[JayCT]

Originally Posted by Konig1985

I can never imagine buying a house without 40% down but that is just me.

Oh come on now. The average person starting out does not have 40% to put down. Not unless they have a deep pocketed parent or are wealthy to begin with.

On a $300,000 home that would be $120,000. Assuming a couple can save $10,000 per year (and that is a lot) it would take them 10 years to save that much. 20% down has historically been the recommended amount so basically they could save that amount in half the time. That is a much more reasonable expectation. Jay

[Philbert]

Originally Posted by Cambium

Thats smart, if it can be done. And People forget that a $400,000 house = paying $775,000 worth of mortgage payments. .

Yes folks, that means in 30 years you will have paid $775,000 on a 5% $400,000 mortgage.

I love the reaction people have to that when their attorney shows them the breakdown at closing.

of course, time isn't free... and as the time value of money grows exponentially, the longer the time period, the more eye-popping the numbers get.

if you start with $400,000 and opted to invest it in the market instead, at a conservative 8% annual return, you'd have over $4,000,000 in 30-years.

[Philbert]

Originally Posted by Konig1985

I can never imagine buying a house without 40% down but that is just me.

if the alternative to putting that cash down on a home is putting it in a savings or money market account, then it's a good investment. but if the alternative is an investment that exceeds the net cost of the mortgage (at current rates, 3-4%), you're missing out on excess returns by putting that much down.

[JayCT]

Originally Posted by Philbert

of course, time isn't free... and as the time value of money grows exponentially, the longer the time period, the more eye-popping the numbers get.

if you start with $400,000 and opted to invest it in the market instead, at a conservative 8% annual return, you'd have over $4,000,000 in 30-years.

Where is there an investment that is paying 8% annually without a significant risk??? None that I know of these days. And there are certainly none that pay that much consistantly over the last 30 years. Jay

[Cambium]

Originally Posted by Philbert

if you start with $400,000 and opted to invest it in the market instead, at a conservative 8% annual return, you'd have over $4,000,000 in 30-years.

Love the thinking there. :-) Most dont think like that or bother to look into or risk.

Originally Posted by JayCT

Where is there an investment that is paying 8% annually without a significant risk??? None that I know of these days. And there are certainly none that pay that much consistantly over the last 30 years. Jay

Not sure about 8% but... Government I-Bonds for one. They dont base the value on companies or government loans. They base it on inflation. And the US Treasury set a floor rate of 0% so even during a recession, you dont lose!

IRAs (NOT 401k) have been proven to return a large sum of money with just investing $200 a month.

[Philbert]

Originally Posted by Cambium

IRAs (NOT 401k) have been proven to return a large sum of money with just investing $200 a month.

IRAs and 401(k)s are just tax deferred vehicles for investing... the same underlying investment in either would have the same return.

Perhaps what you're getting at is that by establishing your own IRA, you have a nearly unlimited selection of investment options, whereas in a 401(k), you are limited by what your company's provider has made available?

The other lesson learned over the past 10-years is that it's dangerous to hold a significant amount of your own company's stock in your 401(k). Holding too large a concentration in any single stock isn't a great idea to start, but it's compounded when your retirement funds and job are both linked to the performance of the same entity.

[Philbert]

Originally Posted by JayCT

Where is there an investment that is paying 8% annually without a significant risk??? None that I know of these days. And there are certainly none that pay that much consistantly over the last 30 years. Jay

If you have a 30-year investment horizon, then a "Total Market" stock index fund (or the traditional standard for approximating the total return of the stock market, an S&P 500 index fund).

Of course, this won't deliver a clean 8% every year. Not everyone can stomach the daily, monthly, even multi-year swings of the stock market. But over long time horizons, the returns become fairly uniform, and the patient investor who just "lets the money sit" will be rewarded.

Try this cumulative average return calculator based on historical data. The most recent end date it will allow is Dec 2011, so starting with Jan 1982 gives you the most recent 30-year period. This returned an annualized 11.03%:

CAGR of the Stock Market: Annualized Returns of the S&P 500

This figure is not adjusted for inflation (though there is an option to do so) since we're comparing to nominal values and returns from the housing market.

[Cambium]

Originally Posted by Philbert

IRAs and 401(k)s are just tax deferred vehicles for investing... the same underlying investment in either would have the same return.

Perhaps what you're getting at is that by establishing your own IRA, you have a nearly unlimited selection of investment options, whereas in a 401(k), you are limited by what your company's provider has made available?

The other lesson learned over the past 10-years is that it's dangerous to hold a significant amount of your own company's stock in your 401(k). .

Bingo. But it doesnt mean people need to monitor it themselves. While each have their Pros and Cons a younger couple will find a Roth IRA is better. The only reason to do a 401k is IF your company matches your contributions. If not, forget them and go for the IRA.

if your adjusted gross income is less than $110,000 (as a single filer), you can contribute up to $5,000/yr to a Roth.

There's plenty of info out there on it but Someone in their 20s putting just $200 a month into an IRA will be very, very....very happy in the future.

Here's a calculator for it. Roth IRA Calculator

[kidyankee764]

Originally Posted by Konig1985

I can never imagine buying a house without 40% down but that is just me.

Don't be ridiculous.

[JayCT]

Originally Posted by Cambium

Love the thinking there. :-) Most dont think like that or bother to look into or risk.



Not sure about 8% but... Government I-Bonds for one. They dont base the value on companies or government loans. They base it on inflation. And the US Treasury set a floor rate of 0% so even during a recession, you dont lose!

IRAs (NOT 401k) have been proven to return a large sum of money with just investing $200 a month.

I-bonds do not pay anywhere near 8% annually. The rate is either a fixed rate or based on inflation. And I should note that only SOME IRAs offer returns at 8% annually. Most do not and it hard to know which do and which do not. Plus there is little security in higher interest investments. Jay