$200k, retirement, home purchase - Thoughts?

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Topic Author
Heal22
Posts: 8
Joined: Sun Jun 02, 2024 10:13 pm

$200k, retirement, home purchase - Thoughts?

Post by Heal22 »

Hi everyone,

I'm fairly new to investing and would love some advice on my situation. I've been saving for a house for the past six years, but now I'm reconsidering my plan. I might delay the purchase for another year as I may need to leave my current living situation by next year.

Here's my financial situation:
- Maxed out Roth IRA ($7k this year) with investments in QQQ and IVV (started this year).
- I work for a large US city and I'm currently maxing out my tax-deferred investment account with 8.25% interest, contributing the maximum allowed ($23k per year, just maxed out this year).
- $15k in a standard investment account, all invested in VOO.
- $200k in a high-yield savings account earning 4.25%. This is the money I saved for a house, but if I delay buying for another year, I wonder if I should invest this money in the market. Is a year too short to ride out market fluctuations?

I've considered moving a portion of the $200k to a UFB savings account with 5.25% interest for funds allocated for the property purchase.

Any suggestions for maximizing retirement interest while keeping a portion of my money liquid and accruing interest? I respect and admire everyone's knowledge on this site, so any feedback is greatly appreciated!
Ostentatious
Posts: 339
Joined: Fri Aug 15, 2014 6:34 pm

Re: $200k, retirement, home purchase - Thoughts?

Post by Ostentatious »

It looks likes you answered your own question. 1 year is not long term. In fact it is a very short term with respect to investing. Don't invest any money you're going to need in less than 3 (sometimes 5) years.
Harmanic
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Joined: Mon Apr 04, 2022 10:19 am

Re: $200k, retirement, home purchase - Thoughts?

Post by Harmanic »

I wouldn't buy a house unless you plan to stay at least 10 years, otherwise the transaction and phantom costs will make it really risky. Renting is often cheaper anyway, as long as you keep investing the difference between rental prices and owning. Even if you can pay cash, you should only buy if you plan to stay put for awhile.
The question isn't at what age I want to retire, it's at what income. | - George Foreman
KlangFool
Posts: 32483
Joined: Sat Oct 11, 2008 12:35 pm

Re: $200k, retirement, home purchase - Thoughts?

Post by KlangFool »

OP,

1) What is the price of the house that you are planning to buy?

"I've been saving for a house for the past six years,"
"- Maxed out Roth IRA ($7k this year) with investments in QQQ and IVV (started this year).
- I work for a large US city and I'm currently maxing out my tax-deferred investment account with 8.25% interest, contributing the maximum allowed ($23k per year, just maxed out this year).
- $15k in a standard investment account, all invested in VOO."

2) What is the mortgage payment after you buy the house?

3) Why do you think you have enough annual savings/investment to pay for the increased housing expense?

4) What is your current rent?

5) It looks like you save 45K per year. Is that enough to pay for the increased housing expense?

6) If you cannot afford to buy the house, what is the point of keeping the 200K around for the down payment?

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Topic Author
Heal22
Posts: 8
Joined: Sun Jun 02, 2024 10:13 pm

Re: $200k, retirement, home purchase - Thoughts?

Post by Heal22 »

Thank you for replies and opinions.

The price of the house I would consider would be no more than $320K with a monthly mortgage no higher than $2300 all in with taxes/insurance.

My current rent is $1500. I can stay in this situation for the next year but not sure it can be longer than that.

My salary is $150k.
KlangFool
Posts: 32483
Joined: Sat Oct 11, 2008 12:35 pm

Re: $200k, retirement, home purchase - Thoughts?

Post by KlangFool »

Heal22 wrote: Sun Jun 09, 2024 6:00 pm Thank you for replies and opinions.

The price of the house I would consider would be no more than $320K with a monthly mortgage no higher than $2300 all in with taxes/insurance.


My current rent is $1500. I can stay in this situation for the next year but not sure it can be longer than that.

My salary is $150k.
Heal22,

Is that with 20% (46K) down payment or 200K down payment?

Why do you need more than 46K (20%) for the down payment?

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Topic Author
Heal22
Posts: 8
Joined: Sun Jun 02, 2024 10:13 pm

Re: $200k, retirement, home purchase - Thoughts?

