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FIRED on 1 June 2013 at age 48
Old 09-25-2012, 04:15 PM   #1
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FIRED on 1 June 2013 at age 48

Hello all. I will retire on 1 June 2013 at the age of 48 after slightly over 26 years of military service in the Army. My wife has been a stay-at-home Mom for all but two months of our 20+ years of married life together. Our daughter is 23 and our son is 21.
I made my first IRA investment in June, 1987, after my first monthís paycheck. I still have the canceled check. I really thought I would make my fortune in the stock market and continued to invest regularly over the years. While market success has been ok, what I found out is that my most powerful tool to reach early retirement has been to do the best I could do with whatever job I was given. This has led to continued progression of increased responsibilities and promotions, to where I now find myself to be in a position where I could continue to work in what is now a very rewarding career financially. However, Iíve reached the point where we have enough, and if we continue to live a balanced lifestyle (all things in moderation), then we should always have enough. I now want the freedom of choice, to choose where I live and to live near family rather than to continue to call home wherever the Army sends us. Iím grateful for my time in service, but it is time to step away and start a new life.
We purchased our retirement home and will move into it when we retire. My MIL will live with us in retirement. She is drawing SS and is in her late 60ís. With the exception of our mortgage, we are debt free, and have been debt free for about 10 years. We did buy more house than most would think we need, but after a career of always living and settling in a home we were told to live in, or one we found quickly because it was good enough, we finally bought a home that met the dreams of my wife and myself. If we had wanted to pay cash for a house, then we would have had to work an extra 2-4 years or deplete our taxable savings beyond an acceptable level. Here is the breakdown of our projected retirement expenses by percentage, given our personal circumstances:

Survivor benefit: $4,908 (6.5%)
Fed Tax $6,200 (8.21%)
State tax $2,214 (2.93%)
Mortgage PITI $20,400 (27.02%)
Home upkeep $2,400 (3.18%)
Utilities Ė gas/water/electric/sewer/trash $2,988 (3.96%)
Phone/Internet/cable $124 (1.97%)
Auto ins/maint/deprec/fuel $6,600 (8.74%)
Medical/Dental $2,400 (3.18%)
Groceries $6,000 (7.95%)
Dining/entertainment $3,600 (4.77%)
Continuing education $2,400 (3.18%)
Activities/Hobbies $2,400 (3.18%)
Fun/Travel $7,000 (9.27%)
Misc/other $4,504 (9.27%)
Total $75,504 (100%)

The survivor benefit provides 55% of my retirement income to my wife if I die. My healthcare is Tricare for Life, the cost of which is very inexpensive. I will also have most of my family healthcare provided in a military treatment facility which decreases costs even more. Iím supplementing this with life insurance to pay off the mortgage in the event of my death. Once I reach 59 Ĺ, I can pay off the house if we chose to do so. One of the ironies of financial planning is that the first decade of my career saw most of my savings go towards tax deferred accounts and it wasnít until the last 10 years of my career did I wake up to the fact that if I wanted to retire early then I needed a sizeable sum in a taxable account. We've enough savings in taxable accounts to supplement income when needed to pay for big ticket items (car replacement, roof, HVAC, etc.,). Son's college is paid through post 9/11 GI Bill, daughter is on her own (mostly).

Iím currently going through the Transition Assistance Program (TAP), which focuses on resume preparation for career transitions. Iím finding it very difficult to contemplate a follow-on career, but want to be prepared in case I find/discover that I need to seek another job. My preference is to follow the ďLife of Riley,Ē to borrow the phrase from the Joy of Not Working book that many here have recommended.
The median income of our neighborhood is 73K.
Iíve followed this forum for several years, and posted only seldom, but I figured now that Iím committed to a FIRED lifestyle that I should post and dive in and start to contribute to a community that has already given much to me. You all donít know it, but you have sustained me through many inner-conflicts of indecision, and have reinforced my desire to pursue an uncommon future. Thanks.
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Old 09-25-2012, 04:26 PM   #2
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I would NEVER pay cash for a home - especially when 15 and 30 year mortgage rates are so low (3-4%) and still tax-deductible. Anyone should be able to safely earn more than 3-4% over the next 10-30 years without taking risks. And by keeping your cash invested, you can still write a check to pay it off whenever you want.

Cash is king, at it won't be too long until inflation rears it's head again and CD's are paying 4-6% while you are paying 3-4% tax-deductible mortgage interest. That's arbitrage and it can help your retirement and future become more secure.

If you can write a check from your left pocket to pay off the loan at anytime - keep the cash and earn a net spread with much more liquidity that ever.

I could write paragraphs more about this... but it's time to get back to work... mark
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Old 09-25-2012, 04:38 PM   #3
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Thanks for the insight Mark. We did consider that inflation would inevitably rise in the future, and probably quite severely as a result of the current monetary policy. It was a pursuasive factor in that we could borrow today at low rates and pay off the debt in future inflated dollars.
Regards,
CBG
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Old 09-25-2012, 05:30 PM   #4
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Originally Posted by Stress-Free Retirement View Post
Cash is king, at it won't be too long until inflation rears it's head again and CD's are paying 4-6% while you are paying 3-4% tax-deductible mortgage interest. That's arbitrage and it can help your retirement and future become more secure.
It will at least be after 2015, if not longer. Ben seems to be for QE forever. I think also having a mortgage isn't bad, but you probably want to consider that the interest you pay needs to be above the standard deduction (something like $11,800 for 2012) or you are not really getting any benefit if you don't have enough other stuff to itemize. $11,800 is 3.5% interest on a $337,000 mortgage!

