Military Retirement Planning: Cash Management and Investment Strategy

Tom should avoid investing his cash for a home purchase within four years to mitigate market risks.

### Retirement Planning: Navigating Investments and Home Purchases
* 💰 Tom, who is on step seven of the financial order of operations, has **$375,000 in CDs and high-yield savings** and plans to retire from the military in four years, aiming to buy a **$500,000 home with cash**.
* 📈 With a four-year timeline, he needs to **save an additional $125,000**, assuming this amount excludes his emergency fund.
* ⚠ Investing this cash could be risky, as market fluctuations in the months leading up to the home purchase might **jeopardize the availability of funds needed for the house**.
* 🏦 The recommendation is to keep the money in CDs, which currently offer **high rates**, and potentially lock in longer-term CDs to **safeguard against falling rates**.
* 💡 Step seven of the financial order of operations focuses on **hyper-accumulation**, where Tom should evaluate his retirement plans and the pension he will receive to ensure he is **on track**.
* 📊 It's crucial for Tom to assess whether he should **pay cash for the house** or consider a **20% down payment** to allow for **more robust investments**.
* 🔍 Understanding the psychological aspects of paying off a mortgage versus the financial implications is vital to avoid **prematurely tying up funds** that could support his **retirement**.
* 📚 Utilizing tools like "Know Your Number" can help Tom determine if he is **ahead, behind, or on track** with his retirement goals, ensuring he **maximizes his financial strategy**.

[Music] um, we have another cash question, but more towards retirement from s Tom that got submitted. It says, I am on step seven of the Foo. I have 375k in CDs and high-yield savings. I retire from the military in 4 years unless promoted, at which point I plan to pay cash for a 500K home. Should I invest my cash? So, similar but different situation 'cause he has the four-year timeline and some goals. What would you say to estom? Was it was four years, not three years? I want to make sure years until he retires from the military unless promoted. There was that caveat. He said four years still. He retires. I'm assuming that what we are going to operate on here is the idea that when he retires, he's going to buy the house. And he said he's going to buy how much of a house? 500k? $500,000 house. He currently has $375,000, so he's got, you know, four years to close the gap on being able to save an

additional $125,000, assuming that this does not include his emergency fund, assuming that this is outside of what he would have for emergency expenses. Here's my opinion, and I'll be curious if you agree with this. If you know the number that is going to be required for you to buy the house and pay for it in cash, and you know where you are now, even though 4 years seems like a long time, I'm going to argue that's relatively short term, and it's certainly a finite timeline. If you know that's going to happen, what I would hate to see happen is all of a sudden say, You know what? I'm going to invest these dollars. I'm going to get them working for me. And man, right there in the 6, 8, 10, 12, 14, 16 months leading up to you needing the cash to be able to buy the house, all of a sudden, that's when we start to see some market weakness. That's when we start to enter into the next

downturn. That's when we see a 20% pullback, and all of a sudden, that $500,000 that you needed to be able to buy the house is not there, readily available for you, just because of market circumstances. So, my opinion is, I think putting them in CDs is great. CDs are paying relatively high rates right now. You could even potentially, if you're nervous about rates falling, you could lock in longer-term CDs between now and that four-year period. But I do not think that this money should be invested since it is a finite timeline that's not yet fully funded. Agree, disagree, want to fight? Well, I think we need more information, and the fact that, 'cause Tom left this pretty open, I love that he's in step seven of the financial order of operations. And like, you know, I remind you guys, go to money.com/resources, download your free copy, 'cause what step seven is, that hyper-accumulation stage, where instead of you think about steps one through six, you're building your financial foundation, you're also

taking advantage of all the tax benefits that are out there. It's kind of streamlined to maximize all those opportunities. Step seven is that first step where you're thinking about, Yes, now that I'm at this point of saving and investing for the future, how am I actually going to use this money? And that's exactly, you're in the perfect place, Tom, to kind of figure this out. But step seven is, you know, you're trying to figure out because you said something, you said, I'm going to retire from the military. When I hear that, that means that I'm assuming you've hit the 20-year mark at least. So, you need to, you have a little bit of homework to do. You first need to figure out, Okay, with the pension I'll get from the military, where I'm going to live, what does my retirement look like? Am I ahead of the curve, behind the curve, or right where I need to be? Because instead of you paying cash for the house, you might need to only put down 20%, and then

fortify your investments, but you know, so that you actually do reach all those retirement goals that you have. Now, if you do the exercise and you realize, Yeah, I've got this great pension that's going to be coming in. It's going to be more money coming in, plus the job or whatever I'm doing, you know, with my time after I leave the military. I'm going to be fat and happy. I'm post-45, so my Army of dollars are just not exponentially growing because of compounding growth and the opportunity cost of that as much as they would have been then. Yeah, let's pay cash for the house, but don't just assume. I had, you know, I have a client right now that's been struggling through an employment issue, and we have a meeting coming up in the next few days, and I know it's a struggle, but there's this psychological thing where they're like, We just need to pay off our mortgage 'cause my life would be so much better if I had this paid off.

mortgage, but the thing is, I know that that mortgage rate is right at 3%, super low, and um, and I I I know, you know, triage-wise, there's a lot bigger things we need to be working through, but the psychological thing that they're thinking is, is I'll just pay off this mortgage, make sure you're doing the actual two parts of it. Yes, there's a psychological component of the happiness of paying off your house or living in a debt-free house, but make sure the math also supports that, so you don't get yourself in a situation where the bridge that's going to actually fund your future or the things that's going to make your life as stress-free as possible. If you dump that into a paid-for house prematurely, you might be surprised to find out it's not everything you thought it was if you need that money to sustain you, to provide for your retirement, so don't skip that. It sounds like you're going to be in a great place.

because you have this pension coming in, but just make sure you do the work. Um, we, there's, this is exactly the case study of why we came up with the course and the tool of know your number. If you get to learn. Money.com, you can actually figure out and do the exercise to figure out your head, the curve behind the curve, are right where you need to be so you can maximize that step seven of the financial order of operations. That's great.

Should I Buy a $400K House in Cash When I Retire in 4 Years?

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Investing Cash for a Home Purchase: A Four-Year Timeline

The individual has $375,000 in savings and plans to retire from the military in four years, aiming to buy a $500,000 home with cash.

They need to save an additional $125,000 in that time.

Investing the cash may be risky, as market fluctuations could occur just when they need the money for the home purchase.

A 20% market pullback can disrupt the availability of funds for a home purchase.

Putting money in CDs is a good option, especially with their high rates and the possibility of locking in longer terms.

Step seven of the financial order of operations is crucial for hyper-accumulation and planning for the future, including figuring out retirement and housing needs after leaving the military.

Balancing Mortgage Payoff and Future Financial Goals

Paying off a low-rate mortgage may seem appealing, but it's important to consider the bigger financial picture.

Compounding growth and opportunity cost are crucial factors to weigh, especially after leaving the military.

Prioritizing future financial stability and retirement goals is essential, as prematurely paying off a house may hinder long-term financial security.

Having a pension is beneficial, but it's important to actively manage your finances.

The course and tool "Know Your Number" can help you assess your financial situation and plan effectively.

By using these resources, you can maximize your financial growth and stay on track with your goals.