We live in a house provided by my husband’s job. Do we save or buy a house?
My partner and I are in our 50s and live in very nice housing provided by his job. We were late in saving because we worked in non-profit and teaching jobs for many years and had two special needs children. We have no debt.
We are now making relatively decent money and are actively saving for retirement. Maximize your 401(k) and 403(b) contributions of $30,000 per year and invest the maximum amount allowed in a Roth IRA and investment account managed by our financial advisors.
Overall, we save just over 40% of our income each year, sometimes as much as 50%.
We have one child in college, but our 529 fund covers the costs. We are expecting our second child to attend a private special education school for the next three years, which is our biggest expense.
We’re not entirely sure where we want to live when we retire in the next 15 years or so, but we’ll have to live somewhere!
Would it be wise to continue saving cash for retirement and investments with a plan to figure out where to live (buy or rent) when you retire? Or should you buy now because homes will never become cheaper?
Two side notes: 1) We couldn’t afford to buy a house in the area where we worked, so anything we bought would be a vacation home somewhere else. 2) Buying or renting something is not in the cards because we were once homeowners and don’t have the courage to do so.
I appreciate any perspective you can give!
I live freely now
see: Reverse Mortgage, Home Sale or Medicaid Sale? How can my parents pay for long-term care?
Do you have any questions about your super? Please email us at HelpMeRetire@marketwatch.com.
Dear readers,
This has several benefits: The first is seemingly having a lot of time to make decisions, the second is motivation to be financially secure for retirement, and the third is free, high-quality housing. Free up your income for other big expenses, like education and future plans.
Many people aren’t able to save a lot of money for retirement when they’re young, and it takes a lot of effort to prioritize when you finally have the money.
Even though you do As great as it is to take your time and save as much money as possible in your retirement accounts, it’s important to save outside of those accounts as well.
“You can always take out a loan to buy a home or for education, but you can’t take out a loan for retirement, so don’t give up on a high retirement savings entirely. ”
You never know what can happen, and you may find that you need to move before 15 years are up. Retirement accounts have provisions that require you to be 59 ½ years old to make withdrawals, so you don’t want to rush it (if possible) and incur potential penalties.
For short-term goals, investment accounts are effective, but you must be very careful with your asset allocation. You want that money to grow, but you also don’t want your portfolio to become too risky, which could deteriorate your savings in a recession. If you plan to buy a home before 15 years, be conservative.
You’ll also need enough liquid assets for an emergency savings account. This is not for a home, retirement, vacation, education or anything else. This is to help you in case of a crisis. Advisors suggest three to six months’ worth of living expenses, but I always like to choose a larger account. You really don’t know.
To your question – do you want to buy now or wait? Don’t rush. A home is a very big purchase, so if you don’t find something you absolutely love but buy it anyway, you’ll probably regret it for the rest of your life.
Additionally, although house prices themselves may rise over the long term, interest rates are still quite high these days, so taking out a mortgage may be a burden if you don’t plan on buying a house right away. Even if you can afford it, if you don’t need it yet and it’s not your dream home, is it worth it? Probably not.
Be realistic about your expectations
Now let’s run some calculations. First: How much do you really need for retirement? Be realistic about your retirement expectations, including how much you want to spend on housing, education, lifestyle, and even medical expenses (expect to spend more than you think). Then figure out how much you need to save to get there. This is what I wrote to another reader about how to deal with those numbers.
Do something similar to your family goals. What is the maximum amount you are willing to spend? How much do I need for a down payment? How much more do you need to save to get there? I can’t afford to buy it where I am now. — but it could happen if you save for the next 5 to 10 years.
“What is the maximum amount you are willing to spend? How much do I need for a down payment? How much more do you need to save to get there? ”
Based on what you find through these calculations, decide how to split your contributions to meet your savings goals. You can always take out a loan to buy a home or for education, but you can’t take out a loan for retirement, so don’t give up on a high retirement savings entirely.
Eventually, figure out where you want to live when you retire. List all your “wants” and “needs” in your home and neighborhood and draw a map of the places you want to see.
Keep an eye on the real estate market. How much does the house cost? What do you need to save to make a sizeable down payment? How much of your mortgage will that leave you with, and what additional costs will you have on the house (utilities, lawn care, tax, housing association fees or local club membership fees)?
If you go to a site like Zillow Z,
Realtors and Redfin RDFN;
You can see which homes have sold in recent years. This will give you an idea of how much your home has increased in value and how much you can expect to spend. If you do this over the next few years, you will become one of the most knowledgeable buyers in your market. This is an amazing location.
See also: I want to retire at age 55 in a country with free health care. My spouse is scheduled to receive Social Security benefits and I have $160,000. Are we crazy?
Do you have any questions about your super? Please email us at HelpMeRetire@marketwatch.com.
