we thought we were ready for a house this year but we hated the house hunting process. everyone was out for our money and every house we saw felt like a money pit. we're okay renting for a few more years.
problem is we have a significant chunk of money split between us: 210k
if we are going to rent, what is the best way to invest what we have to get the best outcome?
immediately we are going to max out our 401ks – wife is only putting 5% again to have extra savings for a house.
we are then going to open a roth ira each and put the max we could for the year and continue putting money in each year.
we are going to keep 6 months of emergency each but where should we look to invest the rest?
we make 225k a year and currently save on average 5k a month after all bills, taxes, utilities and rent.
owning a house may be something to review again next year or in a few years…or we may just be renting moving forward for our peace of mind and freedom for now.
but let's say things change, we would want to pull money from wherever we invest to put down for a house payment without having to repay – such as a 401k.
should we look at CDs, treasury bills, money market funds, all of these? we are good at saving but dont know anything about investing
We saved for a house, but now we kind of don't want one and want to invest – where to start?
byu/Autobot69 inpersonalfinance
Posted by Autobot69
3 Comments
Since you said that you may change your mind and end up moving forward with purchasing a home, it is probably best to keep doing what you have been doing, save up as much as you can and keep it accessible, put it in a high yield savings account rather than putting extra in retirement accounts or investing in stocks. Investing in CDs will lock up your money and the stock market or retirement accounts are not ideal because you said you may need the money soon. If you decide not to buy a home in the near future, then doing what you suggested is reasonable, max out retirement contributions and Roth IRA if you are sure you will not need the money until retirement, CDs if you are confident you will not need the money until maturity, taxable brokerage if you are confident you will not need the money for 10+ years and can tolerate the possibility of loss, etc.
1. Check into Roth IRA contribution limits for your HH income. If too high, consider backdoor Roth IRA. IMPORTANT: if you have any Rollover or Pretax IRA’s, consider rolling into 401(k) before executing backdoor strategy.
2. RUN to open IRA(s) if not already open. See if you can do a prior year contribution before the tax deadline.
3. Retirement Assets – total return strategy. Meaning, capital appreciation + interest + dividends. Reason? No interim taxes from investments providing current gains.
4. When evaluating safe harbor investments, look into your federal/state income tax burden on interest and compare TAX EQUIVALENT YIELD. Hold these until maturity and ignore values that may fluctuate before they come due. This only impacts your chosen investment if you sell early.
Consider the risk of your money losing value and being worth less if you need it to buy a home in the future. You can put money into low, medium, or high risk products. If you invest it in the stock market, that is a higher historic return but higher risk when there is a downturn. If you put your money in a HYSA that is low risk but low return, low interest rate.
If you need that money in the next 6 to 12 months, then keep it in a HYSA where it will earn something. If you don’t need it for 5 or 10 years then put it in stock market. You can also do both by putting the money into different products. There are surely other products in the middle and those could have a place here too.
But you need to understand your longer timeline.