I agree with the article that most 401k plans don’t have enough investment choices, but next to owning a home it is probably the number one way that the middle class builds wealth. One way to get around the limited investment choices in a 401k is to transfer money out and into an IRA, if your employer allows in service rollovers.
And the average age of first time home buyers is 43. There may be a lot more people who have a mortgage in retirement.
Fourty three is the average age, a lot are still buying homes in their late 20s and early 30s. I’m a strong believer in the 15 year mortgage, somebody that doesn’t buy a home until they’re 45 they can still have it paid off by age 60. A lot of people would rather throw money away on a rent in a “luxury” apartment and other things that make them happy now instead of saving for a home, it’s their money they can do what they want with it.
Only going by what ex (a realtor) is hearing at conferences. But to average out those in their 20’s and 30’s, it means that there are about as many over 50 who are getting their first home.
That says a lot more about those individuals then the economy or current real estate market. I work with people that have never owned a home and probably never will, they earn just under six figures without overtime.
Just saying… That’s what America is doing. And Americans have never been very good at a lot of things. Saving is one of them.
That’s true for some groups and has a lot to do with how someone is brought up. Whites and Asians in the US tend to save a lot more than other groups and if someone’s parents lived within their means, they probably will too. I taught my kid about investing, saving, delayed gratification and paying himself first.
Around 75% of US companies offer a 401k or similar plan, plus anyone with income can open a IRA. When I started my current job at age 20 I was making around twice the minimum wage and as soon as I was able to get in the 401K I did, putting in $10 a check and increased that every June when we got our annual raise, it really adds up over the years.
definitely
I find most 401(k) plans have adequate investment choices and reasonable fees.
According to Clark Howard, the 403(b) plans seem to be less adequate in both ways.
But there is always the escape route you mentioned to a place like Schwab or Vanguard with more than enough options.
And we’ve already managed to derail the thread on post #3 due to someone’s political ax to grind.
I tried to get it back on track.
Sometimes pests are best ignored than given attention.
But I fed the troll too, so not judging.
That all depends on the situation, and this also brings up one of the discussions on Dave Ramsey’s advice from the old CHB. If somebody can afford a payment for a fifteen-year mortage in his budget and still be able to fund retirement, I agree with you. However, some people can not fit a fifteen-year mortgage payment into their budget and can only fit in a thirty-year payment. While that definitely not as desirable as a fifteen-year payment, one can make the argument that in many circumstances that is preferable to renting.
And, back to Dave Ramsey, one of his sage points of advice is to throw everything at your mortgage until it is paid off at the expense of everything else. Jimb used to have a field day showing how neglicting retirement accounts would cost a person over the long-run due to the loss of compound growth. And, at a minimum, one would think that it would be common sense that one should at least contribute to a 401(k) so that he gets the company match, which is free money. However, Dave would say not to do that until the mortgate was paid off.
It is not just Dave himself. I told the story about how one big Dave Ramsey fan was discussing how he was following Dave’s advice and how he was settign himself up to be in a great finnacial position. He was singing Dave’s praises and in his eyes Ramsey was God and could do no wrong. I mentioned the above 401(k) company match point, figuring that he might at least acknowledge this. However, he ignored my point and kept saying how thanks to Ramsey he would be so well off in the future.
IMO people should at least put in a employer provided retirement plan to get the match. Even a couple thousand dollars a year early really adds up over 35 years of working. As people’s income increases, they could pay extra on a 30-year and knock years off of it and save tens of thousands of dollars.
I agree. I think in most cases it’s better to own than rent, but not always.
IMO this discussion has the potential to become extremely complicated. 30 vs 15 (or even less) is a risk-reward calculation, and requires economic insight/Nostradamus crystal ball that few have.
I haven’t crunched the numbers myself, but I’m sure there’s a contingent of people who would argue a 50-year mtg is the superior choice because of extra money freed up to invest long term at higher returns.
I think a far more important factor than mortgage term is sticker price discipline. Buy less house than you can afford. The lower the price, the better, assuming the savings are invested long term.
I’ve read one of Ramsey’s books and listened to many episodes of his show. Your statement here portraying his advice is inaccurate.
Ramsey has said to invest 15% of income into retirement before chipping away at the house.
I’m sure there is plenty of room to quibble over that benchmark, but on the whole this is very different advice compared to paying off the house before any retirement savings.
I agree. When we built our current house for $325,000 with a $225,000 down payment and went to get a mortgage, our broker told us we are qualified to buy a $700,000 house. My wife and I laughed and told her no we aren’t, but I’m sure a lot of people would buy more than they could afford.
That might have changed, I thought I remember him saying pay off everything first. Dave does have some good advice like his snowball plan for paying off debt, building an emergency fund and even eating beans and rice and selling crap to pay off debt.
I am sure there are some who would make that argument, mostly those in a position to sell fifty-year mortgages. I too have not run the numbers, but as I understand with a thirty-year mortgage the borrower still owes 75% of the balance after fifteen years have passed, so you can guess what it would be like for a fifty-year mortgage. For practical purposes, for the first half of that mortgage for practical purposes your payments are going towards interest and not principal, which is no different from a renter’s payments going to rent. The only difference is that with a fify-year mortgage you can sell the propoerty and keep any appreciation in value for yourself, assuming the property did appreciate in value.
You are right, and I stand corrected. Ramsey does say to pay off all debts except the house before investing in retirement. I still disagree with his advice, but his advice is what you say here.
You don’t have to, it’s a terrible idea.
I concur this specific piece of advice is a bit sus. Might make sense in some cases but certainly not all.
One problem with Ramsey’s advice is that he dumbs it down heavily to the lowest common denominator.
I believe it was Jimb that said Ramsey’s advice only really works for debtaholics and spendaholics, and I agree.
Sadly, debtaholics and spendaholics are the least likely to be disciplined enough to recover their situations. Therefore, it often seems that Ramsey is simply tap dancing in the spotlight for his own edification.
Clark seems more interested in genuinely helping others.
Often the latter necessarily involves more complex messages less suited to sound bites.
Like I said, the only possible rationale that I can think of for taking out a fifty-year mortgage is to be able sell it at a profit, assuming that it appreciates in value. Otherwise, it is worse than renting. At least with renting you have a landlord to deal with maintenance issues and the like.