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25 and on my way... but a few questions, please.
Old 03-08-2011, 03:29 PM   #1
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25 and on my way... but a few questions, please.

I'm 25 years old and have been maxing my ROTH IRA since I was 18. I currently have an additional $400/week that can be directed toward retirement savings. I have no options at work so I've been dumping into a taxable account with Vanguard. Is there a more tax efficient way to save after the ROTH is fully funded?

My ROTH is currently 100% invested in VFIFX... should I trust this "automatic" allocation approach, or would I be better served controlling allocation myself?

Also, I have $160,000 saved for a down payment on my first home, and I'm looking in the $250-$300K range. Considering historic interest rates, should I put down the minimum to avoid PMI, say 20%, or should I go ahead and flop the entire $160K down? This would leave me with $20,000 emergency fund.

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Old 03-08-2011, 04:02 PM   #2
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Congrats on your excellent progress to date.

I would just keep plugging away putting money in tax-efficient vehicles in your Vanguard account. I would only put down 20% on the house so that you maintain your flexibility.
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Old 03-08-2011, 04:09 PM   #3
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Why are you looking in the $250-300K range for your first house? You can get a nice house in Atlanta for <$160,000. Pay cash and maybe even have a little left over. If, for some reason, you decide to buy a more expensive house, then only put down 20% unless you can pay it all off in full. It sounds like you're doing very well overall so far but don't ruin that by buying a house that is more than you need.
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Old 03-09-2011, 09:28 AM   #4
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Welcome to the board, you are doing great!
For your new house I would only pay 20% down to avoid PMI.
As Brewer said this gives you better flexibility & liquidity.
The house price seem high in general for the metro area (although not out of the line for posh neighborhoods) - Where in Atlanta area are you looking for a house?

For now keep using VFIFX - it's a decent fund with low expense ratio, but eventually you want to educate yourself about asset allocation (and this can be all done within your Vanguard account)
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Old 03-10-2011, 07:06 AM   #5
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Congratulations for being so well informed and seeking investment knowledge. I wish I was that smart at 25. I would ditto the response of not buying more house than you need. Trying to 'keep up with the Joneses' can hamper your saving potential. I made that mistake at one time in my life.
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Old 03-10-2011, 10:44 AM   #6
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You may not need to put down 20% to avoid PMI. You should be able to take an 80% (30 yr fixed) at 4.85% and 10% (variable) at 5.5% loan that would only require you to put down 10%.

At any point in time you could pay off the 10% variable if you wanted.

That would be the most flexible option. This type of financing is fairly common in today's loan market.
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Old 03-13-2011, 01:30 AM   #7
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Congratulations! I just used your example for my 19 year old daughter... that it is possible to be almost set for life at 25!

If you are interested at all in the idea of landlording. I would use your deposit money to buy more than one house... in nice areas that are likely to appreciate and cover cashflow... so tenants are paying down your mortgages.

Lots of people start with a duplex or in your case mebe a fourplex to make management and cashflow easier (than single family homes). However, my suspicion is that if you don't need immediate... single family homes for the same $ will appreciate better.
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