Military members can sometimes be complacent about their biweekly paychecks. They live, in fact, like many Americans, paycheck to paycheck. You can find yourself in serious trouble, though, if something comes up that is outside your normal expenses. Examples include water heaters, car repairs, unexpected travel, gifts, medical expenses. The list goes on and on.
This is why it is so important to have 3-6 months of military pay set aside. Note what I said, 3-6 months of pay, not expenses. Most financial experts say 3-6 months of expenses, but I am convinced that most military families can relate better to the military pay than to the expenses sum.
How do you do it? I recommend that you start an allotment from your pay for 8% of your income. In one year you'll save 1 month's pay. Be patient, you don't have to get it all put away at once. At the end of a 3-4 year tour, you'll be in the heart of the envelope, and well on your way to having a nice shock absorber to meet any financial challenge.
Wednesday, November 19, 2008
Thursday, November 13, 2008
Top Five Reasons why things are great for Military Families
With so much doom and gloom in the financial area, I thought I’d write about the top five things I see right now that are so positive for military members and retirees right now.
1. Real Estate prices are much more attractive than they were 2-3 years ago. This is great if you are within a year or two of retiring, or are planning on purchasing a potential retirement home in the near future. In my blog on a Simple Plan for military families, I suggested one technique is to purchase a home within your BAH after about your fifth year of service. If you take a 15-year mortgage, when you are retirement eligible, the home will be paid off. With the prices lower, it’s much more likely that you’ll be able to find a home that suits you and is within your price target. The BAH rates haven’t fallen. As a matter of fact, they’ve gone up in some areas!
2. With some indications of inflation, retirement COLA adjustments are up, and active duty members will see a 3.9% pay increase in January. This is a significant increase in pay and benefits for military members. I would argue that this increase will outpace inflation in the short run, so military members, both active and retired, should enjoy a modest improvement in their standard of living.
3. VA Refinance Opportunities. The VA has programs in many areas to allow you to refinance your home to a fixed rate even if you don’t have a lot of equity in your home. In some areas of the country, the amount you can refinance may exceed the $417,000 FHA limitation. This is a great chance to reset your mortgage, get reasonable payments, and lock in at very low interest rates for the life of your loan.
4. Stock prices are low. It’s a great time to continue to add to your long-term investment portfolio. If you’re like me, you add a fixed amount to your portfolio every month. While your fund balances might be down, you’re seeing your shares increase at an accelerated rate. It might take a few years for the bulls to return to Wall Street, but when they do your persistence and courage will be richly rewarded.
5. Everything you need is on sale. Retailers are hurting, bad. If you need a car, now might be the best time in years to get a great deal. The same thing applies to home improvement products, furniture, life insurance, vacations, you name it, it’s on sale. Save a dollar or two, and go out and get what you need, and you’ll still have money left to get what you want. It’s a great buyers market out there. Pay cash and have some fun.
There are some tremendous opportunities out there for military members and retirees who have stable incomes and security. There is money available to purchase real estate, and lenders are ready to make some deals. We might not have another “Perfect Storm” like this in our lifetime. Recognize the opportunity, and don’t waste time wringing your hands.
1. Real Estate prices are much more attractive than they were 2-3 years ago. This is great if you are within a year or two of retiring, or are planning on purchasing a potential retirement home in the near future. In my blog on a Simple Plan for military families, I suggested one technique is to purchase a home within your BAH after about your fifth year of service. If you take a 15-year mortgage, when you are retirement eligible, the home will be paid off. With the prices lower, it’s much more likely that you’ll be able to find a home that suits you and is within your price target. The BAH rates haven’t fallen. As a matter of fact, they’ve gone up in some areas!
2. With some indications of inflation, retirement COLA adjustments are up, and active duty members will see a 3.9% pay increase in January. This is a significant increase in pay and benefits for military members. I would argue that this increase will outpace inflation in the short run, so military members, both active and retired, should enjoy a modest improvement in their standard of living.
