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48 year old military & parent of two trying to figure ER options for 2016...
Old 04-28-2015, 12:18 AM   #1
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48 year old military & parent of two trying to figure ER options for 2016...

Finally reaching out for some advice & ER motivation. I have really enjoyed visiting this site off/on for the past couple years and appreciate all the great advice. My DW & I are trying to decide if time is right for semi-ER in 2016 or maybe a couple more years active duty and full ER 2018/19. Oh yeah, and yes, I have already have read Nord's (Doug Nordman) book "The Military Guide..." but I should review it again.

A little more background...

- 48 year old military officer in San Diego; married 25 years; two DD; one in college & one graduating HS this year. Promoted to 06 in 2012; eligible to submit for transition/retirement with 26 years of service in 2016.
- 2016 potential semi-ER or possibly one more tour...probably requires another military move & complete ER 2018/19.

Assets:
$129K TSP (non Roth; 52% 2030 fund)(33% C fund)(15% S fund) & $22K tax-exempt combat pay investment
$64K USAA Roth IRA (USNQX & USSPX funds)
$55K USAA Roth IRA (DW) (USNQX & USHYX funds)
$38K USAA USSPX Fund
$112K MM (Emergency fund & future house down payment)
Current home equity ~$150K; (San Diego market); plan to relocate out of California; most likely Colorado Springs
*Earliest Social Security is 2028; ~$1,700/mo

Current Monthly income:
$10K; not including housing allowance (14% TSP allotment)

Current Monthly expenses:
$6100 (We have a more detailed budget.)
#1 DD college is covered by GI bill & scholarships; #2 DD is planning to attend community college for first 2 years...final two years are TBD at this point.

Projected 2016 monthly pension (26 years): $5,036/mo (20% tax rate)*
Projected 2018 monthly pension (28 years): $6,000/mo (20% tax rate)*
*I am planning to take max SBP (6.5% pre tax) and we are tracking ongoing discussions related to military Tri-care expenses, etc...

Projected expenses in Colorado Springs
$5200/mo (We have a transition budget, based on downsizing and a less expensive cost of living in Colorado. Final house decision will be a major factor; we want to find something in the $350-375 range and make a large down payment.)

Appreciate any ER advice, comments, insight into issues I have not considered....

Thanks for reading my long post & Semper Fi!
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Old 04-28-2015, 10:40 AM   #2
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Welcome! If you've been hanging out here, I'm sure you've already read the questions at this link.

Given your expenses and the unknowns about college expenses, it would seem like some additional cushion would be useful, but your years of service have given you a well deserved base for a secure ER. Did you say if DW has any separate income?
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Old 04-28-2015, 11:04 AM   #3
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Welcome! If you've been hanging out here, I'm sure you've already read the questions at this link.

Katiek, thanks for the response and yes, I have reviewed the questions from the link and added them to my finance planning ref's.

Given your expenses and the unknowns about college expenses, it would seem like some additional cushion would be useful, but your years of service have given you a well deserved base for a secure ER. Did you say if DW has any separate income?
Yes, an "additional cushion" is tempting. DW income has been minimal; 15 moves and multiple overseas deployments have been the trade-off for her to focus on our kids...she is not real interested in any high stress jobs at this point but is very capable of earning some income if required.
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Old 04-28-2015, 12:51 PM   #4
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One other item that I'm sure you've thought about a lot - everyone here is interested in ER and enjoying the freedom that financial independence can provide. A number of us, myself included, also tend to be financially conservative. But just reading about your multiple moves and deployments makes my head spin. I can't imagine the toll it takes on your family. And while I'm always tempted for OMY syndrome, my OMY isn't likely to put me in a war zone or be a real risk to my safety.

Finally being able to be at home with your family and enjoying time with them takes on extra importance after considering all the sacrifices you've made.

