this post was submitted on 05 Sep 2023
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I'll throw out a question:
If homeownership is an eventual, but not immediate, goal how do you balance your retirement and downpayment savings?
I've grappled with the question and have found it challenging to weigh the various options. Since the downpayment savings are kept in lower risk investments, I hate the idea of sitting on too big a pile when I'm still farther away from purchasing. But at the same time it will take some years to build up a downpayment of the desired size.
Well, one challenging part is that the timeline is uncertain. It might be as soon as 3 years or as long as 7. Different savings pathways has different tradeoffs.
For example, in one pathway you initially set more towards retirement and increase the proportion towards the downpayment closer to the time of purchase. This path leads to better retirement savings but the downside is that it reduces the flexibility in timing the purchase.
In the opposite direction you can front load downpayment savings and defer retirement saving. This path has opposite tradeoffs: improved optionality but reduced retirement savings.
I've been struggling lately with how to balance those tradeoffs. In my 20s I knew that a home purchase was so far away because of my career that following the first path was an easy choice. But now that I'm in my 30s and more settled I'm unsure of how aggressively to slow my retirement savings and start saving for a house.
Your home is your retirement. Or so I've heard. 🥲