3. VA Refinance Opportunities. The VA has programs in many areas to allow you to refinance your home to a fixed rate even if you don’t have a lot of equity in your home. In some areas of the country, the amount you can refinance may exceed the $417,000 FHA limitation. This is a great chance to reset your mortgage, get reasonable payments, and lock in at very low interest rates for the life of your loan.
4. Stock prices are low. It’s a great time to continue to add to your long-term investment portfolio. If you’re like me, you add a fixed amount to your portfolio every month. While your fund balances might be down, you’re seeing your shares increase at an accelerated rate. It might take a few years for the bulls to return to Wall Street, but when they do your persistence and courage will be richly rewarded.
5. Everything you need is on sale. Retailers are hurting, bad. If you need a car, now might be the best time in years to get a great deal. The same thing applies to home improvement products, furniture, life insurance, vacations, you name it, it’s on sale. Save a dollar or two, and go out and get what you need, and you’ll still have money left to get what you want. It’s a great buyers market out there. Pay cash and have some fun.
There are some tremendous opportunities out there for military members and retirees who have stable incomes and security. There is money available to purchase real estate, and lenders are ready to make some deals. We might not have another “Perfect Storm” like this in our lifetime. Recognize the opportunity, and don’t waste time wringing your hands.
Sunday, November 9, 2008
Smart (Military) Retirement Choices
Here is another installment of the series on smart places for military people to consider for their retirement homes. In the first installment I discussed the importance of staying connected to military benefits by choosing a location within a 30 minute drive of a military installation. In this article I will talk about taxes and your military benefits.
As you know, tax policies vary state to state. In some states, for example, there is not state income tax. Funding for schools, roads, police and fire protection, the courts and the prison systems come instead from property and sales taxes. In other states, revenues are raised through a combination of income, property, energy, and sales taxes. The bottom line is that each state must find a way to pay for the services it provides, but some states are just more efficient than others.
According to Retirement Living.com, the states with the highest composite taxes are:
Many Californians, for example, have moved to Nevada both to save money on taxes and to be able to afford larger homes. Florida, over the past 50 years, has become the destination of choice for many retirees from the Northeast who wanted to escape the bitter winters and high taxes.
So, when narrowing down your retirement destinations list, contact the state tax department to make sure you understand how much your military retirement benefits will be taxed.
Many states do not tax military retirement benefits. Some of them are on the "Top 10" most expensive list above. They are Hawaii, New Jersey, and Wisconsin. You may find that after taking income taxes out of their equation that these states actually become more attractive for military retirees. ALOHA!
As you know, tax policies vary state to state. In some states, for example, there is not state income tax. Funding for schools, roads, police and fire protection, the courts and the prison systems come instead from property and sales taxes. In other states, revenues are raised through a combination of income, property, energy, and sales taxes. The bottom line is that each state must find a way to pay for the services it provides, but some states are just more efficient than others.
According to Retirement Living.com, the states with the highest composite taxes are:
- New Jersey
- New York
- Connecticut
- Maryland
- Hawaii
- California
- Ohio
- Vermont
- Wisconsin
- Rhode Island
- Alaska
- Nevada
- Wyoming
- Florida
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Louisiana
- Arizona
Many Californians, for example, have moved to Nevada both to save money on taxes and to be able to afford larger homes. Florida, over the past 50 years, has become the destination of choice for many retirees from the Northeast who wanted to escape the bitter winters and high taxes.
So, when narrowing down your retirement destinations list, contact the state tax department to make sure you understand how much your military retirement benefits will be taxed.
Many states do not tax military retirement benefits. Some of them are on the "Top 10" most expensive list above. They are Hawaii, New Jersey, and Wisconsin. You may find that after taking income taxes out of their equation that these states actually become more attractive for military retirees. ALOHA!
Monday, November 3, 2008
Best Places to Retire for Military Families
Money Magazine has just released their annual list of the Top 100 Places to Live. I'm always attracted to the list because as I get closer to my military retirement I'm often asked where I'll live. For many this question is a foregone conclusion. They'll return to their home of record, closer to family, their follow-on job, or to a home they've purchased years ago.