If you did retire from the service, would you be able to find another j*b? Perhaps something part time that would give you some additional income for cushion for a bit, but not something that would give you significantly more time at home or free to pursue other interests?
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Old 04-28-2015, 02:06 PM   #5
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If you did retire from the service, would you be able to find another j*b? Perhaps something part time that would give you some additional income for cushion for a bit, but not something that would give you significantly more time at home or free to pursue other interests?
I think this is definitely worth considering. Former military get preferential treatment when hiring in other government jobs. I think USPS is a frequent favorite. When I was working as receptionist, our mailman often mentioned there were a lot of former military working in the post office.
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Old 04-28-2015, 02:26 PM   #6
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I think this is definitely worth considering. Former military get preferential treatment when hiring in other government jobs. I think USPS is a frequent favorite. When I was working as receptionist, our mailman often mentioned there were a lot of former military working in the post office.
Yes, part time is my current preferred option and something I plan to explore more over the next year. Finding the right "part time" opportunity is my main concern....I have been spoiled with a really great profession for the last 25 years. DW is also interested in part time options too. Thanks for your comments.
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Old 04-28-2015, 04:48 PM   #7
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Yes, part time is my current preferred option and something I plan to explore more over the next year. Finding the right "part time" opportunity is my main concern....I have been spoiled with a really great profession for the last 25 years. DW is also interested in part time options too. Thanks for your comments.
Oh yeah, just a thought. My uncle (retired Navy) is going back to school right now and he says he'll get an allowance for studying. However, I'm not sure if that allowance is through the Navy or through state/county. He worked 5 years for the state/county (can't remember which one exactly) after retiring from the Navy so he's getting pension from there, too aside from his Navy pension and social security when he turns 62.
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Old 04-28-2015, 08:56 PM   #8
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Welcome aboard, Colonel. It sounds like you've given retirement a lot of thought (as is appropriate) and are fairly well prepared. Only you can tell whether sucking it up for another two years is worth the 20% bump in your pension income. That certainly would put you closer to meeting your expected monthly expenses, especially if you are contemplating carrying a mortgage in retirement. I'm presuming that your BAQ (or whatever it's called now; I left before you started) covers your current mortgage. An "encore career" may be necessary if the income is $5036 per month and the outgo is $5200 PLUS mortgage per month.

Is daughter #1 using your transferred GI Bill or her own?
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Old 04-28-2015, 11:21 PM   #9
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Welcome aboard, Colonel. It sounds like you've given retirement a lot of thought (as is appropriate) and are fairly well prepared. Only you can tell whether sucking it up for another two years is worth the 20% bump in your pension income. That certainly would put you closer to meeting your expected monthly expenses, especially if you are contemplating carrying a mortgage in retirement. I'm presuming that your BAQ (or whatever it's called now; I left before you started) covers your current mortgage. An "encore career" may be necessary if the income is $5036 per month and the outgo is $5200 PLUS mortgage per month.

Is daughter #1 using your transferred GI Bill or her own?
Gumby, Thanks for the comments and yes, we have thought a lot about retirement and our plans have changed more than a few times over the last few tours. There are still no guarantees to get promoted and even when selected to the next rank it usually takes 18-20 months to pin on 05 or 06. I was never planning to stay on active duty longer than one tour, but life happened and we have enjoyed the opportunities, but it does get harder and more complicated as you move along. Now 25 years later we are thinking real hard about exit options for the future and simplifying our life....so ER or semi ER is an attractive consideration.

Our current planned budget of $5036 does include a mortgage payment and is based on relocating to a cheaper cost of living geo location.

Daughter #1 is using a portion of my GI bill; she is not old enough to have earned her own yet. The current GI bill is awesome.

I appreciate your questions and comments.
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48 year old military & parent of two trying to figure ER options for 2016...
Old 04-29-2015, 11:50 AM   #10
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48 year old military & parent of two trying to figure ER options for 2016...

Have you looked at the expense ratios of USAA funds when compared to Vanguard? USAA is amazing with insurance and banking, but when it comes to investments, I've never seen a good option with them.

I would suspect your budget may be less if you're going to buy a house in the springs with your savings. If it's just the two of you, you could probably put 75% down quite easily, or 100% for a nice place that's smaller. I wouldn't expect you'd put out more than 300k, and you might try to save as much as you can now in a taxable account before you retire.

Wouldn't you be in the 15% tax bracket, or were you calculating in Colorado tax? I don't think every state taxes military pensions, does Colorado? Also, how do you think your disability will play out? I suspect you may have more coming to you.

