Starting over: Roth 1st, or home purchase?

[Hot dog]

The fifteen year mortgage sounds like a great idea see how that will affect your numbers. If it is too much make sure you do make extra payments on your mortgage you could be 65 and done with mortgages and ready for retirement. That seems more reasonable. However having lower monthly payments does give one peace of mind. Someone else may be more help because I am also learning but with the target retirement funds you can purchase any year you want but the earlier the target date the more conservative the investments will be they will invest a larger percentage in bonds and less in stocks that may have a greater return. The less amount of time you have until retirement the safer they try to keep your funds.

[seanof30306]

Originally Posted by Tree0164

At 50 years old, I am little hestiate at advising anyone going into a 30 year mortgage especially when you haven't saved much for retirment. If you could swing a 15 year mortgage, you may want to do it. Make sure the rate is fixed.

I'd never go with anything but a fixed-rate mortage. The plan is to do a 30-year fixed, and make at least one principle reduction payment every year, so as to have the mortage paid off by the time I retire.

Originally Posted by Tree0164

Could you get a roommate to help with the mortgage?

I'm buying a very small, very inexpensive space so I don't have to do that. I'll be saving 200 per month over what I am currently spending on rent.

Originally Posted by Tree0164

I would continue maximizing your retirement funding. At what age do you plan on retiring?

While I'd love to be able to retire early, that's clearly not in the cards. Barring some serious financial windfall, it'll be 70. I'm already maxing the Roth, and am putting 11% in my 401K.

[seanof30306]

Originally Posted by Hot dog

Someone else may be more help because I am also learning but with the target retirement funds you can purchase any year you want but the earlier the target date the more conservative the investments will be they will invest a larger percentage in bonds and less in stocks that may have a greater return. The less amount of time you have until retirement the safer they try to keep your funds.

I have my 401K in the Fidelity 2025 fund, and my Roth in the Columbia Management 2025 fund. Since Columbia Management is a wholly-owned subsidiary of BOA (my bank), I get it with zero fees.

I think people get hung up on the name "lifecycle fund" or "target retirement fund". Honestly I doubt many people will buy one of these funds and stay in it for 20, 30 or 40 years as the allocation adjusts. However these happen to be great low-cost core funds that are close to perfect diversification.

There's no rule that says it has to be the only fund you ever buy, or that it must be held for 30 years, or that it even needs to be for retirement. It just makes for a nice core fund, especially for those who have a relatively low portfolio balance (say, less than $50,000).

[Fern]

In some ways, it's fun. When you make way more money than you need, that money, and the things you aquire with it, doesn't mean much to you. When you squeeze every dime, though, you get a real sense of accomplishment from things which to some, may seem a bit silly.

This i find is very true.

[terri77]

I personally don't see the problem with going with a 30 year mortgage, 15 year would be better, but if you don't buy you're going to have that housing cost with renting as well.

I bought a 3/2 townhome last year and maintenance doesn't nearly run me $100 a month. Most big problems are covered by the association dues. Things on the inside are my responsibility, but I had a home warranty requirement as part of my offer.

[Tree0164]

Originally Posted by terri77

I personally don't see the problem with going with a 30 year mortgage, 15 year would be better, but if you don't buy you're going to have that housing cost with renting as well.

One part of good retirement planning is being out of a mortgage by the time that you retire.


Getting a mortgage at age 50 for 30 years isn't the smartest strategy unless you know that can aggressive paying it.

With no retirement assets at age 50, the OP needs to be contributing the max to a Roth.

It might be smarter to rent at this point in his life.

[seanof30306]

Originally Posted by Tree0164

One part of good retirement planning is being out of a mortgage by the time that you retire.


Getting a mortgage at age 50 for 30 years isn't the smartest strategy unless you know that can aggressive paying it.

With no retirement assets at age 50, the OP needs to be contributing the max to a Roth.

It might be smarter to rent at this point in his life.

It's not an either/or proposition, though.

The max contribution to the Roth is a given. It's my first financial priority. No matter what else I do or don't do, the Roth gets maxed every year.

The only question was whether a 7,000.00 windfall is better applied towards getting ahead on the Roth contribution, allowing me to make the full yearly contribution earlier in the year, and therefore reaping the earnings benefits associated with that, or to accelerate my second financial priority, getting back into home ownership ssoner.

Again, either way, the maximum Roth contribution will be made each year.

As far as the 15 year vs 30 year loan; the 30 year loan allows me to take the money I'm currently allocating to rent, make the house payment, pay insurance, taxes, and homeowner's association fees, save 100 a month in a maintenence and repair budget line, and make a 1,000.00 yearly principal reduction payment. That principal reduction pays the loan off in under 15 years.

I believe you strive for the best, but plan for the worst. That's why I prefer the 30 year loan to the 15 year loan. It leaves me with options; some "wiggle room" in case of short-term financial reversals in the future.
Worst case scenario, I know I can always scratch up the payment on the 30 year loan, and should have no problem doing principal reductions, as well. If there are problems, though, I can always put those principal reductions off; especially if I'm aggressive with them when times are good.

[terri77]

Originally Posted by Tree0164

One part of good retirement planning is being out of a mortgage by the time that you retire.


Getting a mortgage at age 50 for 30 years isn't the smartest strategy unless you know that can aggressive paying it.

With no retirement assets at age 50, the OP needs to be contributing the max to a Roth.

It might be smarter to rent at this point in his life.

Well yes, of course, having a paid off house is better than not having a paid off house, but at this late in the game it's could have, should have, what if.

The poster has to decide if it's better to rent than buy for his or her particular situation. If it's the renting that is costing him a significant amount of money that could be going to retirment, then it's renting that isn't the smartest strategy.

I would look more at what renting and buying options you have. Maybe you could find a less expensive place to rent.