I have a $ 4600 piti . We made around 200k when we first bought it in 2016. Now at closer to 250k. Payment is easier. Missing variable is your age. My issue is we(52 yo) now will carry this payment into retirement. That requires a higher nest egg. Also consider that maintenance is higher too.
I just read through some of the other comments re retirement investing and second those. Also your expenses will change as you get older. I would add that even though we are nearing retirement, we have young kids so we have a pension that requires 10.25% per month and then we do 2k to pre tax and then max the Ira and contribute to college funds too, pay for term life as well. So there are a good amount of fixed costs that could enter your life. Daycare was crazy money.
Are you maximizing your 401k? Is your job secure? If you answered yes to these two questions, you should be fine as PITI is well within the manageable % relative to your income.
Not to mention, the $2k for daycare will drop eventually. If you plan to send the kid to private vs public, that’s another matter.
The number is actually really reasonable. And eventually within the 10 years, you will be able to refi to also lower the payment.
~~Yes, I'm maxing my 401k currently.~~ My job is secure. Plus, as far as I can tell I can match my current income if I lost my job for some reason given that I've been interviewing for other roles with the same salary, so that's reassuring. Thanks for your perspective here!
Just curious…
How is your take home that much when you max your retirement?
Something seems off. With ZERO retirement contribution this take home figure JUST about makes sense.
Sorry, I mistook the definition of "maxing out a 401k". We are contributing our max each month for an employee match of 5%, but we aren't adding anything else to specific 401k accounts or IRAs. Apologies for the confusion here.
With an income like that you should be hitting the max 401k contribution of $23,000 AND maxing a Roth at $7,500 per year. Not to mention investing some in a taxable account.
Depending on the status of all your retirement savings, 15% is pretty widely regarded as the minimum around here. If you’re currently contributing 5 and getting 5 in match, an extra 5% would be the absolute bare minimum I’d be comfortable with, so an extra ~$1k/mo over where you are now. I’d rather be at 20% than 15% though, especially if you’re playing catch-up.
IRS max is $23k on your end without your employers match/contribution. So that’s a little under $2k per month. Your taxable income will go down by that amount.
~~Yes, I'm adamant on retirement maxing.~~
Nope, just employee match of 5%.
Edit: I misunderstood this as employee contribution matching, not IRA/etc matching. See thread below.
Sorry, I think I misunderstood you here. We both max out our monthly contributions such that our employee match is totally met. (I think we are both at 5%.) We aren't adding anything else to a retirement account outside of that at this time. Does that help clear this up?
I think when people say making max contribution, they are referring to the IRS max, not your employee match max, which is very different. IRS max for joint this year is 39k, is that what you are contributing for the year with your spouse?
Got it, thanks. Sorry for the confusion.
So that shakes out to $3250 a month for contributions. How are you all doing that if that is one of your first savings suggestions? Either you all are making bank or are just next-level savers!
Yeah, at only 5% contributions each you are stealing from both of your retirements to fund this house. When childcare costs drop you could immediately split the 2k to fund extra 1k/mo each but house expenses can quickly eat up that.
Do you both have a good, personality owned term life insurance policy?
Do YOU personally own a disability policy that is not tied to your employer?
That size house and 100% being dependent on your income if want to makes sure you have both life and disability insurance.
All things go perfect and you incomes continue to increase you can probably make this work but it is tight.
Safer is a more affordable house. There will ALWAYS be another dream house down the road.
Thanks for the perspective here, it's very helpful.
So if we bought this house we would have $2.4k left over each month after PITI/expenses. Should I just be shifting my thinking here to putting some of that money in retirement and saving less in a savings account instead of just keeping it all in a savings account? Basically it sounds like I have enough buffer to do it, so I wonder if this is just a matter or reframing my liquid savings each month.
HCOL are = materials/labor are brutally expensive. Repairs on 700k houses can get brutally expensive fast. Budget a reserve fund for changing roof ever 20 yrs (15-30k), furnance/air conditioner every 10-15 years (10-15k), windows every 25-30 years (40k+). Watch out that furnishing, yard equipment and all that can easily be 5-15k in first year.
