My wife and I are in our 50s and live in a very nice condo provided by his job. We've been behind on saving because we've worked in non-profits and teaching jobs for many years, and we have two children with special needs. We have no debt.
We're now making relatively good money and saving aggressively for retirement — maxing out our 401(k) and 403(b) contributions at up to $30,000 per year, maxing out our Roth IRAs; And add money to our accounts. Investment accounts handled by our financial advisor.
Overall, we save a little over 40% of our income each year, sometimes up to 50%.
We have one child in college, but a 529 fund covers expenses. We have a second child in a paid special education school for the next three years, which is our biggest expense.
We're not quite sure where we want to live when we retire in the next 15 years or so, but we'll need to live somewhere!
Would it be wise to continue to store cash in retirement funds and investments – with a plan to figure out where to live (buy or rent) when we retire? Or should we try to buy now, because housing will never get cheaper?
Two side points: 1) We couldn't afford to buy the area we work in, so anything we buy will be a vacation home somewhere else. 2) We used to be property owners and we don't have the courage to do so, so buying something and renting it is not an option.
Thank you for any perspective you can offer!
Live free in the moment
be seen: Reverse mortgage, sell home or Medicaid? How can my parents pay for long-term care?
Do you have a question about your retirement savings? Email us at HelpMeRetire@marketwatch.com
Dear reader,
You have multiple advantages here: the first is time, as you seem to have plenty of it to make your decisions, the second is the motivation to be financially secure for your retirement, and the third is free, high-quality housing, which frees up your income to cover other big expenses such as education and planning for the future.
Many people aren't able to save much for retirement in their younger years, and it takes a lot of work to prioritize that when the money finally becomes available.
Although you are Do You have time on your side, and while it's great that you're storing as much as possible in retirement accounts, it's important to have savings outside of those accounts.
“You can always borrow for a home, or for education, but not for your retirement, so don't give up on those lofty retirement contributions completely. “
You never know what could happen, and you may find that you need to move before those 15 years are up. Retirement accounts have their own rules, including a requirement that you be 59 1/2 years old to withdraw, so you don't want to face potential penalties in your (potential) rush.
For a short-term goal, an investment account may be appropriate, but be very careful with your asset allocation. You want this money to grow, but you also don't want the portfolio to be too risky because that could deteriorate your savings in the event of a downturn. If you plan to buy a home before 15 years, be conservative.
You also need to have enough liquid assets available for an emergency savings account. This is not for a home, retirement, vacation, education or anything else. This is simply to help you in the event of a crisis. Advisors suggest three to six months of living expenses, but I always like to err on the side of larger accounts. You really never know.
To your question – buy now or wait? Do not rush. Homes are a pretty big purchase, and if you don't find anything you absolutely love but buy it anyway, you'll likely regret it.
Also, the homes themselves may rise in price over the long term, but interest rates are still very high these days, so unless you plan to buy it outright, you'll have a mortgage on your head. Even if you can afford it, is it worth it to you if you don't need it yet and it's not a dream home? Probably not.
Be realistic about your expectations
Do some calculations now. First: How much do you actually need to retire? Be realistic about your expectations in retirement, including how much you want to spend on housing, education, lifestyle, and of course health care (expect to spend more than you think there). Then figure out how much you need to save to get there. Here's what I wrote to another reader about how to deal with these numbers.
Do something similar with your home goals. What is the maximum amount you want to spend? How much do you need for a down payment? How much money do you need to save to get there? You can't buy where you are now – But if you save over the next five to 10 years, you might be able to.
“What is the maximum amount you want to spend? How much do you need for a down payment? How much money do you need to save to get there? “
Based on what you find in these accounts, decide how to divide these contributions among your savings goals. You can always borrow for a home, or for education, but not for your retirement, so don't give up on those lofty retirement contributions completely.
Look around for where you might want to live when you eventually retire. List all your “wants” and “wants” in the home and neighborhood, then draw on a map where you want to look.
Keep an eye on the real estate market. How much are homes going for? What do you need to save for a big down payment? How much of a mortgage will that leave you with, and what additional expenses will you have with this home — utilities, lawn care, taxes, home association fees or local club memberships?
If you go to sites like Zillow Z,
Realtor and Redfin RDFN,
You can see what homes have sold in recent years. This gives you an idea of how much home values will increase and what you can expect to spend. If you do this over the next few years, you'll be one of the most informed buyers in this market – and that's a great position to be in.
See also: I want to retire at 55 in a country with free health care. My husband will get Social Security, and I have $160,000. Are we crazy?
Do you have a question about your retirement savings? Email us at HelpMeRetire@marketwatch.com
