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...I just read in another thread that you are contributing 25% to your retirement but only have a 4% match. There is absolutely no reason to be putting 25% in at age 34 when you are only getting
a match at 4%. I assume that is probably the maximum contribution allowance...
The whole 25% isn't with the Company 401K... is it? THAT would be a problem.
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If you really want to buy a home, you should consider decreasing your retirement contribution.
To what? Not less than 10%... right?
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...and put more in savings so you can expand your down payment.
Max out the pretax options available for the 10-15% 401K up to 4%, then the IRA.
Deposit any 'extra' of that 15% into after tax accounts.
But he's still left with an income shortfall: Gross -15% -Tax/FICA ÷52 = weekly net (aka housing budget).
After the new job changes AND with a housemate though... he might be able to do a lot more.
The reason I'm contributing 25% + 4% match is because I'm making up for a 7-month period of unemployment last year, in which I wasn't able to save anything for retirement. In 2019 I will likely reduce it down to probably around 20% + 4% match.
The whole 25% isn't with the Company 401K... is it? THAT would be a problem.
To what? Not less than 10%... right?
Max out the pretax options available for the 10-15% 401K up to 4%, then the IRA.
Deposit any 'extra' of that 15% into after tax accounts.
But he's still left with an income shortfall: Gross -15% -Tax/FICA ÷52 = weekly net (aka housing budget).
After the new job changes AND with a housemate though... he might be able to do a lot more.
Why on earth would anyone be advised to max out pretax options... NOW? When taxes are probably lower than they ever will be? He should put what he needs to put in to get a match and then do a Roth to take advantage of historically low tax rates that we have now. There is absolutely no reason not to be doing a Roth at this point.
Why on earth would anyone be advised to max out pretax options... NOW? When taxes are probably lower than they ever will be? He should put what he needs to put in to get a match and then do a Roth to take advantage of historically low tax rates that we have now. There is absolutely no reason not to be doing a Roth at this point.
Roths are a horrible idea. I used to have one, but liquidated it. It made zero sense to contribute after tax money. Not only does it decrease my disposable income now, but it also reduces the cost basis for growth potential big time. By contributing pre-tax, I am able to build a bigger foundation/basis for growth. Also, in retirement, I expect to live on less income than I do throughout my working life, and therefore, probably be in a lower tax bracket. No one has a crystal ball to know whether and when taxes will go up or down in the future. And if they do go up, I don't mind at all, since I believe in paying hefty taxes.
Why would you spend 5, or 6, or 7 figures to buy something "undesirable"? There's no timetable, no age deadline. You buy when you can afford it, or when you settle down, or when you feel like shouldering the responsibility. What difference does it make if you do it at 34 or 35 or 36?
Why on earth would anyone be advised to max out pretax options (up to X%)... NOW?
Time.
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He should put what he needs to put in to get a match and then do a Roth...
...and also do a Roth with the balance (up to the total of X%).
And if the conflict the OP is having ever comes down to this distinction alone...
well, until then lets not distract him with lesser aspects of the overall picture.
I would either stay in the apt or try to find an affordable condo. Fixer homes suck all your time and money unless you can afford to pay professionals to do the work. I definitely would not move into an area which was not appealing and where all the homes needed a lot of work. Those areas often end up with a lot of rentals that are not kept up well by the owners. Don't be fooled into thinking that home ownership is a better deal financially, especially for a single person.
I don't understand why people say that renting is better than buying because if you own a home and want to relocate, you're stuck. I mean, you can just sell the house! And yes, the selling commission and fees are a lot, but that money would have been spent on rent anyway, since these fees are paid out of equity. No one is stopping a homeowner from picking up and relocating somewhere else. I see people do it all the time. My brother did it a few months ago. He was living in a small village in Wisconsin and got a job offer in Boston, so he put his house on the market and it sold within 2 weeks and he moved to Mass. Also, this guy in my office wanted to relocate to another country with his wife, so they simply rented out their house here in Florida. There are workarounds to this situation. Not to mention, when you break a lease, you would have to pay a hefty fee to do so. It's not as easy as people say.
I don't understand why people say that renting (can be) better than buying ...
Because if done right it really can be the better choice.
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There are workarounds to this situation.
There are workarounds to every situation.
Don't live life anticipating a need for workarounds.
Affordability and budget issues aside... there is a lot to be said for not having the responsibility
if there aren't other considerations in our lives to justify making the purchase.
(common considerations: kids, schools, pets, hobby space)
I don't understand why people say that renting is better than buying because if you own a home and want to relocate, you're stuck. I mean, you can just sell the house! And yes, the selling commission and fees are a lot, but that money would have been spent on rent anyway, since these fees are paid out of equity. No one is stopping a homeowner from picking up and relocating somewhere else. I see people do it all the time. My brother did it a few months ago. He was living in a small village in Wisconsin and got a job offer in Boston, so he put his house on the market and it sold within 2 weeks and he moved to Mass. Also, this guy in my office wanted to relocate to another country with his wife, so they simply rented out their house here in Florida. There are workarounds to this situation. Not to mention, when you break a lease, you would have to pay a hefty fee to do so. It's not as easy as people say.
I had to pay for two places for five months after I left Jax. Most places I rented from in FL only had a 2 months liquidated damages provision, so it would have been a lot less. Yes, I made it back in the long run, but you never know what will happen when you sell a house. Unfortunately I had two sales fall through- one right at the end of the closing period due to the couple having an issue with not being able to secure the loan, and the second also at the end because there was an issue with the HOA agreeing to make a repair and then reneging. If the market drops, then it is another issue entirely. I had friends who weren’t able to sell at all because they had underwater mortgages.
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