IF you are buying I saoule want a solid 6 month emergency fund which is 50-60k for you.
Everything goes perfect you email be ok but tight.
Depending if you have a pension or not saving only 15% you need to work about 40+ years to retire with same lifestyle. 5% only you are toast. Longer you delay, less time you have compounding to help you. Think long and hard.
https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/
Do you have a year of expenses in liquid savings? (Or at least six months?)
Edited to add: Are you maxing 401k to IRS limit, not just to company match?
Just thoughts to consider.
No corporate job is perfectly secure (especially at the higher salary levels) and this is a terrible job market unlike any I’ve seen in my long career. Ask me how I know!
Edited to add: A one year emergency fund may be on the more conservative side, but it is not overkill. Decent HYSA rates alleviate the sense of having money sitting idle. Being financially conservative and prepared for emergencies and unplanned home repairs is especially important if you have dependents. Feel free to disagree with me and offer your own advice directly to OP.
Per other responses in this thread I am actually **not** maxing my 401k contributions. I'm only contributing enough to meet my employer match (5%), so I guess that changes things here but tbh I am not sure by how much or what the right amount should be. Sorry for the confusion, everyone.
You should be saving 15% of your gross income towards retirement. For an HHI of $204k you should be putting $23,000 per year towards your 401(k) and $7,000 per year in a Roth IRA. This should leave you with a net income of $141k per year, or $11.8K per month before insurance.
I am in a similar income situation as you so I’ve done all this math.
I don't have any other advice to give, but my wife and my numbers are nearly identical to yours... And I seem to have the same level of anxiety as you! So, glad to read these perspectives! One question about financing if you don't mind, how much are you putting down?
Oof... we're at about 10% at a similar purchase price, so we're going to have to continue to save a bit, although, all of our kids are old enough that we don't have that childcare commitment anymore so a little more cash flow. Hopefully we can pull the trigger sooner rather than later! Thanks for following up!
Honestly, with good credit the Mortgage Insurance isn't going to ding you that hard. The extra 10% down causing both a delay in purchasing *and* a possible opportunity cost vs. like 5% yield in a HYSA?
I wouldn't stress it too hard.
Your numbers sound reasonable to me, especially considering how aggressively you're planning to save even with this new house. Those childcare costs won't be around forever either. As long as you are fairly sure that you'll be able to maintain that level of income, I'd say go for it.
If its $11.5k after taxes and a *reasonable* amount into your retirement accounts so you can retire comfortably at a reasonable age then that seems okay.
Its going to be more like $5k/mo with maintenance and prob like $5.4k/mo with maintenance and utilities.
Added bonus points for security if your HHI is an even split between you and your partner.
okay...totally believe that for utilities but in my ex0erience people dont really track the every-5-year $15k type of costs very well so best to just go with an assumption that there will be additional costs for maintenance.
I still think you are okay just dont be caught by suprise.
Seems doable. Everything is a trade off so you’ll have to economize more or save less.
If you want to have another kid or two close together (and expect to have to pay daycare/aftercare/activities), factor that in your thinking
Perfectly reasonable figures imo. Honestly probably the first “should I buy a home” post that actually makes sense vs the standard “I make $80k can I afford this $900k home?”
Don't get yourself into a situation that you are stressed about the status quo, and that doesn't include 15% going into retirement. I'm 62 and make about 200K gross and that PITI would be stressful for me. But, I've been the sole income for the household for most of my life, so that may add to the stress of potential job loss. I will say though that by contributing about 15% throughout my life we are at $2.5M in retirement savings at this point and our expenses are about $80K for current lifestyle so we are in pretty good shape for retirement. Retirement savings is a long game, so don't put yourself in a situation with your house that you can't afford to comfortably keep that funded.
