Q: I am a 43-year-old married woman who has $25,000 in my savings account and $2,000 in an ING savings account that is not growing as fast as I’d like. I would like to TX: purchase a home, but the market is overpriced and my income is only $28,000. Should I start a retirement plan or purchase a home?
-Y. Williams, Brooklyn, NY
A: Since you recognize that living in New York presents a financial barrier to your dream of homeownership, it would be prudent to hold off on your plan to purchase unless you can add the income of your spouse to the mix. Based on your salary, buying a home on your own is not your best option.
With your spouse, however, you could consider purchasing in New Jersey, where prices might be a bit more affordable, or you could look at purchasing a one- or two-bedroom condo in your area to start, then trade up to a larger home in the future. A $180,000, 30-year mortgage at 6% interest produces a monthly payment of $1,079, excluding property taxes, insurance, and maintenance fees (if you buy a condo).
As for your retirement fund, you should take the $2,000 you have in the ING account and open a Roth IRA and contribute to it regularly. You can contribute up to $5,000 in after-tax income in 2006, and you won’t pay taxes on your investments when you withdraw your money for retirement starting at 591/2 years old.