Save for Retirement or a House?

[TommyIV]

Looking for opinions on the topic of priority of extra money: put away for retirement or save to invest in property. I'm in my mid-twenties and pay rent which is essentially money thrown away. But with the extra money left over after needed expenses I wonder if saving for a down payment for a property and spending what I now spend on rent towards a mortgage is a smarter choice. To do this anytime soon I would need to drastically cut what I put away for retirement. Thoughts from experience?


Millennials are resorting to this questionable tactic to buy their first homes

 

[Scout333]

Looking for opinions on the topic of priority of extra money: put away for retirement or save to invest in property. I'm in my mid-twenties and pay rent which is essentially money thrown away. But with the extra money left over after needed expenses I wonder if saving for a down payment for a property and spending what I now spend on rent towards a mortgage is a smarter choice. To do this anytime soon I would need to drastically cut what I put away for retirement. Thoughts from experience?


Millennials are resorting to this questionable tactic to buy their first homes

Tom, As an old retiree I wish I had been smart enough to put aside money for my retirement in my twenties. The longer it is invested the bigger it gets. If you buy a house what will you have in 30 years? The tax deductions used to be a big deal. Not so much tax benefit these days since the standard deduction is much bigger fewer people are itemizing. Housing values are relatively stable except for a few hot real estate markets so you don't gain a lot of equity just from general real estate value increases. Best of luck to you! You are asking good questions.

 

[Bullitt]

I'm almost a year late to this one, but... I'd say do not skimp on retirement saving. You did say you were doing 20% so knocking that down to 10-15% would give you some savings while still putting in more than 5% so probably not a big deal. I do think I made a slight TSP deduction early on with the house because there was so much we needed to get fixed.

Don't rush it. Homes are NOT investments unless you plan to rent it out, so find something for the long term. I heard the same thing when I was younger, "Don't rent it's a waste of money, you can buy a house and get a tax writeoff." 1.) the tax writeoff is gone 2.) paying 2x what I was paying in rent to get a tax deduction was not a good deal anyway.

I'm not a fan of the starter home either. My peers who began with a starter home all ended up having to buy a bigger house after marriage and kids. In every case the new home was 2-3x more than the first home and with a bigger home comes bigger headaches. None of them are any more than 10 years into a 30 year mortgage when they should be on the back half of payments. Ironically, my older friends closer to or in retirement are looking to downsize.

Keep renting until you find that special someone to save with or if you plan to move for your job.

PS: Don't take a TSP loan either. I don't know one person in good financial standing that has gone that route.

 

[justcruisin]

Looking for opinions on the topic of priority of extra money: put away for retirement or save to invest in property. I'm in my mid-twenties and pay rent which is essentially money thrown away. But with the extra money left over after needed expenses I wonder if saving for a down payment for a property and spending what I now spend on rent towards a mortgage is a smarter choice. To do this anytime soon I would need to drastically cut what I put away for retirement. Thoughts from experience?


Millennials are resorting to this questionable tactic to buy their first homes

Why not do both?

Contribute to a Roth. Money grows. When you find a house that makes economic sense, use your Roth contributions as the down payment. Your gains are left in the account and continue to grow.