Hey Money Minder,
I’m not wondering if I should save less overall, but maybe I should save less in my retirement accounts and start saving for a house instead. I really want to own a house as soon as I can, but I haven’t saved much for one yet.
I work for the federal government, so I have a TSP and will have a pension.
Here are some details about me:
- Age: 24, single
- Salary: $82,000 (expecting to increase to around $105,000 in the next 2-3 years and then to $145,000 2-3 years after that)
Savings:
- Roth IRA: $11,300 (maxed out for 2024)
- TSP: $20,600
- 401k: $23,000
- HSA: $2,000
- Brokerage: $11,500 (not adding anything currently)
Debt:
- Student Loan: $15,200 (normally 6.54%, currently 0% due to SAVE plan, but expect payment to be around $180 when it expires)
- Rent: around $1450 with everything included
I’m currently maxing out my HSA and 401k/TSP. I split my max $23,000 contribution evenly between my TSP and 401k. My agency puts in 5% into TSP if I contribute 4% and 5% if I contribute 1% to the 401k.
I have about 2 months’ worth saved in an emergency fund, but I’m not too worried about increasing this because I’m a federal employee and could rely on family if needed.
Should I change where I’m saving my money, or should I wait for a few years for my salary to go up? I’m concerned about interest rates dropping and not having a down payment ready. But I also want to take advantage of starting to save early and not miss out on years of compound growth.
Thanks for your help,
House Hunter
Response from THE MONEY MINDER:
Hello There,
Congratulations on saving diligently at such a young age and for seeking advice on how to balance saving for retirement and a house. It’s great that you are already maxing out your HSA and 401k/TSP, setting yourself up for a secure financial future.
Given your financial situation and goals, it may be beneficial to consider adjusting your savings strategy slightly. While continuing to save for retirement is crucial, saving for a house is also an important goal for many individuals. Since you are currently saving aggressively for retirement and have relatively low expenses, you may consider redirecting some of your savings towards a house fund.
One practical approach could be to prioritize saving for a house by allocating a portion of your future salary increases towards a separate house fund, while still contributing a healthy amount to your retirement accounts. This way, you can make progress towards both goals simultaneously.
Additionally, when your student loan’s 0% promotional period expires, make sure to factor in the new monthly payment amount into your budget to ensure you can comfortably manage it along with your other expenses.
Remember, it’s essential to strike a balance between saving for retirement and achieving other financial goals. By adjusting your savings strategy gradually and staying disciplined with your budget, you can work towards owning a house while continuing to build a strong foundation for your financial future.
All the best from THE MONEY MINDER.
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