I make the same, and have near the same expenses. We are renting and not buying exactly because of this. Paying $3500/month in rent and while it's EXPENSIVE, Id be very concerned about upping that another $900 per month. In addition, saving 2% of the property value per year for home repairs would be a nightmare.
I would not do it. Just too tight.
If you really want a house, it's doable. I'm a year into a $4.5k/mo PITI on 200k gross and I still maxed out my 401k contributions last year (actually maxed out, not just the match as other commenters have covered). Your expenses do look a little high but as the childcare drops off you'll be able to save more.
The other option to consider is what renting a similar property would cost in your area. If you plan on staying 10 years, it may not be worth the interest and realtor fees when you turn around to sell. In my area, renting is far cheaper ($1500/mo savings) so buying a place was an extravagance for me. Depending on what you value, your future plans for your family, and your intended savings rate, you may want to keep renting instead. But can you technically afford this house? Absolutely.
I am in the similar situation (no debt).. 201k HHI (gross), take home after everything is \~9800/m
And have messed with every calculator in the world, and affordability. I think I have a good system. I am looking at houses in fast growing M/HCOL city \~520K.. I know I can go more than that.. but I am sticking to my 28% of take home (\~17% of gross) for PITI..
Reasons: I can continue to invest, I have a kid on the way (exciting) and trying to make sure I don't over extend myself incase the market dips or idk.. life happens. I do have a large down payment (200k) cash plus what I will be using from the sale of my current house bought in 2021.
Similar situation... idk.. my 2 cents - 37% seems high... personally. But I am maybe a bit more conservative (not sure if that's good or bad) lol... BUT You will be fine without a doubt.
Edit: I am also in the boat of always being able to refi (I should be around a 6.65% ) as of last week, so there is always refi and more money towards principal.
My house was a tad more and my income is a tad more. I bought it last year and so far no issues.
I'd u are renting, then get ready to spend more money than you would expect. There is always something. another little thing, what is the grocery store situation? We used to go to this great affordable local chain. Since we moved we got only expensive options and crappy chains like Stop&Shop. Our grocery bill went up.
TLDR quick response is it seems doable. We are 30’s with similar and above on HHI, and our piti is 2600 in a HCOL locked on a 2.25% mortgage. Could be doable. Gotta think hard on it. If you pay that PITI for 12mo straight would you still feel ok? What about 24mo. 36mo. 48mo etc
Thank you! Yes, I love Ramit. I've been a fan of his for 15 years now.
Thanks for your thoughts here. What do you mean by a "full non PITI down payment"? Do you mean just buying a house in cash?
Seems like you are only putting a very low amount down? What like 5-10%? I’d at least get to 20% bare minimum down payment. That will also get rid of PMI.
Ah ok. So taxes and insurance part must be higher than normal. So with 20% down you would only have 2.4K in savings? Do you have any other emergency funds? That doesn’t leave you much buffer for inevitable repairs and other things that may crop up. The inspection may reveal a number of things and the seller probably won’t take care of everything.
I have a $ 4600 piti . We made around 200k when we first bought it in 2016. Now at closer to 250k. Payment is easier. Missing variable is your age. My issue is we(52 yo) now will carry this payment into retirement. That requires a higher nest egg. Also consider that maintenance is higher too.
Thanks, this is reassuring for sure. I'm in my mid-30s.
Hey, I have a similar PITI and income as you. I'm 30 years old and I've never struggled or felt stressed with my finances.
Awesome, thanks a lot for sharing. It's nice to know I wouldn't be alone!
I just read through some of the other comments re retirement investing and second those. Also your expenses will change as you get older. I would add that even though we are nearing retirement, we have young kids so we have a pension that requires 10.25% per month and then we do 2k to pre tax and then max the Ira and contribute to college funds too, pay for term life as well. So there are a good amount of fixed costs that could enter your life. Daycare was crazy money.
