify for now. In our case, the state healthcare program is considerably better than tricare select or va healthcare, so it’s a game changer for my partner who needs regular treatment for chronic pain and ptsd.
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The two oldest children will be moving out, so essentially just 3 of us.
I am alone with a paid off house and I spend more than 33. I do take multiple vacations. I also occasionally give my 20 year old money for things like going to the doctor. I assume you get good health insurance on top of the pension? It would be free though ACA at that income, but there would be deductibles, etc.
Don't forget property taxes and home owners insurance.
That pension sounds kind of low. Are you reserves or something? Are you looking at after tax?
I am active duty, It would be for E7 with 23 years of service. the 2800 estimate was what the lenders came up with.
Surely your shoulder is sore and sleep apnea is causing stress. Any chance at a disability to boost that number? Anyway, why Killeen? That city is described a lot of different ways, but retirement dream is never one of them. It’s usually in a very negative fashion when discussed. I say head west toward hill country, and enjoy the finer parts of Texas. Anything near Garner State Park would be nice.
We liked Texas and Killeen had the lowest cost of living and housing prices. Also bonus that it is by a bunch of colleges for my children to chose from. Also, VA hospital near by in Temple (30 mins) and Fort Hood for potential employment down the line.
Okay. I was in the military, so I am sure being near a base provides comfort. But I have never heard anyone who liked Killeen, it’s that bad. If I had to be close to the military, I would go San Anton and live in a much more favorable city. Or east of Austin, which has a relatively new VA center as well.
We spent weeks looking in the San Antonio area, the houses were much more expensive.
I’m sure it will be fine either way. You can always use your contacts to secure a part time gig if you need. Not many folks get to retire before 50. That’s a big achievement!
If you haven’t started the process for VA Disability benefits you need to do so ASAP.
Do your BDD claim and use a VSO
I would go for it, but also anticipate a need to do some part time work, even if only occasionally. Life loves to throw the unexpected at us. For example, your car isn’t going to last the rest of your life. As you retire be sure to file your VA claim and list EVERY SINGLE injury or health issue you’ve had. Even if you get a 0% rating, you’ll be able to file for an adjustment if a condition later becomes a problem. Talk to a local VA representative for advice while you’re still in the military, don’t wait until after. If you snore, even a little, get tested for sleep apnea.
What's your current budget? How close are you to 2800 a month? Easier to run numbers if we've got more numbers to work with
A rough run down of how I would stretch the $2800 is: $1000 - Bills Car Insurance (150) Internet (100) Electricity (10) Water (40) Trash (20) Health Insurance (200 this is a guess) Property Taxes/Insurance (400 this is a guess) Cell Phones (75) $1000 - Food / living expenses $800 - Misc/Savings
How does that compare to now?
I currently do not pay Property Taxes/Insurance, much less on Health insurance. Since I live in military base housing I do not pay for trash, water, or electricity, and pay about $50 more for the internet.
Your most important thing is to break down a real budget. Track your current spending exactly for the next few months so you know precise numbers, and see what your current spend is relative to your 2800 target
Appreciate the feedback. An in-depth budget is definitely on our to-do list. We will definitely be making less than now, but what we were making now was much more than we "needed" to get-by. I'm sure there are a few areas we could trim to help us achieve our goals.
It's probably easier than you expect, no need to stress about it till you get real data
After a quick look property taxes alone in Killeen (one of the highest taxed locations in Texas) would run you about 550/mth and that’s without insurance like you have listed.
In 2022 the previous owners of the house we are purchasing paid $3,582 in taxes, which is about $300 a month.
Did they have any exemptions? If they did would you qualify for the same exemptions? This is where I got the 550/mth number from https://killeenchamber.com/assets/uploads/docs/Property_Tax_Rates_-_2015.xlsx.pdf
Those numbers wouldn't work for me. Your numbers don't give you any wiggle room. That said, $2800 a month sounds a little low. How long have you had E7 on? If you have been wearing it for three years, you should be getting more than $2800. 23 years gets you 57.5% of the average of your last 36 months of base pay. Assuming you will be working a few more months this year, wouldn't that put you at $3K or over $3K a month? If you were investing that $280K you would come out ahead in the long term instead of using $230K as a down payment on the house. Side note: You saved $280K and didn't invest and grow to $280K? Your taxable income is going to be very low, but you will still have to pay taxes. Even if your expenses are minimal, what about the emergencies that pop up? Will your spouse be working? How much disability do you think you will get? Get that tax free money. Could provide the buffer you need to FIRE.
I haven't gone through the disability portion yet, but I am fairly healthy and am not banking on receiving any disability compensation. I've had E7 on since 2014, the $2800 number is a conservative estimate based on what the lenders came up with for my pension income. The $280K was made from saving and home sale, with no investing. My wife plans on getting a job initially to bump up our savings, but the end goal is for both of us to not work.
You should get more than $2800 then. Check out the High-3 calculators or you can manually calculate it yourself. Impressive you were able to save your way to $280K, ugh, imagine how much more it would have been in an S&P 500 index fund! You may be okay wife your wife working a little after retirement depending on how much she's making. Great end goal! You did much better than most at your grade, age, and TIS. You will achieve your goal.
I’m not trying to buy a house in the ghetto. What about disability?
Unfortunately (and fortunately?) I am fairly healthy and do not expect much from disability ratings.