I'm trying to develop a tax-efficient strategy for investing, saving, and retiring.

My main concern is - should I be saving all my cash for my house down payment? Or should I be taking advantage of investing during this time and open an HSA, max out my Roth contributions, etc? Should I be investing my down payment or have it in cash, CDs, or Treasuries?

Age: 30
After-tax income: $65,000
Current Cash Savings: $6,000
Annual 401K contribution: $1,000 (my employer match is $1,000 per year)
Current 401K investment balance: $9,350 (I was previously contributing a large amount of my paycheck)
House down payment Goal: $150,000. I live in California and the house will most likely be around $1,000,000. My partner and I would go 50/50 on the house and the down payment. We would probably utilize a conventional loan and use some kind of first-time homebuyer program. Splitting it 50/50 this way will leave me with a $350,000 loan balance which equates to a $2,446 monthly payment at current interest rates (7.5% - hopefully we can re-finance later)
Student Loans: $11,717, an interest rate of 3.5% (this is assuming that the student loan forgiveness passes.
Credit Cards: I have a Chase Freedom Unlimited and Discover IT. Pay balance in full each money.
Expenses: food, travel, gas, and insurance: Roughly $15,000/year (I live with my partner's parents and have no rent payments, I also own my car)
Taxable Brokerage: $380 (I just started investing and DCA'ing into VTI (I buy 1 share every 2 weeks regardless of share price)
HSA, Roth IRA, Traditional IRA: Currently not using these accounts and have no money in any of these. Think maybe I should start maxing my HSA and Roth.

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alexm2816 t1_iuiwle1 wrote on October 31, 2022 at 5:51 PM

>Should I be investing my down payment or have it in cash, CDs, or Treasuries?

I don't want to crush your dreams on supporting a million dollar home with a $100k income but considering your timeline is likely many years out investing your down payment likely serves the best growth potential. Certainly there is risk involved but the length of time is likely great enough that you can weather ups and downs before needing liquidity.

figs1023 OP t1_iuixd2w wrote on October 31, 2022 at 5:56 PM

It would technically be a $500,000 home, since it is being split equally between me and my partner. A $150,000 down payment leaves me with a $350,000 loan. That's a $2,446 monthly payment.

We would probably seek to find something where we could rent a room out (avg $1,000/month where we live, which would bring the loan down to $2,000/month for me), or buy the house and rent the entire thing out until our equity is high enough to afford to live in the whole house (or until rates are low enough to refinance and comfortably afford the monthly payments).

darkhorsehance t1_iuj0nlb wrote on October 31, 2022 at 6:18 PM

Don’t forget it’s going to cost you something to actually buy the house. In CA, most closing costs go to the seller but there are still buyer costs. You’ll also have a 12.5k property tax bill every year, homeowners insurance, flood/earthquake (maybe), gas/electric/garbage/water/internet/landscaping/etc, maintenance costs (on a million dollar house, expect around 10k a year, assuming no major work like roof), and furnishing the house when you move in.

Werewolfdad t1_iuiuyee wrote on October 31, 2022 at 5:40 PM

Https://www.reddit.com/r/personalfinance/wiki/commontopics

DaemonTargaryen2024 t1_iuj5mo0 wrote on October 31, 2022 at 6:51 PM

Need to contribute way more than $1000 a year to retirement. At least 10%.

$1m home might be a lofty goal. But where house fund goes depends on your timeline. If 1-3 years it's gotta be cash. If +6 it can be stocks just be mindful as you near closer to the goal.

figs1023 OP t1_iuj5wo7 wrote on October 31, 2022 at 6:52 PM

I expect income to increase in the next 5 years. The house will be $500k because it’s going to be a 50/50 split. I do agree I need to contribute more to retirement.