I looked it up...
Colorado Persons who were 55-64 years of age as of December 31 may exclude up to $20,000 of their military retirement benefits received during the calendar year. Persons who were 65 years of age or older as of December 31, may exclude up to $24,000 of their military retirement benefits received during the calendar year.

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Old 04-29-2015, 09:31 PM   #11
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Have you looked at the expense ratios of USAA funds when compared to Vanguard? USAA is amazing with insurance and banking, but when it comes to investments, I've never seen a good option with them.

I would suspect your budget may be less if you're going to buy a house in the springs with your savings. If it's just the two of you, you could probably put 75% down quite easily, or 100% for a nice place that's smaller. I wouldn't expect you'd put out more than 300k, and you might try to save as much as you can now in a taxable account before you retire.

Wouldn't you be in the 15% tax bracket, or were you calculating in Colorado tax? I don't think every state taxes military pensions, does Colorado? Also, how do you think your disability will play out? I suspect you may have more coming to you.

I looked it up...
Colorado Persons who were 55-64 years of age as of December 31 may exclude up to $20,000 of their military retirement benefits received during the calendar year. Persons who were 65 years of age or older as of December 31, may exclude up to $24,000 of their military retirement benefits received during the calendar year.

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Surferlife,

Thanks for the feedback and Vanguard funds are on the top of my short to do list to evaluate. I have spent some time on the Bogleheads website and know I need to consider the long term impact of the fees, etc.... We are planning to keep our housing simple and max our down payment.

I used 20% to be a little conservative, but yes, if I just ER 15% might be more accurate for planning purposes. Lastly, thanks for the Colorado tax comments, every little bit helps.

Thanks again for the comments!
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Old 05-01-2015, 11:18 AM   #12
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CAPT I would think a 28 year 06 would be more than 6K pension?

Projected 2018 monthly pension (28 years): $6,000/mo
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Old 05-01-2015, 11:46 AM   #13
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CAPT I would think a 28 year 06 would be more than 6K pension?

Projected 2018 monthly pension (28 years): $6,000/mo

Thank you for the comment. My estimate is based on DFAS high three and a primary variable is tax rate, @ 20%; just about $72K year before deducting Survivor Benefit Plan (6.5%); health care (Tri-Care) and dental. I would rather be conservative with my estimate but I could end up with more if my tax rate is 15%. Final pension is a planning factor, but after this long in the Marine Corps, I only plan to stay around a little longer if my focus remains the mission...not a few more $. This is only an estimate, final amount may be adjusted based on final retirement date and also does not represent a TBD VA disability rating.
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Old 05-02-2015, 11:38 AM   #14
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Welcome to the board, Epic!

You seem to have thought through all the issues, and (if you haven't already) the next step would be to attend the transition seminar (TAP or GPS). You don't "need" to attend it, but it's a few days away from the job (and hopefully you'll attend the seminar with your spouse) to talk through the process and see whether your plan has overlooked anything.

You have no compelling reason to retire, so you could stay on active duty as long as the assignment officer doesn't piss you off. There are probably words in the Marine Corps version of the personnel manual that say you can't apply to retire if the assignment officer is negotiating orders with you, but you're senior enough to survey the available billets and reach a decision before you get to that point.

On the retirement side, I think your finances will be fine. If you retired tomorrow then you could cover your current projected spending with your pension and a 4% withdrawal rate from your assets. The reality is that your conservative assumptions will result in lower spending. During the first year or two of retirement you'll find even more ways to reduce your spending. It'll happen just because you'll have the time & energy to focus on what's important to you and you'll stop wasting cash on the things you don't care about. If all of your spending assumptions are inaccurate then Social Security will more than make up for it.

I suspect that you and your spouse will also get unsolicited offers for part-time work and consulting, where even $10K/year will make a big difference to your first couple years of spending. You two will have many opportunities to return to work (or a full-time bridge career) and you won't have to worry about losing skills or contact networks.

