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Saving for retirement and buying a house are both important goals. The quandary many people face is figuring out which to prioritize if funds are limited. Consider your income, retirement savings options, time until retirement, and life plans to decide which to focus on and when.

Think About Your Current Circumstances and Future Plans
Many people are eager to buy a home because it’s tangible, unlike a retirement account. However, the housing market can go up and down, while retirement accounts benefit from decades of compounded interest. In addition, adults often change jobs several times before finding the right fit.

If you might look for a new job or move in the next few years, you can put saving for a house on the back burner until you’re more settled professionally and prioritize saving for retirement in the meantime. Once you’ve reached a point where you feel secure in your job and know that you want to stay in the area where you’re currently living, you can begin to think about buying a home and shift your priorities to saving for a down payment.

How to Save for Retirement
If your employer offers a 401(k) or 403(b), you should contribute the maximum if you can. If your employer will match your contributions, putting as much money as possible into your retirement account makes even more sense because your employer will essentially be giving you free money that can help your retirement savings grow even faster. If you can’t contribute the maximum allowed, at least contribute up to the percentage that your employer will match. If your employer doesn’t offer a retirement plan, invest money in a traditional or Roth IRA on your own. The longer your retirement savings can accumulate compounded interest, the larger your nest egg will become.

When and How to Save for a Down Payment on a House
If you plan to stay in the same geographic area for at least the next several years and your job is secure, it makes sense to start thinking about saving to buy a house. After you’ve contributed to your retirement account, set aside what you can for a down payment. Put your money in a savings account with a high interest rate.

Saving 20 percent for a down payment can feel like an overwhelming challenge. You might be able to get a mortgage with a smaller percentage down, but you’d have to pay for private mortgage insurance. Give yourself at least a year to save as much as you can for a down payment while continuing to put money toward retirement.

Set Priorities and Re-evaluate as Necessary
Achieving the goals of saving for retirement and buying a home will require planning and time. Your priorities may shift as your circumstances change. The earlier you start thinking about your long-term objectives and working toward them, the better your chance of achieving them.

This article is intended for informational purposes only and should not be construed as professional or legal advice.