Post by Heal22 »

Yeah, I guess I have not gotten clear on how much I really need to put down. I would put 20 to 30% down to try and make my monthly payment as low as possible (under $2300). To be honest I have been saving diligently with the fear of making a mistake. it feels secure to have a nest egg of $200k but as you are eluding to , I probably do not need a nest egg that large. So I'd really have to figure out how much I am really allocating for a house and keep that liquid in a high yield saving account and invest the rest?
Topic Author
Heal22
Posts: 8
Joined: Sun Jun 02, 2024 10:13 pm

Re: $200k, retirement, home purchase - Thoughts?

Post by Heal22 »

Ostentatious wrote: Sat Jun 08, 2024 8:27 pm It looks likes you answered your own question. 1 year is not long term. In fact it is a very short term with respect to investing. Don't invest any money you're going to need in less than 3 (sometimes 5) years.
got it.. thanks.
Topic Author
Heal22
Posts: 8
Joined: Sun Jun 02, 2024 10:13 pm

Re: $200k, retirement, home purchase - Thoughts?

Post by Heal22 »

Ostentatious wrote: Sat Jun 08, 2024 8:27 pm It looks likes you answered your own question. 1 year is not long term. In fact it is a very short term with respect to investing. Don't invest any money you're going to need in less than 3 (sometimes 5) years.
got it.. thanks.
Topic Author
Heal22
Posts: 8
Joined: Sun Jun 02, 2024 10:13 pm

Re: $200k, retirement, home purchase - Thoughts?

Post by Heal22 »

Harmanic wrote: Sun Jun 09, 2024 8:26 am I wouldn't buy a house unless you plan to stay at least 10 years, otherwise the transaction and phantom costs will make it really risky. Renting is often cheaper anyway, as long as you keep investing the difference between rental prices and owning. Even if you can pay cash, you should only buy if you plan to stay put for awhile.
thanks. So you feel I should rent and invest the money that I saved, correct? If so, do you feel that I should put the rest of my savings all in on VOO ? is that a safe bet with my job retirement account and Roth IRA maxed already? I am 45 years old.
KlangFool
Posts: 32483
Joined: Sat Oct 11, 2008 12:35 pm

Re: $200k, retirement, home purchase - Thoughts?

Post by KlangFool »

Heal22 wrote: Sun Jun 09, 2024 6:16 pm Yeah, I guess I have not gotten clear on how much I really need to put down. I would put 20 to 30% down to try and make my monthly payment as low as possible (under $2300). To be honest I have been saving diligently with the fear of making a mistake. it feels secure to have a nest egg of $200k but as you are eluding to , I probably do not need a nest egg that large. So I'd really have to figure out how much I am really allocating for a house and keep that liquid in a high yield saving account and invest the rest?
Heal22,

A) I disagreed that it is safer to put a large down payment into the house. You should only put 20% down payment.

B) If this is your first house, you will have a fair amount of unaccounted for housing expense that you need to pay for.

C) The answer is do not put more than 20% down payment. If you think that the mortgage payment is too high, buy a cheaper house or do not buy the house.

"I would put 20 to 30% down to try and make my monthly payment as low as possible (under $2300). "

D) That is a bad idea! It does not make the house cheaper. You just tied up more money into the house.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Harmanic
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Joined: Mon Apr 04, 2022 10:19 am

Re: $200k, retirement, home purchase - Thoughts?

Post by Harmanic »

Heal22 wrote: Sun Jun 09, 2024 6:21 pm
Harmanic wrote: Sun Jun 09, 2024 8:26 am I wouldn't buy a house unless you plan to stay at least 10 years, otherwise the transaction and phantom costs will make it really risky. Renting is often cheaper anyway, as long as you keep investing the difference between rental prices and owning. Even if you can pay cash, you should only buy if you plan to stay put for awhile.
thanks. So you feel I should rent and invest the money that I saved, correct? If so, do you feel that I should put the rest of my savings all in on VOO ? is that a safe bet with my job retirement account and Roth IRA maxed already? I am 45 years old.
I can't tell you how to invest your money or if you should buy or rent, only that it is very costly to buy a house if you do not live in it for a long time because of the hidden costs.
The question isn't at what age I want to retire, it's at what income. | - George Foreman
Charon
Posts: 656
Joined: Thu May 03, 2018 12:08 pm

Re: $200k, retirement, home purchase - Thoughts?

Post by Charon »

As is often the case, I think KlangFool has a kernel of a good point, but I mostly disagree with him.

