Save for house vs. invest

[Beckyemerson]

Hi. We live in a rental house since we move every couple of years. For the next couple years should we invest our monthly savings or save to buy a house.

[Cooperd0g]

I am in the military and tend to move every few years as well. I have concluded, at least for us, that renting is easier than buying and I just won't buy until I'm retired from the military. I will just invest and a couple of years away from retirement I will start moving invested money out of stocks to a house fund.

[Beckyemerson]

Do you invest in your tsp?

[gimp]

Invest in what?

Do you have a 401K? Employer match? IRA? And so on.

[Beckyemerson]

I have no idea what to invest in. My husband is in the military hoping to get a pension. So no 401k, no employee match. We recently got out of debt and now we are looking around saying what now?

[Cooperd0g]

Do you invest in your tsp?

Yes, I max out the TSP. I prefer the Lifecycle funds; they are similar to Vanguard Target Retirement funds where they do automatic rebalancing and also update the stock/bond mix as you get close to the retirement date. The military does not match your TSP contribution because you have the retirement option as well. Most people who retire from the military can live just fine on a military retirement, especially if you have your house paid off. Because we move a lot I want to be able to save cash for buying my house.

The problem is that the TSP is pretty much identical to a 401(k) so you are limited in your ability to pull that money out before 59.5 years old. So while I save in my TSP and my IRA I also put other money aside to be my dedicated "house" money for when I retire from the military. I am currently putting that money in two Vanguard mutual funds - Total Stock Market Index fund (VTSAX) and Total International Stock Index fund (VTIAX) in a 70/30 ratio. I am aggressive so I am 100% stocks and am 14 years away from retirement so I have some time.

I recommend you open an account with Vanguard. Your mix of stock/bonds will be based on your timeline. Essentially if you want to have that money in the next five years then you really shouldn't put it in the stock market - just put it in a municipal bond fund, CDs, or money market account.

Let me know if you have any more questions.

[Nords]

I have no idea what to invest in. My husband is in the military hoping to get a pension. So no 401k, no employee match. We recently got out of debt and now we are looking around saying what now?

Becky, I e-mailed a response to your questions back in July.  Let me know if it fell into a spam bucket and I can resend it or post it here...

[Beckyemerson]

Hi Nords,

Yes I got your email. When I initially got it I sent it to my husband and we discussed it. I implemented and studied some of your recommendations and then got side tracked. I just went back and reread the email and it helped immensely. I will send you an email with further detail.

[Nords]

I just went back and reread the email and it helped immensely. I will send you an email with further detail.

Cool.  Glad it's helping.

[Jamesqf]

For the next couple years should we invest our monthly savings or save to buy a house.

It's not really a case of 'or'.  Yes, you should invest what you save (above your emergency fund), rather than keeping it under the mattress, or in a savings account at near-zero interest. 

What to invest in is a broad question, depending on your prsonal circumstances.  Then some day you may want to use a portion of the investments for a house...