I am a 51 year old federal employee scheduled to make $128,000 next year. Single, no kids.
I owe $7,000 on an SUV worth just over $20k, interest rate is 0%. I have no other debt, and max out my TSP (government 401K) and Roth which together are worth $350k. Next year if I make no changes to my retirement contributions, I will contribute almost $40k to my retirement accounts with the government match. I will also have a pension and social security when I retire.
I estimate I have 13 years until I retire. I recently moved cross-country to accept my current position. I won't need a car going forward if I stay in my current apartment because I can walk to work, take the bus for groceries, have delivery for lots of items.
I would like to get out of apartment living, and live in something nicer while I finish my career. I will have the option to telework much more frequently in the future, but teleworking will be more pleasant if I can build a dedicated workspace.
Home prices here are expensive, but I estimate that rent will rise over the next 13 years faster than my paycheck. I currently pay $1600 for a one bedroom, and estimate a condo/townhome would cost between $350k to $500k. I have $10k in the bank, but that is lower than normal because of my move and making extra payments on the car.
Option 1: Sell the car, maintain current retirement contributions.
Option 2: Buy a house. a) Reduce retirement contributions matching until my lease expires, then b) cash out IRA and borrow $50k from my TSP for a 20% down payment, then c) Buy in the spring or wait one more year while accumulating more of a down payment from my reduce retirement contributions. If I don't buy because I can't find something, then I can always double down on my retirement contributions for the rest of the year.
More considerations -
1) If I buy in the next 1.5 years, I would likely keep the car as I most likely could no longer walk to work.
2) I'd like at least 10 years to build equity in the house. I probably won't stay in this high cost area long term after retirement. Waiting 5 to 6 years to build a down payment outside of retirement accounts is possible, but not ideal because it decreases the amount of time I have to build equity in the house and will increase the amount I need as housing costs increase.
3) Buying a house adds a fourth leg to my retirement in addition to social security, pension, and retirement accounts. I'd have the possibility of cashing out equity and moving to a cheaper area, continue to live in the area but with mortgage costs tied to the time I bought the house, or renting as an absentee landlord.
Submitted December 17, 2019 at 07:56PM by donvitovicino https://ift.tt/38Pj0K6
