[patientrenter]

I agree with NYCLurker, and I have been involved in the industry of managing retirement and other long-term funds for 20 years – and, no, I’m not a blind believer in the endless high growth of equity values.

If you want to avoid the risk of investing in equities, you usually can choose a more conservative 401k option that has a more stable value. Personally, I would suggest that you invest at least some in some equity funds, especially if you are young. You need to form a strategy for the next 30-50 years before you come up with tactical adjustments for the next 1-5 years. Any very long-term strategy for a young person almost certainly should invove some diversified investment in equities. This board has more than its share of extremely rsk-adverse people focused on what investments will do over the next 5-10 years, who may not provide the best advice for someone looking to get the best return over a very long period, like 30-50 years.

If you think that the next 5-10 years will be times of excessive prices for equities, then just plan to allocate your 401k money to the fixed/stable accounts for that period, but try to maximize what you contribute to all these tax-favored accounts.

Best of luck,
Patient renter in OC

[patientrenter]

I agree with NYCLurker, and I have been involved in the industry of managing retirement and other long-term funds for 20 years – and, no, I’m not a blind believer in the endless high growth of equity values.

If you want to avoid the risk of investing in equities, you usually can choose a more conservative 401k option that has a more stable value. Personally, I would suggest that you invest at least some in some equity funds, especially if you are young. You need to form a strategy for the next 30-50 years before you come up with tactical adjustments for the next 1-5 years. Any very long-term strategy for a young person almost certainly should invove some diversified investment in equities. This board has more than its share of extremely rsk-adverse people focused on what investments will do over the next 5-10 years, who may not provide the best advice for someone looking to get the best return over a very long period, like 30-50 years.

If you think that the next 5-10 years will be times of excessive prices for equities, then just plan to allocate your 401k money to the fixed/stable accounts for that period, but try to maximize what you contribute to all these tax-favored accounts.

Best of luck,
Patient renter in OC

[patientrenter]

I agree with NYCLurker, and I have been involved in the industry of managing retirement and other long-term funds for 20 years – and, no, I’m not a blind believer in the endless high growth of equity values.

If you want to avoid the risk of investing in equities, you usually can choose a more conservative 401k option that has a more stable value. Personally, I would suggest that you invest at least some in some equity funds, especially if you are young. You need to form a strategy for the next 30-50 years before you come up with tactical adjustments for the next 1-5 years. Any very long-term strategy for a young person almost certainly should invove some diversified investment in equities. This board has more than its share of extremely rsk-adverse people focused on what investments will do over the next 5-10 years, who may not provide the best advice for someone looking to get the best return over a very long period, like 30-50 years.

If you think that the next 5-10 years will be times of excessive prices for equities, then just plan to allocate your 401k money to the fixed/stable accounts for that period, but try to maximize what you contribute to all these tax-favored accounts.

Best of luck,
Patient renter in OC

[patientrenter]

I agree with NYCLurker, and I have been involved in the industry of managing retirement and other long-term funds for 20 years – and, no, I’m not a blind believer in the endless high growth of equity values.

If you want to avoid the risk of investing in equities, you usually can choose a more conservative 401k option that has a more stable value. Personally, I would suggest that you invest at least some in some equity funds, especially if you are young. You need to form a strategy for the next 30-50 years before you come up with tactical adjustments for the next 1-5 years. Any very long-term strategy for a young person almost certainly should invove some diversified investment in equities. This board has more than its share of extremely rsk-adverse people focused on what investments will do over the next 5-10 years, who may not provide the best advice for someone looking to get the best return over a very long period, like 30-50 years.

If you think that the next 5-10 years will be times of excessive prices for equities, then just plan to allocate your 401k money to the fixed/stable accounts for that period, but try to maximize what you contribute to all these tax-favored accounts.

Best of luck,
Patient renter in OC

[patientrenter]

Newblet, I wouldn’t fret too much about high interest rates. There’s a good chance you’ll be able to find some lender who will give you a loan with low initial payments, and then you can re-finance down the road when interest rates decline again.

Just make sure that the price of the home is something you can afford – not the monthly payments, the price. If you had to save all the money to buy the house, and you put all your savings to that purpose, how long would it take you? If it would take you 20 years, then you’re not leaving many options for retirement savings or other needs.

Patient renter in OC

[patientrenter]

Newblet, I wouldn’t fret too much about high interest rates. There’s a good chance you’ll be able to find some lender who will give you a loan with low initial payments, and then you can re-finance down the road when interest rates decline again.

Just make sure that the price of the home is something you can afford – not the monthly payments, the price. If you had to save all the money to buy the house, and you put all your savings to that purpose, how long would it take you? If it would take you 20 years, then you’re not leaving many options for retirement savings or other needs.

Patient renter in OC

[patientrenter]

Newblet, I wouldn’t fret too much about high interest rates. There’s a good chance you’ll be able to find some lender who will give you a loan with low initial payments, and then you can re-finance down the road when interest rates decline again.

Just make sure that the price of the home is something you can afford – not the monthly payments, the price. If you had to save all the money to buy the house, and you put all your savings to that purpose, how long would it take you? If it would take you 20 years, then you’re not leaving many options for retirement savings or other needs.

Patient renter in OC

[patientrenter]

Newblet, I wouldn’t fret too much about high interest rates. There’s a good chance you’ll be able to find some lender who will give you a loan with low initial payments, and then you can re-finance down the road when interest rates decline again.

Just make sure that the price of the home is something you can afford – not the monthly payments, the price. If you had to save all the money to buy the house, and you put all your savings to that purpose, how long would it take you? If it would take you 20 years, then you’re not leaving many options for retirement savings or other needs.