The main reasons that people keep their investments with USAA are convenience and trust. (And communicating with military-friendly customer service staff while you're overseas.) They can't compete with Vanguard & Fidelity (or the TSP) on price. You could transfer your IRAs now with no tax consequences, and you could decide whether paying the taxable account's capital gains taxes are worth the long-term reduction in annual expenses.

Keep in mind that your pension is the equivalent of the income generated by a few million bucks in I bonds, so you could invest your other assets into a higher allocation of equities. You have to sleep comfortably at night, but when you have the world's most reliable inflation-adjusted annuity then you can invest your other assets in more equities than bonds.

When you sell your California home and buy in Colorado, in a few years CA may come after you for cap gains taxes on the sale of your home. You'll have to provide evidence that you invested the CA cap gains in CO real estate, so keep good records of your sale and purchase. If you downsized and ended up with extra cash then you'll have to pay particular attention to calculating the cost basis of the CA home at sale and the cost basis of the CO home at purchase.

You may have already seen this week's post:
Stay For 30 Or Retire At 27? - Military Guide

Let me know if you have more questions. I can also refer you to a retired Marine who's now an experienced CFP and would be happy to do a fee-only review of your finances and any other questions. He does not sell any products-- only his time & labor.
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Old 05-02-2015, 12:47 PM   #15
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I know you said Colorado, but you might consider Texas for financial reasons. Texas has no income tax, and the courts are either about to rule or have ruled that the Hazelwood act applies to all military rather they were Texans when they entered the service or not. That act pays a good chunk of money for you, spouse and kids college. Not just undergrad either. I think it will pay for law school and other advanced degrees. http://www.tvc.texas.gov/Hazlewood-Act.aspx

Just a thought. Also, you SS seems a little low. I am an O4 retiree, and I get $2,100 a month and DW gets $1,000. I took SS at 67, eligible at 66. On the other hand if yours may be right is you are figuring drawing at 62. You might check Scott Burns articles on waiting and spending retirement funds until 70. I believe he feels that is a better way to go.
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Old 05-02-2015, 01:25 PM   #16
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I know you said Colorado, but you might consider Texas...
No, that's not a good idea. Definitely not.
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Old 05-02-2015, 04:32 PM   #17
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Welcome to the board, Epic!

You seem to have thought through all the issues, and (if you haven't already) the next step would be to attend the transition seminar (TAP or GPS). You don't "need" to attend it, but it's a few days away from the job (and hopefully you'll attend the seminar with your spouse) to talk through the process and see whether your plan has overlooked anything.

You have no compelling reason to retire, so you could stay on active duty as long as the assignment officer doesn't piss you off. There are probably words in the Marine Corps version of the personnel manual that say you can't apply to retire if the assignment officer is negotiating orders with you, but you're senior enough to survey the available billets and reach a decision before you get to that point.

On the retirement side, I think your finances will be fine. If you retired tomorrow then you could cover your current projected spending with your pension and a 4% withdrawal rate from your assets. The reality is that your conservative assumptions will result in lower spending. During the first year or two of retirement you'll find even more ways to reduce your spending. It'll happen just because you'll have the time & energy to focus on what's important to you and you'll stop wasting cash on the things you don't care about. If all of your spending assumptions are inaccurate then Social Security will more than make up for it.

I suspect that you and your spouse will also get unsolicited offers for part-time work and consulting, where even $10K/year will make a big difference to your first couple years of spending. You two will have many opportunities to return to work (or a full-time bridge career) and you won't have to worry about losing skills or contact networks.

The main reasons that people keep their investments with USAA are convenience and trust. (And communicating with military-friendly customer service staff while you're overseas.) They can't compete with Vanguard & Fidelity (or the TSP) on price. You could transfer your IRAs now with no tax consequences, and you could decide whether paying the taxable account's capital gains taxes are worth the long-term reduction in annual expenses.

Keep in mind that your pension is the equivalent of the income generated by a few million bucks in I bonds, so you could invest your other assets into a higher allocation of equities. You have to sleep comfortably at night, but when you have the world's most reliable inflation-adjusted annuity then you can invest your other assets in more equities than bonds.