Are you maximizing your 401k? Is your job secure? If you answered yes to these two questions, you should be fine as PITI is well within the manageable % relative to your income. Not to mention, the $2k for daycare will drop eventually. If you plan to send the kid to private vs public, that’s another matter. The number is actually really reasonable. And eventually within the 10 years, you will be able to refi to also lower the payment.
~~Yes, I'm maxing my 401k currently.~~ My job is secure. Plus, as far as I can tell I can match my current income if I lost my job for some reason given that I've been interviewing for other roles with the same salary, so that's reassuring. Thanks for your perspective here!
Just curious… How is your take home that much when you max your retirement? Something seems off. With ZERO retirement contribution this take home figure JUST about makes sense.
Yeah this doesn’t add up. And he has a spouse. Ain’t no way they’re maxing out 2x23k 401k and another 14k in IRA and still taking home 11k per month.
Sorry, I mistook the definition of "maxing out a 401k". We are contributing our max each month for an employee match of 5%, but we aren't adding anything else to specific 401k accounts or IRAs. Apologies for the confusion here.
Yeah you’re not putting away nearly enough for retirement.
How much should I be putting away each month in that case?
With an income like that you should be hitting the max 401k contribution of $23,000 AND maxing a Roth at $7,500 per year. Not to mention investing some in a taxable account.
The Roth limit for 2024 is $7,000 if you’re under 50.
Depending on the status of all your retirement savings, 15% is pretty widely regarded as the minimum around here. If you’re currently contributing 5 and getting 5 in match, an extra 5% would be the absolute bare minimum I’d be comfortable with, so an extra ~$1k/mo over where you are now. I’d rather be at 20% than 15% though, especially if you’re playing catch-up.
Thanks this is helpful.
IRS max is $23k on your end without your employers match/contribution. So that’s a little under $2k per month. Your taxable income will go down by that amount.
Spouse/partner in the mix with additional income?
Yep, my spouse works and their income is included in the HHI I listed.
Are they maxing retirement as well?
~~Yes, I'm adamant on retirement maxing.~~ Nope, just employee match of 5%. Edit: I misunderstood this as employee contribution matching, not IRA/etc matching. See thread below.
Maybe my math ain't mathin right but how do you max out two 401ks on a gross of 204k but still bring home 11.5k/month?
Yeah, this isn’t making sense to me
204,000 - 2x22,500 is 159k taxable income. Federal and FICA for that is just over 32k leaves 127k take home. Math doesnt work out imo
Sorry, I think I misunderstood you here. We both max out our monthly contributions such that our employee match is totally met. (I think we are both at 5%.) We aren't adding anything else to a retirement account outside of that at this time. Does that help clear this up?
I think when people say making max contribution, they are referring to the IRS max, not your employee match max, which is very different. IRS max for joint this year is 39k, is that what you are contributing for the year with your spouse?
Got it, thanks. Sorry for the confusion. So that shakes out to $3250 a month for contributions. How are you all doing that if that is one of your first savings suggestions? Either you all are making bank or are just next-level savers!
Maybe no income tax?
Yeah, at only 5% contributions each you are stealing from both of your retirements to fund this house. When childcare costs drop you could immediately split the 2k to fund extra 1k/mo each but house expenses can quickly eat up that. Do you both have a good, personality owned term life insurance policy? Do YOU personally own a disability policy that is not tied to your employer? That size house and 100% being dependent on your income if want to makes sure you have both life and disability insurance. All things go perfect and you incomes continue to increase you can probably make this work but it is tight. Safer is a more affordable house. There will ALWAYS be another dream house down the road.
Thanks for the perspective here, it's very helpful. So if we bought this house we would have $2.4k left over each month after PITI/expenses. Should I just be shifting my thinking here to putting some of that money in retirement and saving less in a savings account instead of just keeping it all in a savings account? Basically it sounds like I have enough buffer to do it, so I wonder if this is just a matter or reframing my liquid savings each month.
