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Thread: Advice please home/tsp in retirement

  1. #1

    Default Advice please home/tsp in retirement

    My situation: Forced retirement in 6/2020. I will get a job, but most likely low pay.
    I believe I can live off the pension if I have no house payment.

    Just bought my retirement home. The projected sale of my current home should net
    a little more than what I paid for the retirement home. My current home is paid off, new home has
    a 30 year VA at 3.5%.

    Pondering if I should use the money from the sale of my home to pay for the new one
    completely, partially, or carry a loan.

    My TSP last year pulled in more than 3.5%. It's at 250k now.

    I have a little money in the stock market, and I averaged well over 3.5% last year (before dividends).

    So what would you recommend? I'm considering putting some in the market, but I know that's a crap shoot.
    My 3.5% on the new home is low enough that I think I could probably find something (any ideas?) that would
    get more than that, perhaps an annuity on the TSP?

    Would you pay off the home, or maybe a balloon payment, and invest some of the money while carrying some
    of the loan? Would you pay off the loan?

    If the home loan had a higher interest rate, I would just pay it off, but I'm thinking I should probably be able to come out ahead with investments.

    Thanx for any advice.
    Dave


  2.  
  3. #2

    Join Date
    Oct 2010
    Location
    Aiea, Hawaii
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    1,084

    Default Re: Advice please home/tsp in retirement

    Quote Originally Posted by dave123 View Post
    My situation: Forced retirement in 6/2020. I will get a job, but most likely low pay.
    I believe I can live off the pension if I have no house payment.

    Just bought my retirement home. The projected sale of my current home should net
    a little more than what I paid for the retirement home. My current home is paid off, new home has
    a 30 year VA at 3.5%.

    Pondering if I should use the money from the sale of my home to pay for the new one
    completely, partially, or carry a loan.

    My TSP last year pulled in more than 3.5%. It's at 250k now.

    I have a little money in the stock market, and I averaged well over 3.5% last year (before dividends).

    So what would you recommend? I'm considering putting some in the market, but I know that's a crap shoot.
    My 3.5% on the new home is low enough that I think I could probably find something (any ideas?) that would
    get more than that, perhaps an annuity on the TSP?

    Would you pay off the home, or maybe a balloon payment, and invest some of the money while carrying some
    of the loan? Would you pay off the loan?

    If the home loan had a higher interest rate, I would just pay it off, but I'm thinking I should probably be able to come out ahead with investments.

    Thanx for any advice.
    Dave
    Wow, that’s a tough question!
    Probably should visit a trustworthy financial planner.

    You don’t say how old you are, but should I assume that you are about 40yrs old, and faced with 20 year retirement from military or special federal job? If so, a job in Federal Gov’t would be ideal in retirement.

    In any case, you need to continue putting as much as possible into TSP/IRA. Conventional advice is to get rid of your mortgage, but at 3.5% VA, KEEP IT! You can definitely do better than 3.5% longterm investment-wise.

    I actually did the same when I retired at 65 and 36 yrs service. Got a new 3.4% mortgage as suggested by my financial planner.

    But this decision is very situation based. If not a financial planner, then look through the retirement threads on this board. There is a plethora of info.

    PS: I do NOT recommend annuity (TSP or other). Long Term investment is going to get you better returns. 2019 returns were in the 18-20% (or more) range, and annuities paid what.....6%?
    Last edited by uscfanhawaii; 01-02-2020 at 09:31 PM. Reason: PS
    There are 10 types of people in the world. Those who know binary, and those that don't!!
    Retired on December 31, 2018!!

  4.  
  5. #3

    Join Date
    Oct 2010
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    Default Re: Advice please home/tsp in retirement

    Also, see my many posts on retirement. I did a lot of posting on this subject.
    There are 10 types of people in the world. Those who know binary, and those that don't!!
    Retired on December 31, 2018!!

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  7. #4

    Default Re: Advice please home/tsp in retirement


  8.  
  9. #5

    Default Re: Advice please home/tsp in retirement

    Great question, Dave ! ...and congratulations on being in such a "predicament" ! You're way ahead of an awful lot of people in this world...

    The one BIG question that only you can answer is : How much risk are you comfortable taking ? What keeps you awake at night ?

    There sure is something to be said for paying off your home and owning it free and clear. OTOH, the siren song of returns greater than your loan's 3.5% is strong.

    Also, if there is a spouse or dependents in the picture, be sure to think about all angles before deciding...

    For the record, when I retired in 2012, I chose to keep my 15 year mortgage @ 3.25%, rather than paying it off with my TSP investments.

    Best of luck ! Let us know what you decide to do, and why...others here will benefit from your experience !