When you sell your California home and buy in Colorado, in a few years CA may come after you for cap gains taxes on the sale of your home. You'll have to provide evidence that you invested the CA cap gains in CO real estate, so keep good records of your sale and purchase. If you downsized and ended up with extra cash then you'll have to pay particular attention to calculating the cost basis of the CA home at sale and the cost basis of the CO home at purchase.

You may have already seen this week's post:
Stay For 30 Or Retire At 27? - Military Guide

Let me know if you have more questions. I can also refer you to a retired Marine who's now an experienced CFP and would be happy to do a fee-only review of your finances and any other questions. He does not sell any products-- only his time & labor.

Nords, Wow, thanks for the response and all the information. I really appreciate what you post on this site and your Military Guide website....great information! My wife and I both enjoyed reading your response and the article you referenced...Thanks!

I am considering dates for the Senior Transition course....I already have the 2015 dates posted at my desk...just need to pick a workable timeframe. I was fortunate and attended the Ruehlin Seminar last year....it really led me to start seriously evaluating semi-ER or ER vice seeking out another full time job after the Marine Corps. I thought Ruehlin's was a great course, but it also made me really think about "why" or "if" I needed to pursue another career vice simplifying and slowing down.

Also, due to this website and many related post, I have finally submitted the paperwork to change both my and DW Roth IRA's to Vanguard. Paperwork was mailed this morning and both of us established our new Vanguard accounts yesterday! Expect it will take a couple weeks to process. You nailed it with your comments about why I have stayed with USAA, but we are definitely motivated to reduce our expense ratio's. I have not moved the USAA joint account yet, but it will be next after I figure out the tax issues.

Lastly, you are right, I am fairly certain of my next tour options....fewer opportunities as you move up and most everyone has "baggage"; family issues, etc... Currently, wife and I are leaning towards seeing what is offered next for orders and if family is onboard we will very likely accept one more adventure, but we are leaning into developing our "mental state" to submit for retirement later this year and plan to semi-ER in 2016. My wife and I are visiting Colorado Springs in a couple weeks to explore it a little more and check out some neighborhoods in more detail, etc...

I would really appreciate the CFP reference; please PM me the contact info.

Thanks again for your response and all the information you provide to all the military veterans!!!
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Old 05-02-2015, 05:02 PM   #18
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Nords, Wow, thanks for the response and all the information. I really appreciate what you post on this site and your Military Guide website....great information! My wife and I both enjoyed reading your response and the article you referenced...Thanks!

I am considering dates for the Senior Transition course....I already have the 2015 dates posted at my desk...just need to pick a workable timeframe. I was fortunate and attended the Ruehlin Seminar last year....it really led me to start seriously evaluating semi-ER or ER vice seeking out another full time job after the Marine Corps. I thought Ruehlin's was a great course, but it also made me really think about "why" or "if" I needed to pursue another career vice simplifying and slowing down.

Also, due to this website and many related post, I have finally submitted the paperwork to change both my and DW Roth IRA's to Vanguard. Paperwork was mailed this morning and both of us established our new Vanguard accounts yesterday! Expect it will take a couple weeks to process. You nailed it with your comments about why I have stayed with USAA, but we are definitely motivated to reduce our expense ratio's. I have not moved the USAA joint account yet, but it will be next after I figure out the tax issues.

Lastly, you are right, I am fairly certain of my next tour options....fewer opportunities as you move up and most everyone has "baggage"; family issues, etc... Currently, wife and I are leaning towards seeing what is offered next for orders and if family is onboard we will very likely accept one more adventure, but we are leaning into developing our "mental state" to submit for retirement later this year and plan to semi-ER in 2016. My wife and I are visiting Colorado Springs in a couple weeks to explore it a little more and check out some neighborhoods in more detail, etc...

I would really appreciate the CFP reference; please PM me the contact info.

Thanks again for your response and all the information you provide to all the military veterans!!!
You're welcome! PM on the way.

The earlier you take the transition course, the better, even if you decide to do another tour. You'll have a lot of VA disability-screening questions at your retirement physical, and the seminar's VA info will help you pursue the right answers. You and your spouse will have a lot to talk about from listening to the presentations, so the sooner you start those conversations the better. The other officers in your command asked me to pass on to you that they're perfectly capable of surviving without you for a week, thankyouverymuchsir.

