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  • help buying a new house

    hi everyone. thanks in advanced - need some advice. ill make it short.

    im 50yo. practicing 15yrs. max 401k every year. current home likely around 1mill - no mortage. salary 450k. about 700k in savings. i have no debt. 1 kid going to university soon. 3 others much younger but would like to possibly send to private school in the future. we would like to move - how much can i afford? thanks all.

    oh property taxes are crazy here - 1mill home is 20k a yr.

  • #2
    Welcome! Are you saying that your NW is $1.7M? What are the property values in the area you are looking to move to?

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    • #3
      Originally posted by krokill View Post
      hi everyone. thanks in advanced - need some advice. ill make it short.

      im 50yo. practicing 15yrs. max 401k every year. current home likely around 1mill - no mortage. salary 450k. about 700k in savings. i have no debt. 1 kid going to university soon. 3 others much younger but would like to possibly send to private school in the future. we would like to move - how much can i afford? thanks all.

      oh property taxes are crazy here - 1mill home is 20k a yr.
      When you say 700k in savings, so you mean savings for a new house or for retirement? If the latter, you really shouldn’t be moving.

      If 700k is your 401k/ira balance, you are not on track to retire. As a general rule, a 4% withdrawal rate is reasonable - so if 700k is your nest egg, you have enough to live off of 28k/year we’re you to retire now. Let’s say you cut your expenses to 200k/y from what you currently live on, you’d need a $5M portfolio to support that. That’s a big ask from 700k in 15y. Obviously you’re not retiring now and will continue to save, but I’m in my mid 30s and have about 400k saved on 2/3 the salary. If this is the case, I would be thankful you don’t have a mortgage payment and start piling everything I can into investments.

      if you are on track to retire, the general rule of thumb for houses is a mortgage no more than 2x salary, so 900k + current home equity + as much of that 700k as you would like to spend. Mind you, I’m in my 30s, so I can’t speak to the life experience you have, but if I was taking on a mortgage at 50 id be inclined to go small and short. Maybe 1x salary and a 15 y note.

      Welcome.

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      • #4
        ok sorry. im actually not sure how much i have in 401k but ive put in max for about 15y. i have 700k in TD ameritrade i believe mutual funds. the properties in this area vary but i would say most homes are in the 1-2m range. i have no plans to retire until my youngest graduates college (in 20y or so - yikes). my grand plan was to use 700k savings plus value of my current house toward the new house and basically start from scratch again (without mortgage). is this nuts?

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        • #5
          I would first sit down and figure out how much money I had before I start buying a house and wanting to send kids to private schools. It sounds like you don't have a good handle on your own finances.

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          • #6
            ok im obviously a newb.

            50yo plan to retire in 20y.
            401k = 280k
            700k in mutual funds
            no student debt
            current home no mortgage, value likely around 1m.
            salary 450k

            we would like to move - how much can i afford? we would use the value of current home and savings in mutual funds to pay for new home (prefer not to have a mortgage). is this crazy. thanks again everyone. or any other advice would be appreciated.

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            • #7
              Yea. You need to have more data. And maxing a 401k is great, but that’s just over 4% of your income. 20% is a good rule of thumb.

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              • #8
                Also, the desire to retire and need to do so don’t always go hand in hand.

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                • #9
                  Originally posted by krokill View Post
                  ok im obviously a newb.

                  50yo plan to retire in 20y.
                  401k = 280k
                  700k in mutual funds
                  no student debt
                  current home no mortgage, value likely around 1m.
                  salary 450k

                  we would like to move - how much can i afford? we would use the value of current home and savings in mutual funds to pay for new home (prefer not to have a mortgage). is this crazy. thanks again everyone. or any other advice would be appreciated.
                  Is that really all you have in your 401k? I find it hard to believe that you've been maxing out your 401k and that is your current balance. I say that respectfully, as I am several years your junior and my 401k balance is nearly the same (including employer match).

                  If so, then I think you have a bigger problem on your hands. If you are planning to use your mutual funds and current house to buy a new house, AND you want to do private school x3 kids xhowever many years, AND you want to retire in 20 years, I think you may struggle. Not saying it's impossible, but you really need to prioritize. How much house do you NEED? As others have echoed, 2x income seems reasonable. This would give you money to keep in investments. If you are banking on your house's value for retirement in the future, where will you live?

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                  • #10
                    You say you are maxing the retirement plans but have only 280K.

                    You plan to work until 70 but might not have the physical or mental capacity that you think you might have. And your income will go down.

                    You want to move into a more expensive home and send 3 kids private. You are having some lofty dreams.

                    And what is wrong with your current home that you need to move? And how much of that 450K are your really putting in retirement plans each year.

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                    • #11
                      What have you been investing in in your 401k?
                      If you have been maxing out over the past 15 years in even a basic reasonable life cycle fund you should have 2-3x that.

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                      • #12
                        What are your expenses?

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                        • #13
                          thanks everyone will need reassessment of my plans.

                          1. as to "home value = annual income x 2" - for some reason i thought this applied to one's first home with a mortgage - i.e., is less applicable of a rule if it is a subsequent home and the first home mortgage is completed.

                          2. i havent added anything over the required to 401k because i've put everything into mutual funds. i've only really been saving diligently for about 10y or so (finished fellowship about 14y ago). i haven't even done 529s. is this not smart?

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                          • #14
                            wow this group is great.

                            ive been fortunate enough to not have any debt. biggest issues through the years have been taxes, summer camps, recent SUV for 4 kids, home upkeep/repairs, and um take out for dinner way more than we should.

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                            • #15
                              Why are you opposed to a mortgage? It's so cheap to get a loan right now, plus you get a tax deduction. I would put the money from the sale of the house you own into stocks (ie Vanguard), to be honest. Use your salary to pay off the new mortgage and better manage your spending.

                              And yes, you should also be funding 529's for your kids.

                              As to what you can afford, it's hard to say without knowing what your monthly burn is. But if you're 50 and you've got four kids with thoughts of private school, I would be really nervous about spending $1 million on a house.

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