Patient renter in OC

[patientrenter]

Newblet, I wouldn’t fret too much about high interest rates. There’s a good chance you’ll be able to find some lender who will give you a loan with low initial payments, and then you can re-finance down the road when interest rates decline again.

Just make sure that the price of the home is something you can afford – not the monthly payments, the price. If you had to save all the money to buy the house, and you put all your savings to that purpose, how long would it take you? If it would take you 20 years, then you’re not leaving many options for retirement savings or other needs.

Patient renter in OC

[patientrenter]

Trojan, sorry, I didn’t mean to be obtuse. What I was getting at is that it might be helpful to assess how much you can afford to pay for a home based not on monthly mortgage payments, but rather how much the purchase price is versus your lifetime income and outgo.

For example, if you applied this method using these assumptions (that I just made up):

1. Income (net of taxes and other deductions) = $120K+37K = $157K

2. Expenses (excluding non-expense items such as savings) = $70K.

3. Number of years you’re OK with committing to working at $120K job = 15.

4. Number of years after you’ve quit working the $120K job at which you’re prepared to run out of cash in your old age = 90 – (42+15) = 33

The you’d get total lifetime savings = 15 x 157 + 33 x 37 – (15+33) x 70 = $216K.

So if you have no other things you want to save for, then you can afford about $200K for a home. Plug in the numbers you think are appropriate. It’s just a way to strip out all the “noise” from complicated assumptions about interest and other investment income and inflation. I hope this helps as an alternative view.

Patient renter in OC

[patientrenter]

Trojan, sorry, I didn’t mean to be obtuse. What I was getting at is that it might be helpful to assess how much you can afford to pay for a home based not on monthly mortgage payments, but rather how much the purchase price is versus your lifetime income and outgo.

For example, if you applied this method using these assumptions (that I just made up):

1. Income (net of taxes and other deductions) = $120K+37K = $157K

2. Expenses (excluding non-expense items such as savings) = $70K.

3. Number of years you’re OK with committing to working at $120K job = 15.

4. Number of years after you’ve quit working the $120K job at which you’re prepared to run out of cash in your old age = 90 – (42+15) = 33

The you’d get total lifetime savings = 15 x 157 + 33 x 37 – (15+33) x 70 = $216K.

So if you have no other things you want to save for, then you can afford about $200K for a home. Plug in the numbers you think are appropriate. It’s just a way to strip out all the “noise” from complicated assumptions about interest and other investment income and inflation. I hope this helps as an alternative view.

Patient renter in OC

[patientrenter]

Trojan, sorry, I didn’t mean to be obtuse. What I was getting at is that it might be helpful to assess how much you can afford to pay for a home based not on monthly mortgage payments, but rather how much the purchase price is versus your lifetime income and outgo.

For example, if you applied this method using these assumptions (that I just made up):

1. Income (net of taxes and other deductions) = $120K+37K = $157K

2. Expenses (excluding non-expense items such as savings) = $70K.

3. Number of years you’re OK with committing to working at $120K job = 15.

4. Number of years after you’ve quit working the $120K job at which you’re prepared to run out of cash in your old age = 90 – (42+15) = 33

The you’d get total lifetime savings = 15 x 157 + 33 x 37 – (15+33) x 70 = $216K.

So if you have no other things you want to save for, then you can afford about $200K for a home. Plug in the numbers you think are appropriate. It’s just a way to strip out all the “noise” from complicated assumptions about interest and other investment income and inflation. I hope this helps as an alternative view.

Patient renter in OC

[patientrenter]

Trojan, sorry, I didn’t mean to be obtuse. What I was getting at is that it might be helpful to assess how much you can afford to pay for a home based not on monthly mortgage payments, but rather how much the purchase price is versus your lifetime income and outgo.

For example, if you applied this method using these assumptions (that I just made up):

1. Income (net of taxes and other deductions) = $120K+37K = $157K

2. Expenses (excluding non-expense items such as savings) = $70K.

3. Number of years you’re OK with committing to working at $120K job = 15.

4. Number of years after you’ve quit working the $120K job at which you’re prepared to run out of cash in your old age = 90 – (42+15) = 33

The you’d get total lifetime savings = 15 x 157 + 33 x 37 – (15+33) x 70 = $216K.

So if you have no other things you want to save for, then you can afford about $200K for a home. Plug in the numbers you think are appropriate. It’s just a way to strip out all the “noise” from complicated assumptions about interest and other investment income and inflation. I hope this helps as an alternative view.

Patient renter in OC

[patientrenter]

Trojan, sorry, I didn’t mean to be obtuse. What I was getting at is that it might be helpful to assess how much you can afford to pay for a home based not on monthly mortgage payments, but rather how much the purchase price is versus your lifetime income and outgo.

For example, if you applied this method using these assumptions (that I just made up):

1. Income (net of taxes and other deductions) = $120K+37K = $157K

2. Expenses (excluding non-expense items such as savings) = $70K.

3. Number of years you’re OK with committing to working at $120K job = 15.

4. Number of years after you’ve quit working the $120K job at which you’re prepared to run out of cash in your old age = 90 – (42+15) = 33

The you’d get total lifetime savings = 15 x 157 + 33 x 37 – (15+33) x 70 = $216K.

So if you have no other things you want to save for, then you can afford about $200K for a home. Plug in the numbers you think are appropriate. It’s just a way to strip out all the “noise” from complicated assumptions about interest and other investment income and inflation. I hope this helps as an alternative view.

Patient renter in OC

[patientrenter]

I’ve had a similar experience, VoZangre. She had horrible credit, liens from the IRS, the works. I wanted to take care of her nevertheless, and I did for a long time. I just couldn’t allow my own financial future to depend on her financial judgment. Selfish? Perhaps, but how can she turn to you for security if you allow her to destroy that security, inadvertently or otherwise?

Patient renter in OC

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