    Stoplight...
    "Too old to rock and roll...too young to die"... - I. Anderson

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  11. #6

    Default Re: Advice please home/tsp in retirement

    Thank you for the replies. I'm going to look at the links for sure.

    To answer some of the questions, I'm federal law enforcement, with mandatory retirement at 57, which is this June. This is another reason I'm considering letting the mortgage go the length, I want to enjoy life a bit now when I'm "young" and healthy rather than be "house rich and cash poor." I also need to put about 20k into the new house to get it the way I want; which would exceed my cash savings.

    @stoplight: I absolutely don't want to offend, or start political arguments; but what keeps me up at night concerning the stock market is the fear that the USA is drifting towards a candidate like warren or sanders (socialism) that I personally think will be very bad for investing (I do think Trump will get one more term). Ok, if you disagree, but that's my answer

    So, yeah my TSP and small stock portfolio are doing well, but trusting my nest egg in the market long term (post Trump) scares me. For example, I've managed over 17% on the market the last 12 months, I don't expect that to last.

    Yes, I'm putting the max in TSP now (including catch-up) but that's only going to last another 6 months.

    Opinions on a financial adviser? For example, I spoke to someone from Edelman, and if I recall they get 1% off the top - too much?

    One other thing, If I can put 200k into dividend stocks (companies like MSFT, AT&T), I'm thinking I could get nice dividends even if the share prices are dropping...

  12.  
  13. #7

    Default Re: Advice please home/tsp in retirement

    Quote Originally Posted by dave123 View Post

    ...

    @stoplight: I absolutely don't want to offend, or start political arguments; but what keeps me up at night concerning the stock market is the fear that the USA is drifting towards a candidate like warren or sanders (socialism) that I personally think will be very bad for investing (I do think Trump will get one more term). Ok, if you disagree, but that's my answer

    ...
    No offense taken !!! ...and no political discussion intended !

    My question was merely rhetorical...just saying you might want to ask yourself what worries you ! If the future of the market, or the election, worries you, then perhaps paying off the house makes more sense for you...purely your call !!!

    Take care, Friend !!!


    Stoplight...
    "Too old to rock and roll...too young to die"... - I. Anderson

  14.  
  15. #8

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    Default Re: Advice please home/tsp in retirement

    Quote Originally Posted by exnavyew View Post
    exnavy,

    Thanks for the link.
    May the force be with us.

  16.  
  17. #9

    Default Re: Advice please home/tsp in retirement

    Quote Originally Posted by dave123 View Post

    Just bought my retirement home. The projected sale of my current home should net
    a little more than what I paid for the retirement home. My current home is paid off, new home has
    a 30 year VA at 3.5%.

    Pondering if I should use the money from the sale of my home to pay for the new one
    completely, partially, or carry a loan.

    So what would you recommend? I'm considering putting some in the market, but I know that's a crap shoot.
    My 3.5% on the new home is low enough that I think I could probably find something (any ideas?) that would
    get more than that, perhaps an annuity on the TSP?
    Hello,

    I visit this site often because I enjoy the commentary and have learned a lot from it. I've been a member of this forum for a longtime (2005 I think), but posted only a couple of times before, I couldn't sit this one out.

    Thank you for your federal law enforcement service, first and foremost. So you've paid off a home (I'm assuming with some increasing down payments as you may have moved and built equity from previous home purchases/sales; but if not, maybe a full 30 yr loan on a single home purchase) have you considered how much you have already paid the bank(s) on interest (a review of your amortization scheduled may help)? Even at 3.5%, the interest amount you will end up paying is quite substantial (I suggest looking at the amortization schedule with the mortgage you already have). I think the main reason for paying off a home is to not have to pay the bank any more interest.

    A sound argument against paying off your mortgage is that you can make more money on the market than what you'll pay in interest rate on the money you have on hand over the 30 yrs, but risk tolerance and your timeline will have a lot to do with your decision.

    Is the piece of mind knowing that your house is paid for worth the potential to make more money in the long run? If you make more money in the long run, what are your plans for that money?

    I saw some of the other posts you made on another thread and you've considered your take home pay, what's the impact to your take home if you still have a mortgage? If you do not have a mortgage, is that extra cash on top of what you had calculated? If so, what could you do with that extra cash that you are not using for a mortgage payment (invest, buy toys, save, or whatever).

    Either way, if I was in your shoes, I think I would definitely pay off my new mortgage with the money from my old house. I might consider renting out the old house, if it would more than cover the new mortgage, but rental properties are not fun and can go wrong in many ways (repairs, bad renters, housing market stagnation, etc.).

