Author Topic: We don't plan to buy a house for at least 10 years. How to save for that?  (Read 2711 times)

angelisagemini

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My husband is halfway to retiring from the military. We always figured we would wait until he got out and we could actually settle down before we bought property. We just figured we move too much to make it worth it, plus when my husband deploys my son and I go live at grandma's house rent free. We've seen so many friends working two jobs to cover a mortgage on a house across the country, or stressing about dealing with damage from renters. It's just really put us off the idea.

So anyway, my question is how would you save for a future home purchase that is 10-12 years away? We have about 1500 (1800 by the spring) to do with as we please. We spent the past few years killing our debts and then saving up 6 months of expenses. We have about 10,000 combined in our Roth IRAs so we're basically starting from scratch.

imustachemystash

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If you don't need the money for 10 years or more I think a index funds would be fine.  A lot of us here use Vanguard because they have low fees.  You are smart for holding off on buying a house!

chasesfish

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+1 to the mutual fund.

I'd personally recommend going into the Vanguard Wellington Fund, purchased directly through Vanguard.

angelisagemini

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I'm seriously a beginner to all of this. I always thought that any money you invest is stuck there until you're a certain age and if you take it out early you have to pay a penalty. Clearly I'm missing a pertinent piece of information here.

Kira

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I'm seriously a beginner to all of this. I always thought that any money you invest is stuck there until you're a certain age and if you take it out early you have to pay a penalty. Clearly I'm missing a pertinent piece of information here.

The basics: when you save money in a retirement account, like a Roth IRA, a traditional IRA, or a 401k, there may be penalties for removing the money before you are of retirement age.

What these guys are referring to is investing money directly, not in a retirement account, through a brokerage. You could sign up with Vanguard, ShareBuilder, etc and buy the index funds without having them in a retirement account.

The difference is that you will pay taxes each year on the dividends you earn on that money, and then you will pay taxes on the profit you make when you sell those index funds. But there are no restrictions on when you can sell index funds in a non-retirement account and you don't pay penalties (just regular taxes, if you made any profit.)

MilStachian

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Angelisagemini,
I currently keep my housing fund in a taxable Vanguard account invested in index funds.

When I withdraw the money, I'll have to pay a 15% tax on the capital gains (if my eventual sale price is higher than my purchase price, I'll pay a 15% tax on the difference).  I also have to pay taxes on dividends earned each year.

Your Roth IRAs, Roth 401(k)s, and regular 401(k)s operate differently.  They're pots of money that hold your retirement investments, and if you take money from the pot too early or for an unauthorized expenditure, you are indeed penalized.

AccidentalMiser

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+1 more on the Vangaurd account.

Read up on how it works: (http://www.mrmoneymustache.com/2011/05/18/how-to-make-money-in-the-stock-market/), it's time for you not to be a beginner anymore.

There's a ton of great advice both here and all over the internet, just start reading, talk to your husband, and take control of your money life.

When you say you have 1500 to "do as you please", is that per month?