Hello Bogleheads! I first discovered this forum in 2017 and have learned so much from this group. I've read numerous portfolio review posts on this site and have seen some wonderful advice and knowledge be shared. My spouse and I recently received some good but surprising news, and are in need of some of that same external perspective and wisdom. Full disclosure, the focus of this post is actually more of a housing question rather than a straight up portfolio review, though any and all advice will be greatly appreciated. Please consider the information provided below.
Summary of the basics:
Age: 35, spouse is 34
Tax Filing Status: MFJ
Tax Rate: 24% Federal, 9.3% State
State of Residence: CA
Assets: ~$935,000 invested (details below), ~$80,000 "operating cash" and emergency funds, ~$400,000 home equity
Debt: Mortgage, ~$225,000 remaining @ 2.625%
Annual Household Income: Conservatively assume $265,000/year for planning, but varies (somewhat wildly and mostly upward) month to month and year to year.
Annual Investment Contributions/Savings: ~$65,000 (+ employer match, details below)
Annual Expense: ~$200,000 (some details below)
Invested Assets Detail:
His 401k at Fidelity
33.8% Fidelity Total Market Index Fund (FSKAX) (0.015%)
1.9% Fidelity Global ex U.S. Index Fund (FSGGX) (0.06%)
9.2% Fidelity Investment Grade Bond Fund (FBNDX) (0.45%)
His HSA at Fidelity
3.3% Fidelity Total Market Index Fund (FSKAX) (0.015%)
0.6% Fidelity Total International Index Fund (FTIHX) (0.06%)
His Roth IRA at Vanguard
13.8% Vanguard Total World Stock Index Fund (VTWAX) (0.10%)
Her Roth IRA at Vanguard
8.3% Vanguard Total World Stock Index Fund (VTWAX) (0.10%)
His Treasury Direct
3.4% iBonds, 10k purchased 8/2022, 12/2023, 1/2024
Her Treasury Direct
3.4% iBonds, 10k purchased 8/2022, 12/2023, 1/2024
Total 529 at Vanguard
4.8% Vangaurd Growth (0.15%)
Joint Taxable
5.2% Vanguard Total Stock Index Fund (VTSAX) (0.04%)
9.8% Vanguard Total International Stock Index Fund (VTIAX) (0.11%)
2.5% cash (VMFXX)
Total = 100.0%
Annual Investment Contributions/Savings Detail:
$23,000 his 401k
$26,500 his 401k (expected employer contribution)
$8,300 his HSA
$14,000 his/her Roth IRA
$6,000+ total 529
$12,000+ joint taxable
We've also been fortunate to be able to purchase $20,000 in iBonds each of the past 3 years, but are not currently planning to do so in 2025, regardless of whether we purchase a new house or not.
Annual Expense Detail:
Income Taxes: ~$60,000+/year
Health Insurance: ~$19,000/year (pre-tax through employer)
Current PITI: ~$18,000/year
Current Utilities: ~$8,000/year
All the Rest: ~$95,000+/year
My spouse and I bought our house ~10 years ago as newlyweds. It is a nice house in a good location, but we have been feeling a space crunch the past year or so. We have been casually shopping over this time period, and have declined to offer on some really nice houses because we previously determined we could make do and that the cost wasn't worth the upgrade. Well the inputs to this equation are changing...and we need to wrap our heads around affording an upgrade in the next year or two. Before anyone asks, a renovation of the current house is not really feasible due to the way the house and lot are oriented unless we build up (yeah right) or completely gut/redo our current layout (yeah right). We are focused on purchasing a new larger house in the same area.
To keep things relatively simple, see the sample house below, which represents a somewhat typical house in our area that would meet our needs and wants.
Purchase Price: $800,000
Down Payment: $350,000 (assuming rolling over all existing equity, minus transaction fees and sales prep)
Loan Amount: $450,000 at ~6% for 30 years
New PITI: ~$43,000/year
New Utilities: ~$12,000/year
First Year Interest Paid: ~$27,000 (allowing us to itemize every year, currently itemize every other year when we lump charitable contributions)
Estimated Annual Cost Increase: ~$29,000 (PITI plus utilities)
Questions:
Can we afford this sample house? I believe this answer is technically yes as we could cut taxable, 529, and Roth contributions to account for increased costs, though this admittedly makes my stomach turn a bit.
Should we afford this sample house (i.e. is it "smart", or too much of a stretch)? I am not expecting any significant changes to income, or any type of windfall.
If your answer is no to either or both questions above, what can we currently afford (in your opinion)?
Should we sell assets to increase the down payment if we did purchase a house similar to the sample above? We have at least ~$220,000 that could be used for this purpose (~$160,000 taxable brokerage + ~$60,000 iBonds). We would of course need to account for taxes in this scenario as there are gains.
