No retirement savings....what to do with $150k? Buy a house or invest for retirement

[Anonymous]

Hi,

I am 47 and recently moved to the US. I got a 150k pension settlement from my job in my country. I'm deciding what to do with this $150k.

1) do I invest this $150k toward retirement
2) or do I use this $150k on a down payment for a house IF I can find an affordable house

My current job pays me $110k and I started 2 months ago. Given my age 47 and the fact that I just started contributing to US social security, and my $401k has just couple of thousands, I guess it would best to invest the $140k toward retirement...

But I really do want to buy a house.

What would you do? On weekends I do food delivery and Uber driver to further supplement my income and save more for a house.

My wife doesn't work yet and we have 2 kids and currently living in a 1 bedroom apartment. My health is good but of course we can't predict anything post 50 and if I were to lose my job I heard that finding a job in the US after 50.is very difficult.

[Anonymous]

You need to have savings, especially as a sole earner with kids. Don’t use all the 150k for a house payment.

[Anonymous]

Save some and use some to buy a house or townhouse. It doesn’t have to be large.

Good Luck! Sounds like you are on the right track.

[Anonymous]

If you are planning on working for at least ten years in the US you will get social security. To get the Maximum benefit you need to have worked for 35 years, which, obviously, you won't have done, but you'll get a decent benefit regardless.

Where do you want to buy a house? If your job is stable (a government job or a high skilled architecture or doctor job) you don't need to worry as much about not finding a job after 50. I mean, anything could happen.

Since this $150K is your nest egg, i think you should indeed use if for a down payment. Focus on somewhere that has good bang for the buck. Probably make sure you get three bedrooms because kids need a lot more space as they get older.

But, since your wife doesn't work yet and since you're starting a career in the US at an older age, I think you should focus on a less expensive / modest duplex or row house or single family home for around 600K / 650K in the parts of DC or PG county that you can afford (if you are in this area).

Real estate is a decent investment, as long as you don't buy a condo, and you can move to a less expensive area when you do retire and put that money to work for your retirement.

[Anonymous]

I would use $110k toward the house and save $40k. But I will push the decision to buy into next year. At 47 assuming you work until 65 and delay social security until 67 you may get about $2k in today's dollar assuming your current salary. And your $401k assuming descent return may yield perhaps $1500 a month in today's dollar. You will be able to have a basic retirement with most of your needs met.

So I'll buy the house instead but defer to next year. And your gig money I will put it in a Roth IRA.

Believe it or not you are in much better shape than almost half the country with your current financials.

[Anonymous]

You need 6 months living expenses in liquid form. That's not a retirement account.

Put money in a 401K out of your new salary. You can also do a SEP IRA out of your self employment income.

[Anonymous]

Save $50k. Use gig income toward the $100k for down payment. Do not ever listen to people who will tell you to keep renting you will continue making people like me rich.

Good luck. And hope you and your family find a nice home.

[Anonymous]

Anonymous wrote:Save $50k. Use gig income toward the $100k for down payment. Do not ever listen to people who will tell you to keep renting you will continue making people like me rich.

Good luck. And hope you and your family find a nice home.

I disagree. Buying can be the biggest mistake. So many hidden costs sometimes. Current property needed 30k of unexpected stuff an inspector missed in one year. Many years ago I was thinking I "made money" on a house when it sold for 100k more than I paid. But then I calculated all of the money I put into it (not including bank interest) and realized I spent 50k on that house in 5 years. So my "profit" was 50k. I am not even counting costs of insurance and taxes and the cost of selling, which means my profit was much less than 50k.

The buy or rent calculator from the NYT is pretty good. Unless you stay put for 8-10 years, buying is almost always worse.

https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html

I am selling my house in 2 years (I've owned houses before). I will never own again unless I pay cash.

The NYT calclulator with my numbers says buying never makes sense, which I can agree on.

In many scenarios, investing in an index fund over 20 years yields better results.

OP: Watch this video:
https://www.youtube.com/watch?v=hTy2Vh0GuIQ

Also, OP: You have nothing for retirement! I would put 100k in a retirement account. Then 20k in an emergency fund in a high yield savings and then 30k in an account for a down payment maybe later on. But I would consider not buying at all.

[Anonymous]

Retire at 70. That is max SS and will give you 23 years of work to get a big benefit

[Anonymous]

Renting can be great even long term. My net worth will be higher renting the same place vs buying. If landlord gets rich at the same time, win-win.
Nothing wrong with 1-bedroom for now. We lived in one for 15 years.
Wife needs to get a job also. Invest the money and it doesn't have to be retirement account. Max out Roth for you and wife if eligible. It's important to know what to buy inside of your Roth. Learn to invest.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Save $50k. Use gig income toward the $100k for down payment. Do not ever listen to people who will tell you to keep renting you will continue making people like me rich.

Good luck. And hope you and your family find a nice home.

I disagree. Buying can be the biggest mistake. So many hidden costs sometimes. Current property needed 30k of unexpected stuff an inspector missed in one year. Many years ago I was thinking I "made money" on a house when it sold for 100k more than I paid. But then I calculated all of the money I put into it (not including bank interest) and realized I spent 50k on that house in 5 years. So my "profit" was 50k. I am not even counting costs of insurance and taxes and the cost of selling, which means my profit was much less than 50k.

The buy or rent calculator from the NYT is pretty good. Unless you stay put for 8-10 years, buying is almost always worse.

https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html

I am selling my house in 2 years (I've owned houses before). I will never own again unless I pay cash.

The NYT calclulator with my numbers says buying never makes sense, which I can agree on.

In many scenarios, investing in an index fund over 20 years yields better results.

OP: Watch this video:
https://www.youtube.com/watch?v=hTy2Vh0GuIQ

Also, OP: You have nothing for retirement! I would put 100k in a retirement account. Then 20k in an emergency fund in a high yield savings and then 30k in an account for a down payment maybe later on. But I would consider not buying at all.

This! Do NOT buy a house. Mortgage interest rates are bad. Homes have increasing costs. You probably want a nicer lifestyle than you grew up with abroad. Plus your tastes may change in a few years or your job location might.

Follow Ramit Sethi about how not buying is a better idea.

[Anonymous]

The OP needs to get out of their apartment. A family of 4 in a 1 bedroom is not a sustainable way to live. It's also illegal depending on where you live and the size of the bedroom.

A house doesn't need to be a SFH, it could be a very small townhouse that still gives them an extra bedroom.

I'd rather work till I drop than live the next 10 years in a 1BR as a 4 person family. Just my two cents.

[Anonymous]

OP, where do you live? How old are your kids?

[Anonymous]

Anonymous wrote:OP, where do you live? How old are your kids?

... also what are you paying for rent for this 1 BR?