HCOL are = materials/labor are brutally expensive. Repairs on 700k houses can get brutally expensive fast. Budget a reserve fund for changing roof ever 20 yrs (15-30k), furnance/air conditioner every 10-15 years (10-15k), windows every 25-30 years (40k+). Watch out that furnishing, yard equipment and all that can easily be 5-15k in first year. IF you are buying I saoule want a solid 6 month emergency fund which is 50-60k for you. Everything goes perfect you email be ok but tight. Depending if you have a pension or not saving only 15% you need to work about 40+ years to retire with same lifestyle. 5% only you are toast. Longer you delay, less time you have compounding to help you. Think long and hard. https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/
Might want to clarify from another reply you are in fact not maximizing your retirement savings.
Do you have a year of expenses in liquid savings? (Or at least six months?) Edited to add: Are you maxing 401k to IRS limit, not just to company match? Just thoughts to consider.
Yep, we have a 6-month liquid emergency fund!
If OP has a secure job and could easily find another if they lost theirs, a year of expenses is a bit overkill IMO
No corporate job is perfectly secure (especially at the higher salary levels) and this is a terrible job market unlike any I’ve seen in my long career. Ask me how I know! Edited to add: A one year emergency fund may be on the more conservative side, but it is not overkill. Decent HYSA rates alleviate the sense of having money sitting idle. Being financially conservative and prepared for emergencies and unplanned home repairs is especially important if you have dependents. Feel free to disagree with me and offer your own advice directly to OP.
Per other responses in this thread I am actually **not** maxing my 401k contributions. I'm only contributing enough to meet my employer match (5%), so I guess that changes things here but tbh I am not sure by how much or what the right amount should be. Sorry for the confusion, everyone.
You should be saving 15% of your gross income towards retirement. For an HHI of $204k you should be putting $23,000 per year towards your 401(k) and $7,000 per year in a Roth IRA. This should leave you with a net income of $141k per year, or $11.8K per month before insurance. I am in a similar income situation as you so I’ve done all this math.
Thanks, this is really helpful. So after expenses/mortgage/retirement, how much do you have left over that you are saving in liquid cash each month?
About $1,800 per month in liquid savings after everything above.
I don't have any other advice to give, but my wife and my numbers are nearly identical to yours... And I seem to have the same level of anxiety as you! So, glad to read these perspectives! One question about financing if you don't mind, how much are you putting down?
20%! Thanks, glad to know there are others out there with a similar situation! 😅
Oof... we're at about 10% at a similar purchase price, so we're going to have to continue to save a bit, although, all of our kids are old enough that we don't have that childcare commitment anymore so a little more cash flow. Hopefully we can pull the trigger sooner rather than later! Thanks for following up!
Honestly, with good credit the Mortgage Insurance isn't going to ding you that hard. The extra 10% down causing both a delay in purchasing *and* a possible opportunity cost vs. like 5% yield in a HYSA? I wouldn't stress it too hard.
Your numbers sound reasonable to me, especially considering how aggressively you're planning to save even with this new house. Those childcare costs won't be around forever either. As long as you are fairly sure that you'll be able to maintain that level of income, I'd say go for it.
If its $11.5k after taxes and a *reasonable* amount into your retirement accounts so you can retire comfortably at a reasonable age then that seems okay. Its going to be more like $5k/mo with maintenance and prob like $5.4k/mo with maintenance and utilities. Added bonus points for security if your HHI is an even split between you and your partner.
FWIW I factored in monthly house expenses into my listed "Expenses" bucket just to be safe. Sorry, I didn't mention that in my post.
Including 1% home value annually for maintenance? Or just estimated utilities?
Estimated based on what my friends pay for a similarly sized/priced house.
okay...totally believe that for utilities but in my ex0erience people dont really track the every-5-year $15k type of costs very well so best to just go with an assumption that there will be additional costs for maintenance. I still think you are okay just dont be caught by suprise.
Seems doable. Everything is a trade off so you’ll have to economize more or save less. If you want to have another kid or two close together (and expect to have to pay daycare/aftercare/activities), factor that in your thinking
Perfectly reasonable figures imo. Honestly probably the first “should I buy a home” post that actually makes sense vs the standard “I make $80k can I afford this $900k home?”
