Request help with deciding if this is the right time to invest

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Request help with deciding if this is the right time to invest

Post by Faisal » Sun Dec 18, 2016 7:04 pm

Background Information:
1. Married couple with 3 month old
2. Our main objective is to provide for our son and future.

Emergency funds: 6 months available
Debt: 0 Debt. No student, credit card, bank, car loans for both of us.
Tax Filing Status: Married Filing Jointly
Tax Rate: 140k combined income (25% federal and not sure about state right now)
State of Residence: NY
Age: Early-30s

I feel the need to start planning now for the future of my family. Thus the desire to invest. Have my money make some money. At the same time I feel buying a home would provide financial security which would increase in value over the long term without the drama of the investing in stocks and bonds in case things go south.

So the question I have is should I invest in say a ROTH IRA for the future or should we save up and buy a home first and then after we have a home, then start investing via a ROTH IRA or a general investment account?

The ideal situation would be to do both but at this point I don't think I can swing that and maintain 6 months of emergency funds.

EDIT: Insurance Information:
1. We both have health and dental. My organization provides us and our son with the best possible in the US from what I understand (Empire BCBS). And they subsidize our insurance premiums.
2. I have life Insurance from my organization (300,000 in the US - 1 million in the field). My wife has it from a private company (300,000 as well)
3. Total liquid assets roughly 200k US dollars. No other assets.

Pension is with the organization. Its regularly taken from my salary and the organization contributes an equal amount. So its 1 for 1 on a monthly basis.
Last edited by Faisal on Mon Dec 19, 2016 10:00 am, edited 2 times in total.

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Re: Request help with deciding if this is the right time to invest

Post by snowshoes » Sun Dec 18, 2016 8:15 pm

Welcome to! ... ket-timer/ :wink: Consider Bob! Good Luck!

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Re: Request help with deciding if this is the right time to invest

Post by selters » Sun Dec 18, 2016 8:48 pm

I would have mixed feelings about investing a large lump sum right now, but I wouldn't at all about contributing monthly into the stock market.

At today's valuations, expected returns in the stock market are moderate, so one could make that argument that — for now — you should just contribute up to whatever match you have available. Then put the rest towards a down payment and other future expected expenses in a good old savings account. When I say "for now", I'm not saying that you should wait for valuations to be lower and expected returns to be higher. That would be market timing, which Bogleheads discourage. But until you have a down payment for a house, you may want to limit retirement contributions to whatever amount you get a match on.

Having a baby in the house is also an argument in favor of prioritizing a sense of security over higher expected (but not guaranteed) returns in the stock market.

I know very little about ESA or 529 accounts for educational savings purposes, so I'll let someone else comment on that.

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Re: Request help with deciding if this is the right time to invest

Post by retire57 » Sun Dec 18, 2016 9:12 pm

Way to go!!! It's impressive that you are so young, debt-free, and mindful. You are in a great position.

The corollary to your question is that it's never a good time to not invest. See the previous link provided by snowshoes. I know because we are Bob. And came out OK in the end.

If you decide to purchase a home, it's imperative that your income is substantial - you will frequently be parting with disposable income. If you have owned a home previously, you know what I'm talking about. If you haven't, look into the true cost of home-ownership. It's an expensive labor-intensive asset.

Here's a dispassionate take on the cornerstone of the American dream: ... nvestment/

My vote is to fund your Roth(s). Dollar cost averaging over a few months or quarters might make the decision more palatable if you are concerned about valuation.

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Re: Request help with deciding if this is the right time to invest

Post by mortfree » Sun Dec 18, 2016 9:23 pm

Do you have term life insurance?

Eventually cars need replacing.

20% down payment can be a significant hurdle if you are in high cost of living area.

I think you'll be best to spread your money around to various savings initiatives

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Re: Request help with deciding if this is the right time to invest

Post by krow36 » Sun Dec 18, 2016 9:47 pm

First, fund your emergency fund.
If either of you can take advantage of your employer's match, contribute up to the match.
After the above, I think a Roth IRA takes precedence over saving for a home down payment. If you can't afford to contribute to an IRA and for a down payment, maybe you should be a renter?

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Re: Request help with deciding if this is the right time to invest

Post by Faisal » Mon Dec 19, 2016 9:59 am

Thank you all for your response and advice regarding investing.

I have added the information regarding insurance and pension in the original post. I have also added that our total liquid assets are roughly 200k in savings and current account. I consider that my emergency fund as my father has Parkinson's and I will need to pay for his medical bills.

I am looking to buy a home because I have seen that security actually benefit my parents compared to my uncles. My uncles have to pay substantive rents compared to my parents who pay only for up keep, while it is a financial drain, here in NY it can actually be cheaper to own then rent.

We plan on buying in NJ in a good school district (and a district which has seen house prices increase over the past few years) with a 25 to 30% down payment and having money to cover 6 to 8 months of mortgage as well as a small amount as an emergency fund. We have thought about renting in NJ before buying to save up more but I feel its more money going to someone else which I could be putting towards owning a physical asset.

My current rent is a large portion of my salary for a medium size apartment in Manhattan. A home in NJ would be large, cheaper and would allow us to have guests and a back yard for my son. I feel that element for my son would be nice, to see family and see people and the great outdoors.

But then if I invest now and make some money on a taxable investment account or an IRA, that could go towards a better home, a better school district and a better safety net.

I understand and see the benefit of both plans. Invest now, make a bit more money over the long term which can be used to buy a place. While the other is buy a home, have a cheaper rent, have a physical asset which will be a constant drain but will appreciate in value and invest the much smaller portion in a few years.

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