In an ideal world, you would have enough money to fund both your retirement and everything else in your life. However, in reality, you often have to make decisions because your income rarely, if ever, satisfies every single need you have. For a lot of working Americans, the decision sometimes comes down to something you need soon, perhaps a home, and something you won’t realize for many years, such as retirement. Let me outline an approach I used to save for my retirement and come up with funds for an immediate need. In my case, the immediate need was some down payment funds for a home.
What it comes down to is priority and the immediate priority is a down payment for a home so many people just cut off retirement savings. I recommend that you reduce your retirement savings to the bare minimum and then focus on your other goal. In my case, I dropped my 401(k) contributions to the minimum that would ensure I received the company match. From there, I decided that contributing the full $4,000 (at the time, now it’s $5,000) limit for my Roth IRA was going to be important as well. I predicted that one day, hopefully, my income would exceed the contribution limits so I should get my contributions in while I still could.
So, I was able to save up some money for a down payment on a home and ratchet down my retirement contributions without, hopefully, causing much long term harm.
4 responses to “Putting Retirement Saving On Hold”
I do this, too. I save for retirement but sometimes pull back because I am also saving for a house.
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Help! I need any advice.. I keep reading about all the smart
people who start saving at age 20 until they are 40 and then stop. After waiting 20 years they end up with more than the guy who started at age 35.. and invested all the way to 65.
Thing is Im the 35 year old guy! All I see is reasons to be discouraged. All the blogs seemed aimed at the ones who
didnt procrastinate like me. What can I do? Im self employed.
So no 401 K option yet..
There has to be SOMEONE out there who at least can offer a ray of hope.. Or tell me its too late even…
Matt, if it helps, being the 35 year old guy is better than being the 55 year old guy! Sure, you won’t end up with as much as the “smart” 20 year old but you also had the opportunity to spend that money and enjoy more out of life… that has to be worth something!
I’m also self employed, consider a SEP-IRA or another individual retirement program like that and you should be just fine. Starting late beats never starting at all.