Home / Personal Finance / Real Estate / #177: Ask Paula and Joe: Should I Buy a House or Catch Up on Retirement Savings?

#177: Ask Paula and Joe: Should I Buy a House or Catch Up on Retirement Savings?

Imagine that your job is extraordinarily well-paying, however you don’t take pleasure in it.

You’d like to change employers, regardless that this may in all probability require a paycut. But earlier than you make the change, you need to accomplish two targets: purchase a house and catch up on retirement financial savings.

Should you pursue each targets? Or do you have to defer the house buy, given the potential future paycut?

If you resolve to pursue each targets, which one ought to come first?

This is without doubt one of the 5 questions that former monetary planner Joe Saul-Sehy and I reply on this week’s podcast episode.

We additionally reply a query from a listener who’s self-employed and desires to contribute extra to his retirement accounts. We speak to a different listener who’s residing on $600 month-to-month paychecks whereas maxing out his Mega Backdoor Roth contributions.

We speak to a 22-year-old with an $80,000 wage who’s debating between paying off her scholar loans vs. investing. And we reply a query from a listener who’s questioning what she ought to do with 401ok accounts from earlier employers.

Here are extra juicy particulars:

Jane asks:
My husband and I need to save for a downpayment whereas additionally catching up on retirement financial savings. How can we finest navigate this example?

The downpayment state of affairs: A modest 2-bedroom house will value round $600,000-$675,000 in our metropolis. Ideally we’d transfer in October, by which era we’ll have $120,000 saved, however we will in all probability wait one other 12 months.

The retirement financial savings state of affairs: My husband has $25,000 in an outdated Roth 401(ok) that he plans to roll over to a Roth IRA.

I have $23,000 break up between a Traditional and Roth IRA, and $10,000 absolutely vested in a Traditional 401(ok). I’ve began to contribute month-to-month what would quantity to the utmost in the direction of my conventional 401(ok). