| Max Roth IRA or put away more money for a downpayment? |
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| How much to invest in my Roth? |
| Continue current $300 per month or $1400 short of my max |
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0% |
[ 0 ] |
| Max out Roth |
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100% |
[ 4 ] |
| Stop contributing to Roth and put that money towards a house downpayment |
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0% |
[ 0 ] |
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| Total Votes : 4 |
Crazy_Life
New Poster
Cash: $ 0.45
Posts: 2
Joined: 15 Mar 2011
Location: Portland, OR
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| Max Roth IRA or put away more money for a downpayment? |
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So here is the quick and dirty: I am 27 years old and net about $55,000 per year, my employer automatically gives me 12% in retirement (not a match, I know I am lucky!). That 12% has been going into a 403 b and is invested in a targeted mutual fund. It has come out to about $10,000 per year so far.
Other than that I have been putting away $300 a month into a Roth IRA which is invested in various mutual funds. With my $300 per month investment I come out to $3600 per year going into my Roth or $1400 short of my $5000 max.
So my question is should I continue to contribute to my Roth at my current rate , max it out, or stop contributing. I am currently putting away $900 per month for a down payment on a house. I have about $15,000 saved so far and would like to be close to $50,0000 when it comes time to buy. Which will likely be 3-5 years from now.
With my current level of retirement savings versus more short term goals what is your opinions on what I should do? Thanks in advance!
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Tue Mar 15, 2011 11:52 pm |
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oldguy
Senior Member
Cash: $ 309.30
Posts: 1481
Joined: 21 May 2006
Location: arizona
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I would not pick any of your three. I would save for a DP but then NOT use that money for a DP - borrow the DP instead, and retain your own money in a reserve account (to cover risk). That way you can invest the $900/m (and the $15k) in longterm products (at 10%/yr to 12%/yr) rather than in savings.
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Sun Mar 20, 2011 9:25 pm |
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Crazy_Life
New Poster
Cash: $ 0.45
Posts: 2
Joined: 15 Mar 2011
Location: Portland, OR
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oldguy - Thanks for the advice but I am not a big fan of taking out loans just to invest the money. There would likely be negligible returns (you may get 10-12% but 30% of that profit is taxed away) plus it has the inherent risk of losing money on my principal if I have to pull out at the wrong time.
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Tue Mar 22, 2011 8:18 pm |
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littleroc02us
Moderator
Cash: $ 205.35
Posts: 1015
Joined: 09 Feb 2009
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Don't change a thing, max out those Roth IRA's and continue to save your 50k downpayment. Is that DP more then 20% down?
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Tue Mar 22, 2011 8:58 pm |
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littleroc02us
Moderator
Cash: $ 205.35
Posts: 1015
Joined: 09 Feb 2009
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quote:
Originally posted by Crazy_Life
oldguy - Thanks for the advice but I am not a big fan of taking out loans just to invest the money. There would likely be negligible returns (you may get 10-12% but 30% of that profit is taxed away) plus it has the inherent risk of losing money on my principal if I have to pull out at the wrong time.
Yes risk and taxes are scary aren't they. Since you would be maxing out your Roth's while saving for a downpayment I like your strategy.
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Tue Mar 22, 2011 9:00 pm |
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oldguy
Senior Member
Cash: $ 309.30
Posts: 1481
Joined: 21 May 2006
Location: arizona
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quote:
Thanks for the advice but I am not a big fan of taking out loans just to invest the money. There would likely be negligible returns (you may get 10-12% but 30% of that profit is taxed away) plus it has the inherent risk
Good enough - but run thru the math for yourself, don't make a decision on 'not a fan' or 'negligible returns'. I've used this concept on our rental houses over a 35 yr period - ie, refi them and invest the equity. An example - refi & add $50,000 to a 30 yr house loan, the added payment is $300/m, ie $108,000. Place the borrowed $50k lump sum at 11% for 30 yrs, it grows to $1,140,000. As you say, I have to pay taxes on the $1,090,000 profit, about $150,000. It is a capital gain, not earned income so the rate is lower.
At age 27, you have about 35 yrs evaluate the risk levels that you want to take to build wealth - lots of opportunity. So it would be a good time to understand various concepts that might appeal to you.
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Tue Mar 22, 2011 10:39 pm |
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