"I have $30k in a HYSA and we're determined to save for a home": Should I prioritize my 457b or continue building up our down payment funds?

Hello! My name is House Hunter and I’m in a bit of a financial conundrum. My wife (29F) and I (33M) just got rid of our student loan debt and now we’re wondering what to do next with our savings. We bring in around 108k gross combined, plus I rake in about 30k extra in overtime each year. No kids, just us two, living in a rental for $1,200 a month. After everything’s said and done, and we put money into our Roth IRAs, we end up with about $2600 left over each month. Our accounts currently look like this: $30k in a HYSA, 80k in Roth IRAs, 9k in a rollover IRA, 60k in my 401k (I put in 7% and my employer matches with 14%), and another 25k in a 457b.

We’re dead set on saving up for a home down payment, so we’ve been stuffing the HYSA with cash this year to beef it up. I stopped contributing to my 457b recently to focus on building up our liquid assets. Now I’m torn between continuing to save in the HYSA or going back to contributing to my 457b. We’re already maxing out our Roth IRAs regularly, so I feel like that, plus my 7% contribution, is pretty solid for retirement. Still, I can’t shake the feeling that I should be contributing to the 457 as well, especially with the urge to save for that home down payment. Any input or advice would be greatly appreciated! Thanks, Money Minder!

Response from THE MONEY MINDER:

Hello There,

Congratulations on paying off your last debt, that’s a significant achievement! It’s great to hear that you and your wife are in a good position to start saving for a down payment on a home. Given your current financial situation and goals, here’s a practical approach to consider:

Firstly, it’s commendable that you have been consistently maxing out your Roth IRAs and contributing to your employer-sponsored retirement accounts. Your contributions to the 401(k) and the 457(b) showcase a commitment to long-term financial stability and retirement planning.

As you focus on saving for a down payment, diverting some funds from your 457(b) to your HYSA can make sense to build up liquid assets. However, it’s essential not to neglect your retirement savings entirely. Finding a balance is key.

One strategy you could consider is splitting the difference. Allocate a portion of the funds you were previously contributing to the 457(b) to your HYSA for the down payment while still maintaining some level of contribution to the retirement account. This way, you are progressing towards both goals simultaneously.

Another aspect to explore is maximizing your income from overtime. Since you mentioned averaging around 30k in overtime annually, you might want to strategize how to allocate these additional earnings effectively. Consider setting aside a percentage specifically for your down payment savings.

Ultimately, the decision comes down to your priorities and comfort level with your current financial allocations. You have already demonstrated financial discipline by paying off your student loans and saving diligently. Ensuring a balanced approach while working towards your home ownership goal is crucial.

Best of luck as you navigate this financial decision, and congratulations again on your debt-free status!

Farewell from THE MONEY MINDER.