Buying A Home Or Saving For Retirement

Buying a home is a big financial commitment, and one of the smartest you can make.  It is important, however, to determine if it is the right commitment at the right time for you because having a mortgage payment for most of your life is ultimately going to affect how much you are able to put away for retirement.  As you search homes online and visit open houses, keep in mind how well you'll be saving for retirement once you become a homeowner.  The last thing you'd want is to be forced to postpone retirement because you became a homeowner too soon.  We have put together some questions you should ask yourself to help you decide if you should become between buying a home or saving for retirement.  Keep reading to learn more and click this link to read the full article.

“The old-school mentality is that you want to own a home when you start a family, but there’s nothing wrong with pushing back buying a house to save more for retirement,” says Brandy Wright, a certified financial planner at Modera Wealth Management in Atlanta.

Of course, we’re not saying you shouldn’t buy a house. We're just suggesting you weigh the financial consequences carefully before diving into homeownership. When you're contemplating buying, here are three questions you should ask yourself to determine if now is the right time.

Question No. 1: Where will I get the money for a down payment?

Before you delve any further, you need to first make sure that you have enough cash for the down payment. Most financial planners recommend that home buyers strive to make a down payment amounting to 20% of the price of the home in order to avoid paying private mortgage insurance, or PMI, a premium that protects your lender in case you default on the loan. (PMI ranges from about 0.3% to 1.15% of your home loan.) With the national median home price currently around $235,000, according to the National Association of Realtors®), the average 20% down payment costs $47,000.If you don’t have enough cash to make a down payment, you might be considering dipping into other savings accounts—like your retirement fund. However, making early withdrawals from an IRA or 401(k) might be a big mistake for two reasons. If you borrow from either plan before age 59½, you’ll get slapped with a 10% excise tax on the amount you withdraw, on top of the regular income tax you pay on withdrawals from traditional defined contribution plans. Also, withdrawing funds prematurely prevents the money from accruing interest in these accounts—a mistake that can have a “huge negative impact on your retirement plans,” says Craig Jaffe, a financial planner at United Capital in Boca Raton, FL.Basically, if you need to tap retirement savings to scrape together enough money for a down payment, you’re better off waiting a few years until you save more cash.