Retirement vs home ownership

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by r3dt4rget

Here is what I did:

  • Starting from day 1 at my full time time, I was saving the minimum required to get full match in my 401k. So that was 7% with a 3.5% match. I didn’t contribute more than that or to any IRA accounts. I did put some money in my HSA, though.
  • During the first 7 years of my 20’s I was aggressively paying down student loans with my excess income. Getting rid of the high interest debt was important to me, more than buying a house, car, etc.
  • After the student loans were paid off, I simply took what I was paying on the loans and put that money into a savings account each paycheck
  • Once we hit the down payment number we wanted (10%) we bought a house and now what we were saving for downpayment each paycheck is going into our 401k and IRA’s
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So bottom line, always save the minimum for retirement. With the extra income left over, focus on your short term goals. For us, that meant buying a house. With a high savings rate, it only took us a year or so to save the entire down payment. After that, we can now focus on saving in our retirement accounts. For you, if you aren’t sure about buying a house, save cash as an emergency fund. Saving is saving. I wouldn’t feel bad about saving a nice bit of cash to give you the option of buying a home, even if you aren’t sure yet. IMO, go ahead and focus on building up a cash reserve for a couple years, and then focus on retirement saving.

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