Hello, from the southwest

[Regulator]

Hello everyone. I’ve been reading this forum for a couple of weeks and have enjoyed reading the stories. Here is mine.

I’m 36, DW is 40, and we have two young children. I’m in the military and she also works. Our combined income is ~125K per year and our expenses are around ~72k per year. The rest goes to taxes and savings. Here are the numbers:

250k in retirement accounts (Roth IRAs, TSP, 401k, rollover IRA)
17k in 529’s (Also, my Post 9/11 GI Bill will be split between them)
33k emergency fund
82k saved for a house down payment
ZERO debt

We currently add 20k per year to retirement accounts, 4k per year to 529’s, and ~15k per year to our house down payment fund.

We want to purchase a house in a good school district in a couple of years when I retire from the military. A decent home where we want to live is about ~300k. My pension will be ~26k per year after SBP, and we both plan to work after the transition. Our goal is to buy a house on a 15 year, fixed-rate mortgage and the PITI be less than or equal to 25% of our gross income. Between the two of us, we’ll need to earn ~60k in addition to the pension to be within that ratio and still maintain a functional lifestyle. I’m pretty sure we can do this amount as long as one of us has a job at any given time.

Anyway, that’s the closest alligator to the boat. We’ll see what happens. Once we get past the military to civilian transition, then it’s on to planning for an early retirement. After our kids go to college and we have a paid for home, our living expenses will be significantly lower (~50k). I wish everyone the best of luck, and I look forward to reading more in this forum.

[MichaelB]

Welcome to the forum, Regulator.

[panacea]

Welcome, Regulator. One thought... have you considered a 30-year mortgage? I know you'd pay a higher rate but even those rates are really low right now and you can always pay ahead. However, if you ever get in a bind (something you can never predict) your minimum payment would be much lower and your chances of keeping the house are much better. Just a thought from a risk management standpoint. I totally get the motivation for wanting a 15-year mortgage. As I said, just a thought.

[Regulator]

Thanks for the advice, panacea. A 30 year mortgage is definitely an option, but 15 year is the objective. Whatever is best for our kids education, and makes financial sense, will win.

[walkinwood]

Welcome! You've got a great savings habit already. Watch out for lifestyle inflation as your household income increases.

[38Chevy454]

Welcome, you are on the right path. You should be able to get the house you want, your house savings is almost 1/3 of your $300K house price after 1 more year of saving.

Keep up the good work, having a plan is the way to success. Getting your 20 years and military retirement with the health care covered is a good thing. The switch to civilian life will be a change, but also something to look forward to.

[Regulator]

Thanks for the replies and the warm welcome. We'll certainly be on the lookout for lifestyle inflation. Ain't nobody got time for that. Retiring from the military will definitely be a change, but I'm looking forward to it like you mentioned. I'm dreaming of the day that I can hold down a normal schedule (and maybe a couple months of terminal leave to regenerate).

[progmtl]

Welcome, I'm a newbie also!

I second the recommendation to consider a 30 year mortgage. If rates are still crazy low, lock in something low and let the term stretch way out into the future. Then put all (or most) of that extra money you might have used to pay down the mortgage into equities (index funds would be my choice). This approach is not for everyone, but is likely to put you way ahead in the distant future. That mortgage also acts as an inflation hedge, as the payment and interest rate would never increase while inflation could run rampant.

This is all assuming that you expect to stay "forever", or at least for a long time, in the house you buy. My own mortgage approach is a little different from the above, largely because I am pretty sure we will not be in this house forever.

Good luck!

[ggbutcher]

Welcome to the party. I'm a military retiree, 20 years and a couple of hours, in 1997. Seemed like a really weird word to be batting around at age 39, 'retirement'. But it has been a real blessing, a COLA'ed stipend that meets our expenses and health care for ~$500/yr. One mistake on our part - we took the reduced SBP, for reasons that now escape me. Just do the 55%, if the program is still structured that way.

At your stage, you're probably thinking about the 'retirement assignment' - that'd be a good thing. We've found being within easy driving of a military facility with a hospital to be a godsend; we kept Tricare Prime and our place at the MTF where I was attached at retirement. Don't use the commissary at all any more, but I do check the BX for comparative pricing occasionally. The auto and wood hobby shops have also proved very useful.

Your thinking the right way early on, and this forum is a good place to learn and discuss.

[EastWest Gal]

A 30 year mortgage is a better idea to start out. You then have flexibility. You can either plow more into the investments or pay additional principal each month, or both. We always paid extra principal except for a few lean years. We bought our current house in 1998. Refinanced in 2003 to a 15 yr to get some cash to finish the basement and put in a pool. Interest rates were low (still are). Paid the house off in 11 years by making extra payments of 200-500/mo, and a lump sum this year to cut it shorter by one year.

[Dash man]

Hi Regulator and thank you for your service! I also agree with the idea of a 30 year mortgage as long as there is no prepayment penalty (which is rare these days). You can pay ahead at a 15 year rate or faster if you choose, but have the flexibility to pay the lower 30 rate if things get tough. We had a 30 year mortgage and paid it off in 9 years with bonus money. You're off to a great start