What are we not considering in our initial analysis?
Any anecdotes or advice from those who faced a similar decision?
Thanks in advance!![:sharebeer]( "celebrate")
Summary of the basics:
Age: 35, spouse is 34
Tax Filing Status: MFJ
Tax Rate: 24% Federal, 9.3% State
State of Residence: CA
Assets: ~$935,000 invested (details below), ~$80,000 "operating cash" and emergency funds, ~$400,000 home equity
Debt: Mortgage, ~$225,000 remaining @ 2.625%
Annual Household Income: Conservatively assume $265,000/year for planning, but varies (somewhat wildly and mostly upward) month to month and year to year.
Annual Investment Contributions/Savings: ~$65,000 (+ employer match, details below)
Annual Expense: ~$200,000 (some details below)
Invested Assets Detail:
His 401k at Fidelity
33.8% Fidelity Total Market Index Fund (FSKAX) (0.015%)
1.9% Fidelity Global ex U.S. Index Fund (FSGGX) (0.06%)
9.2% Fidelity Investment Grade Bond Fund (FBNDX) (0.45%)
His HSA at Fidelity
3.3% Fidelity Total Market Index Fund (FSKAX) (0.015%)
0.6% Fidelity Total International Index Fund (FTIHX) (0.06%)
His Roth IRA at Vanguard
13.8% Vanguard Total World Stock Index Fund (VTWAX) (0.10%)
Her Roth IRA at Vanguard
8.3% Vanguard Total World Stock Index Fund (VTWAX) (0.10%)
His Treasury Direct
3.4% iBonds, 10k purchased 8/2022, 12/2023, 1/2024
Her Treasury Direct
3.4% iBonds, 10k purchased 8/2022, 12/2023, 1/2024
Total 529 at Vanguard
4.8% Vangaurd Growth (0.15%)
Joint Taxable
5.2% Vanguard Total Stock Index Fund (VTSAX) (0.04%)
9.8% Vanguard Total International Stock Index Fund (VTIAX) (0.11%)
2.5% cash (VMFXX)
Total = 100.0%
Annual Investment Contributions/Savings Detail:
$23,000 his 401k
$26,500 his 401k (expected employer contribution)
$8,300 his HSA
$14,000 his/her Roth IRA
$6,000+ total 529
$12,000+ joint taxable
We've also been fortunate to be able to purchase $20,000 in iBonds each of the past 3 years, but are not currently planning to do so in 2025, regardless of whether we purchase a new house or not.
Annual Expense Detail:
Income Taxes: ~$60,000+/year
Health Insurance: ~$19,000/year (pre-tax through employer)
Current PITI: ~$18,000/year
Current Utilities: ~$8,000/year
All the Rest: ~$95,000+/year
My spouse and I bought our house ~10 years ago as newlyweds. It is a nice house in a good location, but we have been feeling a space crunch the past year or so. We have been casually shopping over this time period, and have declined to offer on some really nice houses because we previously determined we could make do and that the cost wasn't worth the upgrade. Well the inputs to this equation are changing...and we need to wrap our heads around affording an upgrade in the next year or two. Before anyone asks, a renovation of the current house is not really feasible due to the way the house and lot are oriented unless we build up (yeah right) or completely gut/redo our current layout (yeah right). We are focused on purchasing a new larger house in the same area.
To keep things relatively simple, see the sample house below, which represents a somewhat typical house in our area that would meet our needs and wants.
Purchase Price: $800,000
Down Payment: $350,000 (assuming rolling over all existing equity, minus transaction fees and sales prep)
Loan Amount: $450,000 at ~6% for 30 years
New PITI: ~$43,000/year
New Utilities: ~$12,000/year
First Year Interest Paid: ~$27,000 (allowing us to itemize every year, currently itemize every other year when we lump charitable contributions)
Estimated Annual Cost Increase: ~$29,000 (PITI plus utilities)
Questions:
Can we afford this sample house? I believe this answer is technically yes as we could cut taxable, 529, and Roth contributions to account for increased costs, though this admittedly makes my stomach turn a bit.
Should we afford this sample house (i.e. is it "smart", or too much of a stretch)? I am not expecting any significant changes to income, or any type of windfall.
If your answer is no to either or both questions above, what can we currently afford (in your opinion)?
Should we sell assets to increase the down payment if we did purchase a house similar to the sample above? We have at least ~$220,000 that could be used for this purpose (~$160,000 taxable brokerage + ~$60,000 iBonds). We would of course need to account for taxes in this scenario as there are gains.
What are we not considering in our initial analysis?
Any anecdotes or advice from those who faced a similar decision?
Thanks in advance!
Statistics: Posted by dvvader — Wed Oct 30, 2024 11:18 pm — Replies 1 — Views 144