Money Matters
SmrBrd2012
member
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Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
upping 401k or put into savings?
Hello all, I was just wondering what my priority should be right now. I'm currently contributing 10% of my income into a 401k. H has not contributed at all because he's been in school. He will be starting a FT job soon with a reasonable income about equal to mine. We also are hoping to buy a house and really want to have the 20% dp + closing costs, + efund. We think with the current amount I've saved up that this will be possible in about a year, maybe slightly longer. I've read multiple times that we should be contributing at least 15% to our 401ks. We're both in our mid to late 20s. Would you up retirement contributions immediately or delay this until having enough to buy a house?
Thanks!
Re: upping 401k or put into savings?
10% is a great starting place.
You could do a bit a both, though. Why not contribute 12-13% to retirement and put the rest toward your home savings?
Once the home savings (DP, closing, e-fund) is all taken care of, you could bump up to 15% or more for retirement.
For something else to consider, with your husband going FT pretty soon, you will need to evaluate whether or not you want to buy a home taking into account one or both salaries. Perhaps one of you may be a SAH parent in the future and budgeting for a one income mortgage might prepare you and provide opportunities for you to have flexibility in the future.
Also, as you earn more income, your spending may increase. This is a common occurence, so just be mindful of it and/or plan to have one salary go entirely into savings or toward debts. Lastly, if you spending increases, you may need to also buff up that e-fund to account for some aspects of your increased costs of living (if you needed to use your e-fund).
Usually the 15% recommended includes employer matches, though I'm in the camp that you can't really save too much for retirement.
I know that you didn't ask, but if you both qualify for Roth IRA's I would look into that. You could contribute enough to your 401k's to qualify for the full employer's match and then max out a Roth IRA for each of you. If you still have money left over that you want to save for retirement, you could go back to the 401k and increase that.
I agree with the previous poster about considering basing the mortgage on one income if there is potential for one to stay home in the future. That will make it a lot easier to do so.
Yep, they match up to 5%, so technically I am contributing 5% of my salary. If I don't change my retirement contribution now, I would most definitely up it once we have enough in savings for the down payment, etc. I've also been considering doing a Roth IRA but was also thinking maybe I should wait until we can do the house stuff first.
I also hadn't really thought to try to base the mortgage on around one person's salary in case I want to stay home. That's some good advice although we do live in a HCOL area so I'm not sure how feasible it will be. Thanks for all of your input!