When Should I Get My Retirement Savings Started?

Ryan and his wife have been renting a house for a while and would like to purchase within the next few years. Is it okay to partially fund retirement while they save their down payment?

QUESTION: Ryan in Houston and his wife are about to finish their debt snowball. They’ve been renting a house for a while and would like to purchase it within the next few years. It will take about two years to save up the emergency fund and down payment. They’re concerned about not having any money in retirement yet. Is it okay to partially fund retirement while they save their down payment?

ANSWER: Sure. Once you finish Baby Step 3, which is where you’re debt-free and you have your emergency fund of three to six months of expenses, that’s the point you would start saving for a house and Baby Step 4—15% of your income into retirement. If you want to delay some or all of the retirement savings to build the down payment faster for a short period of time, I’m okay with that. We call that Baby Step 3(b), but if you wanted to put some into retirement and some into the savings for the house, that’s fine too. That works.

The bottom line is you’re not going to be out of retirement savings for very long. You’re still making $100,000. You’re still being very smart, very intentional with your money. You’re still going to be wealthy. But if you wanted to save 5% into retirement, maybe get the company match or something like that and then the rest of it we’re going to build up as much savings for the down payment as we can, that’s okay. As soon as the down payment is done, boom! We step hard on Baby Step 4, which is a full 15% of our income. Baby Step 5 is kids’ college, and then Baby Step 6 is we start paying that house off.