Author Topic: Roth now or continue saving for a house  (Read 526 times)

bostonengineer

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Roth now or continue saving for a house
« on: December 29, 2018, 04:11:03 PM »
I'd appreciate some input. I've started prioritizing saving money for a downpayment on a home. At this time, I don't have a house in mind or a specific date I'd like to purchase. I'd like to put down 20%, but 10% (~$40k) is more realistic for a first time home buyer, as well as the opportunity cost of investing, as opposed to saving that cash out of the market to accumulate that extra 10%.

For the past 5 years, I've maxed 401k, rothIRA, and VTSMAX. As of 2 months ago, I cut my 401k contributions back to meet the match of my employer, and have been putting the rest into a 2% savings acct. I'm now contemplating whether or not I should contribute to my roth Jan 1, especially with the down market. I currently have saved $10k cash, so I have the funds, but would set me back a bit if a great home appeared.

Thanks

Rob_bob

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Re: Roth now or continue saving for a house
« Reply #1 on: December 29, 2018, 05:24:12 PM »
I guess it really depends on just how important a house is to you and how soon you want it.

The more $$ you put into a tax deferred account and the sooner you do it the more compounding will work for you.  Time is the one thing you can never get back.  Plus since IRA contribution limits are much lower than 401k contributions if you really want a Roth to be worth something years down the road you need to start as early as possible.

Just my $0.02 and worth every penny  :)

MTBmustachian

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Re: Roth now or continue saving for a house
« Reply #2 on: December 30, 2018, 07:36:04 AM »
One interesting aspect of a ROTH IRA is that you can always withdraw your contributions to the account penalty-free. So in theory, if you invest $10k right now in 2 ROTH IRAs (I assume you're talking about you and a significant other... max annual contribution to a ROTH is $5,500) and then decide at the end of the year you want that $10k back, you could sell your investments and withdraw that amount.

This, of course, assumes that your investments increase in value or stay at an equal level, and don't absolutely tank--you could still lose your pants in the short term, even though it all goes up and to the right in the long haul.

chasesfish

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Re: Roth now or continue saving for a house
« Reply #3 on: December 30, 2018, 07:46:06 AM »
How much do you have saved/invested in non-tax deferred accounts.

I like getting to $100,000 here as a financial goal, it gives you so much flexibility even if its means not maxing out every tax deferred vehicle

bostonengineer

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Re: Roth now or continue saving for a house
« Reply #4 on: December 30, 2018, 02:27:23 PM »
How much do you have saved/invested in non-tax deferred accounts.

I like getting to $100,000 here as a financial goal, it gives you so much flexibility even if its means not maxing out every tax deferred vehicle

I have ~$200k in investment accounts, excluding my savings.


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Roketrider

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Re: Roth now or continue saving for a house
« Reply #5 on: February 08, 2019, 02:45:23 AM »
Max the Roth.   Wait, wait,... MAX THE ROTH! !!.

I would have so much more in my Roth but I kinda came from an unstable childhood where the whole "house" issue was complicated. I was determine to have plenty saved for a house so that once I found a wife I would guarantee myself a more stable lifestyle. Well, there's turned out to be a lot more needed for stability than just a paid for house, but I spent those years saving without knowledge you can take all of your money back out without the penalty. All I ever heard was Clark Howard saying if you take it out before 65 you have to pay 20%, and I interpreted that as the full amount. Big mistake, but it was years and years before I finally found out this wasn't accurate. Had I known I'd went all in, because you can always invest in something safer if your worried and switch to more risk after I was married and settled (I didn't know how much I would need or who I would marry, so I felt like I couldn't stop saving)