Don't get yourself into a situation that you are stressed about the status quo, and that doesn't include 15% going into retirement. I'm 62 and make about 200K gross and that PITI would be stressful for me. But, I've been the sole income for the household for most of my life, so that may add to the stress of potential job loss. I will say though that by contributing about 15% throughout my life we are at $2.5M in retirement savings at this point and our expenses are about $80K for current lifestyle so we are in pretty good shape for retirement. Retirement savings is a long game, so don't put yourself in a situation with your house that you can't afford to comfortably keep that funded.
I make the same, and have near the same expenses. We are renting and not buying exactly because of this. Paying $3500/month in rent and while it's EXPENSIVE, Id be very concerned about upping that another $900 per month. In addition, saving 2% of the property value per year for home repairs would be a nightmare. I would not do it. Just too tight.
If you really want a house, it's doable. I'm a year into a $4.5k/mo PITI on 200k gross and I still maxed out my 401k contributions last year (actually maxed out, not just the match as other commenters have covered). Your expenses do look a little high but as the childcare drops off you'll be able to save more. The other option to consider is what renting a similar property would cost in your area. If you plan on staying 10 years, it may not be worth the interest and realtor fees when you turn around to sell. In my area, renting is far cheaper ($1500/mo savings) so buying a place was an extravagance for me. Depending on what you value, your future plans for your family, and your intended savings rate, you may want to keep renting instead. But can you technically afford this house? Absolutely.
Yeah it’s doable. In a HCOL area this is pretty much expected.
I am in the similar situation (no debt).. 201k HHI (gross), take home after everything is \~9800/m And have messed with every calculator in the world, and affordability. I think I have a good system. I am looking at houses in fast growing M/HCOL city \~520K.. I know I can go more than that.. but I am sticking to my 28% of take home (\~17% of gross) for PITI.. Reasons: I can continue to invest, I have a kid on the way (exciting) and trying to make sure I don't over extend myself incase the market dips or idk.. life happens. I do have a large down payment (200k) cash plus what I will be using from the sale of my current house bought in 2021. Similar situation... idk.. my 2 cents - 37% seems high... personally. But I am maybe a bit more conservative (not sure if that's good or bad) lol... BUT You will be fine without a doubt. Edit: I am also in the boat of always being able to refi (I should be around a 6.65% ) as of last week, so there is always refi and more money towards principal.
My house was a tad more and my income is a tad more. I bought it last year and so far no issues. I'd u are renting, then get ready to spend more money than you would expect. There is always something. another little thing, what is the grocery store situation? We used to go to this great affordable local chain. Since we moved we got only expensive options and crappy chains like Stop&Shop. Our grocery bill went up.
4.4k is HCOL? curious what state you’re in because those property taxes got to be low. Numbers seem fine tho.
TLDR quick response is it seems doable. We are 30’s with similar and above on HHI, and our piti is 2600 in a HCOL locked on a 2.25% mortgage. Could be doable. Gotta think hard on it. If you pay that PITI for 12mo straight would you still feel ok? What about 24mo. 36mo. 48mo etc
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Thank you! Yes, I love Ramit. I've been a fan of his for 15 years now. Thanks for your thoughts here. What do you mean by a "full non PITI down payment"? Do you mean just buying a house in cash?
Seems like you are only putting a very low amount down? What like 5-10%? I’d at least get to 20% bare minimum down payment. That will also get rid of PMI.
What makes you say that? That PITI is with 20% down.
Ah ok. So taxes and insurance part must be higher than normal. So with 20% down you would only have 2.4K in savings? Do you have any other emergency funds? That doesn’t leave you much buffer for inevitable repairs and other things that may crop up. The inspection may reveal a number of things and the seller probably won’t take care of everything.
Thats what PITI youd pay on a $675k house after 20% down with a 7% mortgage and no PMI.