If you don't need the mortgage deduction, 3.5% guaranteed rate of return (by paying cash on the house) is pretty darn good.
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Old 09-26-2012, 10:01 AM   #5
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Mortgage income tax deductions are a good way to rationalize buying more house than you need.

Show me a fool proof way to earn more than 3.5% after taxes for the next 30 years and I will consider taking a mortgage on my paid for home.
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Old 09-26-2012, 10:57 AM   #6
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Originally Posted by Lazarus View Post
Mortgage income tax deductions are a good way to rationalize buying more house than you need.

Show me a fool proof way to earn more than 3.5% after taxes for the next 30 years and I will consider taking a mortgage on my paid for home.
Don't you mean 3.5% pre-tax assuming that mortgage interest is tax deductible?

If I pay 3.5% and my marginal tax rate is 15% then my net cost is ~3.0%. So in order to "break even" I only need to earn ~3.0% after-tax or 3.5% pre-tax.
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Old 09-26-2012, 11:06 AM   #7
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Don't you mean 3.5% pre-tax assuming that mortgage interest is tax deductible?

If I pay 3.5% and my marginal tax rate is 15% then my net cost is ~3.0%. So in order to "break even" I only need to earn ~3.0% after-tax or 3.5% pre-tax.
Right. When talking about mortgage interest or the lack of having to pay it as an investment, it is best to just consider it a wash.

If you pay 3.5% in mortgage interest and itemize, you would have to find an investment that yielded 3.5% before taxes to equal it. This is not easy to find unless you go out 20, 30 years in duration or take on high risk.
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Old 09-26-2012, 11:10 AM   #8
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There are still a lot of us (especially among those of us who have already retired) who choose not to carry a mortgage.

Whether or not to pay off the mortgage is one of our most frequent and most contraversial topics.

Personally, I think that paying off the mortgage was a huge step towards reaching my goals. Many agree with me. Others differ as you have seen here.
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Old 09-26-2012, 11:25 AM   #9
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I meant after taxes. I don't think the mortgage interest on my house would rise to the standard deduction amount. It for sure did not in the latter stages of payoff.
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Old 09-26-2012, 11:31 AM   #10
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The biggest benefit I found from having no mortgage was the peace of mind that owning my own home held. It was and is a great feeling.
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Old 09-26-2012, 11:33 AM   #11
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I meant after taxes. I don't think the mortgage interest on my house would rise to the standard deduction amount. It for sure did not in the latter stages of payoff.
I get it. I agree that it would be 3.5% after-tax if you are assuming that one would not itemize.
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Old 09-26-2012, 11:39 AM   #12
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I'm another who would just rather not carry a mortgage and we paid off our last 30 yr mortgage in just over 15 years. It was a great feeling, and it makes expenses look lower. The mortgage deduction has little appeal now that we're retired, after a lifetime of itemizing, we're finding it hard to beat the standard deduction now that I'm retired. But there's no question the historically low mortage interest rates are more compelling than I've seen in my lifetime. We expect to be buying another home in about 2 years, so we'll have to give it some serious thought when we reach that bridge...
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Old 09-26-2012, 01:59 PM   #13
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I know that the paid for house vs. mortgage issue is well debated within the forums. I respect both points of view.

For me, the issue came down to when I wanted to retire. If I want to pay cash, then I would need to work for several more years to be comfortable that I had enough cash reserves after paying cash for the house.

The COLA'd pension meets my needs and then some. My mortgage payment is manageable, and I could survive for 5 or 6 years with no pension if it came to it -- plenty of time to go back into the workforce if need be. So, I'm willing to give it a go. If it turns out that I'm not comfortable living with a mortgage, then I will go back to work and use that extra income to pay off the mortgage, and stop working again when the mortgage is paid off. I will let you all know how I'm doing with this aspect of my plan come the end of 2013 after I've had a chance to experience it for 6 months.
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Old 09-28-2012, 01:35 AM   #14
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Welcome, ChainsBeGone. Love this screen name !
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Old 09-29-2012, 02:36 PM   #15
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The biggest benefit I found from having no mortgage was the peace of mind that owning my own home held. It was and is a great feeling.
That's why there's different strokes for different folks. My peace of mind comes from knowing that I have a mortgage by choice. Knowing I can pay it off any day is more important than actually paying it off.
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Old 09-29-2012, 03:22 PM   #16
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Best wishes to you. Enjoy.
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Old 11-17-2012, 05:50 AM   #17
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All, thank you for the comments and the welcome. It's been awhile so I thought I would update.

I have my retirement orders in hand (I guess I should have titled this thread "Will FIRE on 1 June 2013.." not "FIRED on 1 June..."). I've been through all the transition assistance programs to include the resume writing classes for Federal and civilian resumes. I sat through the classes but couldn't bring myself to actually develop a real resume. Now, by Federal mandate as of this month, all separating military personnel must have a completed resume before being allowed to separate. So, I guess I will create one afterall even though I have no motivation for it.

I will sign up for the survivor's benefit option which provides my wife 55% w/COLA of my retired pay if she survives me and I've purchased a Level II term 30 year life insurance policy. I know many choose not to take the SBP, but I want to know that the security is there for her. My father had a similar plan for my Mom, and now that he's gone I can see the peace of mind it brings her.

My wife and I have our bucket list and we keep adding to it. Right now, working again is not on the list. However, the first question peers and friends ask is "what are you going to do next?" When I tell them our plan IS retirement they look at me with disbelief or reply "what are you really going to do?" and my wife's friends say "he is going to drive you crazy" with all sincerety.
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Old 11-17-2012, 04:04 PM   #18
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Congratulations !! I would love to be retired and drive my DH crazy all day and. I known he'd love it too!! I wish you and your wife many happy, relaxing, carefree days of being crazy, not with , but *about* each other during this next chapter.
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