For others, there is uncertainty. They aren't tied to any particular area and are flexible to choose a home based on their tastes and experiences.
So, what criteria can you use to select the best places to retire?
Let's consider Money Magazine's list. The magazine considers criteria like average income, cost of a family home, weather, access to health care, education, entertainment and recreation.
For military retirees, access to military bases and facilities must be considered. Access to healthcare, commissaries, exchanges, fitness centers, and other benefits unique to military retirees is a huge factor in selecting a home.
Consider Cheyenne Wyoming, for example. While not ranked in the top 100 cities on the Money List, it is easily within driving distance to the number 2 city, Fort Collins Colorado. With F.E. Warren Air Force Base located in the city, a low cost of living, no state income tax, almost no crime, and clean air, Cheyenne offers the military retiree a great place to settle down.
If you prefer a warmer climate, consider Peoria Arizona. Close to Luke Air Force Base and Phoenix, Peoria ranked number 55 on the magazine's annual poll. It was highlighted for it's access to professional sports teams, cultural events, large parks and access to recreation. While exceptionally hot in the summers, you won't see nicer weather than Arizona in the winter.
The Money Magazine list provides military members considering retirement a good resource to explore as they narrow down their choices. It's interesting to note, I think, that the list is different every year. The bottom line is that America is full of great places to live. For military members, the added factor of living in reasonable proximity to major military bases helps narrow down the choices.
I am from Vermont, for example. Vermont doesn't have a military facility, but nearby states like New York and Massachusetts do. By mapping out bases and then determining the distance you'd be willing to travel to get there on a regular basis, you can begin to create short lists of places to investigate.
For me, I am willing to drive 40 minutes to reach a base. While Vermont is out of reach, I could live in New Hampshire near the Portsmouth Naval Yard, and still be close to family while taking advantage of New Hampshire's reasonable taxes.
Everyone has their own criteria, but a military retiree must consider access to services as an important resource. A good reference is About.com's list of U.S. Military Bases and Installations.
For others, there is uncertainty. They aren't tied to any particular area and are flexible to choose a home based on their tastes and experiences.
So, what criteria can you use to select the best places to retire?
Let's consider Money Magazine's list. The magazine considers criteria like average income, cost of a family home, weather, access to health care, education, entertainment and recreation.
For military retirees, access to military bases and facilities must be considered. Access to healthcare, commissaries, exchanges, fitness centers, and other benefits unique to military retirees is a huge factor in selecting a home.
Consider Cheyenne Wyoming, for example. While not ranked in the top 100 cities on the Money List, it is easily within driving distance to the number 2 city, Fort Collins Colorado. With F.E. Warren Air Force Base located in the city, a low cost of living, no state income tax, almost no crime, and clean air, Cheyenne offers the military retiree a great place to settle down.
If you prefer a warmer climate, consider Peoria Arizona. Close to Luke Air Force Base and Phoenix, Peoria ranked number 55 on the magazine's annual poll. It was highlighted for it's access to professional sports teams, cultural events, large parks and access to recreation. While exceptionally hot in the summers, you won't see nicer weather than Arizona in the winter.
The Money Magazine list provides military members considering retirement a good resource to explore as they narrow down their choices. It's interesting to note, I think, that the list is different every year. The bottom line is that America is full of great places to live. For military members, the added factor of living in reasonable proximity to major military bases helps narrow down the choices.
I am from Vermont, for example. Vermont doesn't have a military facility, but nearby states like New York and Massachusetts do. By mapping out bases and then determining the distance you'd be willing to travel to get there on a regular basis, you can begin to create short lists of places to investigate.
For me, I am willing to drive 40 minutes to reach a base. While Vermont is out of reach, I could live in New Hampshire near the Portsmouth Naval Yard, and still be close to family while taking advantage of New Hampshire's reasonable taxes.
Everyone has their own criteria, but a military retiree must consider access to services as an important resource. A good reference is About.com's list of U.S. Military Bases and Installations.
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