Ruehlin is outstanding. They either leave you all fired up to start your bridge career (with the skills in hand to make it happen) or they leave you wondering why you'd want to bother with it. You have the financial independence to choose. I suspect that you'll get a few unsolicited offers as soon as your retirement request is approved, and six months after you retire (when the ethics window closes) you'll get another wave of employment queries. In your case it's also fairly easy to get sucked into the gravitational well of NORTHCOM. Don't feel obligated to take the first offer. In fact, if you want a real ego-enhancing boost then read the biographies of the board of directors of USAA, and then consider how many military-friendly financial institutions and non-profits there are in the country needing junior board members. A few phone calls & e-mails every month, a quarterly videoconference, an annual meeting or two... it's a great gig.

My brother lives in Denver and I've spent some time around Parker, Castle Rock, and Colorado Springs. There are also several other members of this site who should be able to share their extensive & detailed knowledge of the area too. I also have a couple of readers living there to whom I could introduce you if you want. One person you could contact right now for a coffee Q&A is Mary Kelly: Contact Mary | Productive Leaders She's very familiar with COS and can give you more info about the military network.

I've watched dozens of O-6s wrap up their careers at ROTC units. They've seemed very happy with the duty. And, of course, if the assignment officer should send you out here then I'd be happy to help with that transition!
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Old 05-02-2015, 05:07 PM   #19
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Welcome to the board, Epic!





When you sell your California home and buy in Colorado, in a few years CA may come after you for cap gains taxes on the sale of your home. You'll have to provide evidence that you invested the CA cap gains in CO real estate, so keep good records of your sale and purchase. If you downsized and ended up with extra cash then you'll have to pay particular attention to calculating the cost basis of the CA home at sale and the cost basis of the CO home at purchase.



.
I'm confused by the above statement. Doesn't California tax yourr gains whether you buy in CO or not? And since the Colonel only has $150k equity, I'm assuming that he's below the $500k capital gains exclusion? Does that exclusion apply to CA state taxes as well?



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Old 05-02-2015, 05:09 PM   #20
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Originally Posted by Rustic23 View Post
I know you said Colorado, but you might consider Texas for financial reasons. Texas has no income tax, and the courts are either about to rule or have ruled that the Hazelwood act applies to all military rather they were Texans when they entered the service or not. That act pays a good chunk of money for you, spouse and kids college. Not just undergrad either. I think it will pay for law school and other advanced degrees. TEXAS VETERANS COMMISSION - Hazlewood Act

Just a thought. Also, you SS seems a little low. I am an O4 retiree, and I get $2,100 a month and DW gets $1,000. I took SS at 67, eligible at 66. On the other hand if yours may be right is you are figuring drawing at 62. You might check Scott Burns articles on waiting and spending retirement funds until 70. I believe he feels that is a better way to go.
Rustic23,

Thank you for the comments. Funny, you mention Texas, my wife and I are both Texas residents and almost all our family are still living in Texas. They love it....mostly. Trust me we have really tried to convince ourselves of the benefits of returning home, but we have also experienced a lot of really incredible places the past 25 years and we want to enjoy one of those special places in retirement. Currently, we think Colorado Springs provides a good option for at least the first phase of post military transition, not sure we will stay forever, but we might. Texas will always be a place we visit.

Interesting you mention the Hazelwood act, I have definitely considered it for my kids and myself, but I also have read if the State is "forced" to expand the program to all veterans, they might curtail benefits or eliminate it. Apparently it may not be affordable to provide "any" military veteran with free access to any Texas state university. I am hopeful the program will not be expanded, just seems to be unreasonable to me based on GI bill benefits and programs already provided by other states for their respective military veterans. Let me know if you have an update on this proposal.

Yes, my SS estimate is based on receiving benefits at 62. Most recently, I read the current projections for SS solvency is 2030, and I will turn 62 in 2028....so I expect SS solvency will continue to evolve, but if it does not improve, I am planning to lock in my payments when I can. Although, I am certainly open to delaying SS if/when program solvency projections improve. My current SS projections are a lot more if I do delay receipt until 67 or later....will see what happens in the next 14 years.

Thanks for your comments!
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