Q: Hi, June. I have been in the military for four years. I am 23 years of age. A year ago I started a Roth IRA, a mutual fund and the TSP. I am currently contributing the max in the Roth, $100 dollars a month in the mutual fund, and 10% in TSP. I think I might ultimately retire military. I plan on switching from enlisted to officer in about a year or two. My question is, do you think it is wise to invest in a house not knowing where I will be in a year or two? Or is it wise, or not, to purchase a home while in the military? Thank you.
-Pringle, Fayetteville, N.C.
A: Two thumbs up! You've definitely got your financial "game face" on! Buying a house may be a great decision -- even while you're in the military ... just not yet. By saving in the pre-tax TSP, the tax-free Roth, and the currently taxable mutual fund account you're hitting a trifecta on the savings front! Great job.
Under almost any circumstances, it is not advisable to buy a house as a one or two year proposition -- especially with your own situation in a state of flux. Make no mistake about it: Real estate is a long-term investment of 10 or more years. There have been times in the real estate market where one could buy a house and sell it at a profit the next year. But that is certainly not the norm! How about this: Make your mutual fund account a "house fund." Focus on increasing your monthly contributions to build up this account, and then in the future, when you have a better idea of where you're going, you'll have money to make a cash down payment, buy furniture, and really settle in ... on your terms.
Down the line, if you arrive at a new duty station and just have to buy, keep in mind that when you PCS (permanent change of station), you'll have a couple of decisions to make. Do you want to sell? Even at a loss (which is not tax deductible). Or do you want to be a landlord? Keep up the excellent work! And thank you for your service.
June Lantz Walbert is a CERTIFIED FINANCIAL PLANNER practitioner with USAA Financial Planning Services. She is also a lieutenant colonel in the U.S. Army Reserve with 20 years of service. Walbert's basic branch is Air Defense Artillery. She writes a weekly advice column, " Ask June " on military.com. Follow June @AskJune_usaa.
Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP and CERTIFIED FINANCIAL PLANNER in the United States, which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.
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