    Good luck to you in retirement!
    Last edited by knowlittle; 01-06-2020 at 01:29 PM. Reason: duplicate wording


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  19. #10

    Default Re: Advice please home/tsp in retirement

    Thanx for the post knowlitte. I disagree with your name; you seem quite informed Some great thoughts for me to ponder, I'd like to reply off the cuff, curious opinions.

    "I couldn't sit this one out.
    thanx!.
    So you've paid off a home (I'm assuming with some increasing down payments as you may have moved and built equity from previous home purchases/sales; but if not, maybe a full 30 yr loan on a single home purchase)

    I had a 15 year loan, it just happened.

    have you considered how much you have already paid the bank(s) on interest (a review of your amortization scheduled may help)? Even at 3.5%, the interest amount you will end up paying is quite substantial (I suggest looking at the amortization schedule with the mortgage you already have). I think the main reason for paying off a home is to not have to pay the bank any more interest.


    Sound points. I’ve always subscribed to the “pay it off” position, hence the 15 year loan on my current home. The total interest if I take it maturity is 173k!!! So yes, even a 3.5 is quite costly.

    A sound argument against paying off your mortgage is that you can make more money on the market than what you'll pay in interest rate on the money you have on hand over the 30 yrs, but risk tolerance and your timeline will have a lot to do with your decision.



    As I said, I’ve always paid bills early, all cars paid off early, and the home 15yr loan. So now I’m 56 years old. Factoring in the pension (as mentioned from the other thread) and “low” interest on this loan, this is my thinking:



    I’m healthy now, but in 30 years, who knows? As inflation and cost of general living goes up, my home payment will get lower as years go by compared to everything else. I kinda want to enjoy living now, I’ve always been cheap, maybe a little decadence at this point is my thoughts. I would like to put about 20k into the home to get it the way I want. If I spend all my money paying it off, I can’t do this and there will be little cash for things like a new roof down the line.

    Thinking maybe I can enjoy life (responsibly) have cash for stuff like the roof, and hopefully at least match the 3.5 with investments. I’m thinking when I die, who cares if there is a mortgage? The home will always be worth more than I owe, so it won’t hurt my heirs.

    Am I crazy?

    Is the piece of mind knowing that your house is paid for worth the potential to make more money in the long run? If you make more money in the long run, what are your plans for that money?

    I saw some of the other posts you made on another thread and you've considered your take home pay, what's the impact to your take home if you still have a mortgage?


    This is the rub. I will have to slowly take money from investments. Ouch… But… I’m thinking if I pay off the mortgage, there will not be much left over – I will just be living.

    If you do not have a mortgage, is that extra cash on top of what you had calculated? If so, what could you do with that extra cash that you are not using for a mortgage payment (invest, buy toys, save, or whatever).

    If I don’t pay it off, the money (other than the initial 20k or so for stuff) would go into the market, bonds, etc. The guy I spoke to from the Edleman firm seems pretty confident he can exceed the 3.5. But of course, we all know that “Past Performance Is Not Indicative Of Future Results.” Hence my thread here!

    Either way, if I was in your shoes, I think I would definitely pay off my new mortgage with the money from my old house. I might consider renting out the old house, if it would more than cover the new mortgage, but rental properties are not fun and can go wrong in many ways (repairs, bad renters, housing market stagnation, etc.).


    I ruled out renting this one, too many horror stories.


    My mind is NOT made up on this, and you have just made it harder as I was leaning towards not paying the home off. What a quandary I’m in!

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  21. #11

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    Default Re: Advice please home/tsp in retirement

    If the payments on the 15 year mortgage is low enough not to interfere with your retirement plans, personally I wouldn't pay it off. I refinanced just as I retired from a 30 year (20 left on it) to a 15 year 3.29% mortgage and it knocked just over $100 off the monthly payment I was already making on the 30 year.
    Something to think about, if your invested money earns more than 3.5% per year and you can funnel some of that profit out of your account, you can use that to make an additional payment on your mortgage and reduce the timeline and the interest paid. It doesn't have to be every month, but when you feel you can afford to do it.

    Good luck.
    May the force be with us.

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  23. #12

    Default Re: Advice please home/tsp in retirement

    Dave, just wanted to confuse things even more. This actually isn't an either/or choice. You can take part of the money from the paid off house you are selling and pay off part of the mortgage on the new house. Gives you a nest egg and a smaller mortgage payment on the new house. All kinds of options depending on what you want to do in retirement. One other thought, as a young man you really need to consider what you want to do in retirement. I retired at 62 to take care of my mother and mother-in-law but still too young to sit on my hands at the house. Have fun, travel, buy a boat, etc. You earned it!
    Scout

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