We make $300K in California and want to invest and buy a home. Who can help us?

Will we be smart investors if we buy a house?

Getty Images

Question: My spouse and I recently moved from Canada to California. We both have stable jobs with a combined family income of around $300k. I’m 47 and she’s 41. We want to have the right balance to achieve the following goals: 1) Build a decent retirement plan in 20 yrs time, 2) Be able to buy a house after 1 year, around $1.2 million, 3) Ensure we have enough funds to support our son’s university fees (he’s in 10th grade now). Our dilemma is whether we should invest in a 401(k), or save money to buy a house. We’re also looking for tax saving strategies to achieve our goals. What kind of financial plan or financial adviser do we need?

Answer: Welcome to the United States and congratulations on starting the financial planning process. You’ve highlighted some of the most pressing goals for working families — retirement, housing and college savings. The good news:  “They do not have to be mutually exclusive,” explains certified financial planner Eric Uchida Henderson at East Horizon Investments. Certainly, working with a financial planner may be a good idea to help prioritize goals and manage your money, pros say. This free tool can match you with a fiduciary adviser who may meet your needs.

But first, let’s take a look at the goals you have and see how hiring an adviser can help you — and how to find the right one.

You will want to start with a look at where you are financially right now. “How much do you already have saved for retirement, a house fund and your son’s college fund? That will help determine how to allocate your monthly savings,” says certified financial planner Ryan Haiss at Flynn Zito Capital Management. Regardless of your answers, Haiss recommends contributing at least up to the company match for your 401(k). “Otherwise, you’re leaving free money on the table. This will also help with your tax saving question as the contributions are made before taxes are taken out,” says Haiss. 

Have an issue with your financial adviser or looking for a new one? Email picks@marketwatch.com.

There’s a lot to consider when weighing purchasing house vs. saving for retirement and college. That said, if you’ve undersaved for retirement, it may not make sense to sock away money for your kids’ college, pros say; your children can get loans for college, but you won’t for retirement. If you prioritize funding college savings, by the time your graduates you’ll both have theoretically less than 15 years to focus on saving for retirement, which is not a lot of time, says Clay Ernst, executive director, financial planning at Edelman Financial Engines. “There are financing options for college and many students have saved enormous amounts of money by attending a local community college for two years and then transferring to a public or private university for their final two years,” says Ernst.

As for saving for a home, that may be a good idea. That said, “we have seen many real estate plans delayed or augmented in this market due to the rapid rise in mortgage rates and low inventory levels,” says Henderson. A high-yield savings account can be a good place to put money away for your short term home purchase goal. Short-term treasuries are an option as well as the interest can be exempt from state and local taxes, but you should consult with a CFP to determine how best to implement this plan depending on your goals,” says Haiss. You can see some of the highest-paying savings accounts here.

If you are on track for retirement and house savings — and you also have an emergency fund — by all means, save for college. A 529 plan can be an excellent savings vehicle, as the earnings grow tax-free and are withdrawn tax-free as long as they are used for qualified education purposes. 

For each of these three goals, “there are big differences in timeframes and tax treatment of those goals ,” says Henderson.  But “a planner will help you see the ideal combination of these three financial vehicles,” says Segarra.

What kind of adviser do you need — and where do you find one? 

You’ll want to find an adviser who does comprehensive planning, explains certified financial planner Harrison Hinz at Spark Financial. Comprehensive financial planning takes into consideration your entire financial picture including your goals, budget and cash flow planning, assets, taxes, debt management, a retirement plan, and more. “This is a vague term to say the services include more than asset management, which is what you need. You can use adviser search engines such as NAPFA, FPA or XYPN to find those advisers and you should look for 3 to 4 that you can meet with and interview to understand their planning process and fees. It’ll also give you a good understanding about how comfortable you are with the adviser,” says Hinz.  Remember, too, that the biggest value of a financial plan comes with the relationship built to allow adjustments to the plan as life happens, says Hinz.

Moreover, you’ll likely want to find a financial adviser that takes a holistic approach. “They can look at all the resources available and determine the most efficient way to allocate them to achieve your goals. Not only will they help you develop a plan, but they’ll also help you protect it. There may be risks you’re not thinking about but a good adviser will help you identify them and discuss potential ways to mitigate those outcomes,” says Brian Leslie, director, financial planning at Edelman Financial Engines. (Looking for a new financial adviser? This free tool can match you to an adviser who may meet your needs.)

A certified financial planner, or CFP, might be a good option for you. In order to earn the CFP designation, someone must complete extensive coursework, exams and thousands of hours of work-related experience. CFPs are also held to a fiduciary duty, meaning they’re required to put their client’s best interests ahead of their own which minimizes the potential for conflicts of interest. Before hiring a planner, consult this MarketWatch Picks guide to 8 questions you should ask a financial adviser.

Questions edited for brevity and clarity.

Have an issue with your financial adviser or looking for a new one? Email picks@marketwatch.com.

Leave a Reply

Your email address will not be published. Required fields are marked *