If you don't put the money into the house, what else are you going to do with it? Mortgages are currently 6-7.5%, and there is no safe investment that yields that much. So put as much into the house as you can. With your income and the housing prices you're looking at, you will not be house poor. You're putting a good amount into retirement as well.

However, one thing I do agree with KlangFool on is that you should retain a substantial amount of cash. There are quite a few costs that come with home ownership, and there will be things to fix, things you want to upgrade, and so on. However, your plan to put 20 to 30% down sounds like it would leave you with plenty of cash.

Put your cash into something higher yielding but still very safe. E.g., VMFXX is yielding 5.27% (as does VUSXX - if you have state taxes, you might want the latter). You don't want this money in stocks for a house purchase within a year.
carminered2019
Posts: 1997
Joined: Fri Jun 21, 2019 7:06 pm

Re: $200k, retirement, home purchase - Thoughts?

Post by carminered2019 »

Save some more, pay cash for the house then go 100% stock until age 50.
momopi
Posts: 141
Joined: Wed Dec 12, 2007 4:59 pm

Re: $200k, retirement, home purchase - Thoughts?

Post by momopi »

Heal22 wrote: Sat Jun 08, 2024 3:48 pm Hi everyone,
I'm fairly new to investing and would love some advice on my situation. I've been saving for a house for the past six years, but now I'm reconsidering my plan. I might delay the purchase for another year as I may need to leave my current living situation by next year.
Here's my financial situation:
- Maxed out Roth IRA ($7k this year) with investments in QQQ and IVV (started this year).
- I work for a large US city and I'm currently maxing out my tax-deferred investment account with 8.25% interest, contributing the maximum allowed ($23k per year, just maxed out this year).
- $15k in a standard investment account, all invested in VOO.
- $200k in a high-yield savings account earning 4.25%. This is the money I saved for a house, but if I delay buying for another year, I wonder if I should invest this money in the market. Is a year too short to ride out market fluctuations?
I've considered moving a portion of the $200k to a UFB savings account with 5.25% interest for funds allocated for the property purchase.
Any suggestions for maximizing retirement interest while keeping a portion of my money liquid and accruing interest? I respect and admire everyone's knowledge on this site, so any feedback is greatly appreciated!
A primary residence is not the same as an investment/rental house. If you're going to make a long-term commitment to buying a primary residence, it's not just about making the numbers work, but also how much you like the house, neighborhood, and future prospects like having a family, access to parks/playground for kids, school district ratings, etc.

My first purchase was a new build 1 bedroom condo, it suited my younger single life with plenty of HOA amenities like 4 swimming pools, sauna, BBQ, tennis court, gym, parks, creek side trail, rabbits (!), small family farm nearby where you can buy produce harvested the same day, 2 colleges nearby with plenty of girls, 20 mins to the beach, etc. But totally unsuitable for a family with only 1 bedroom.
hbdad
Posts: 242
Joined: Fri Dec 13, 2019 2:29 pm

Re: $200k, retirement, home purchase - Thoughts?

Post by hbdad »

momopi wrote: Mon Jun 10, 2024 12:03 am
My first purchase was a new build 1 bedroom condo, it suited my younger single life with plenty of HOA amenities like 4 swimming pools, sauna, BBQ, tennis court, gym, parks, creek side trail, rabbits (!), small family farm nearby where you can buy produce harvested the same day, 2 colleges nearby with plenty of girls, 20 mins to the beach, etc. But totally unsuitable for a family with only 1 bedroom.
So you lived in Irvine!
momopi
Posts: 141
Joined: Wed Dec 12, 2007 4:59 pm

Re: $200k, retirement, home purchase - Thoughts?

Post by momopi »

hbdad wrote: Mon Jun 10, 2024 12:10 am
momopi wrote: Mon Jun 10, 2024 12:03 am
My first purchase was a new build 1 bedroom condo, it suited my younger single life with plenty of HOA amenities like 4 swimming pools, sauna, BBQ, tennis court, gym, parks, creek side trail, rabbits (!), small family farm nearby where you can buy produce harvested the same day, 2 colleges nearby with plenty of girls, 20 mins to the beach, etc. But totally unsuitable for a family with only 1 bedroom.
So you lived in Irvine!

Down the street from Tanaka Farms!
Topic Author
Heal22
Posts: 8
Joined: Sun Jun 02, 2024 10:13 pm

Re: $200k, retirement, home purchase - Thoughts?

Post by Heal22 »

Thank you all for the advice and perspective ! This is helpful!
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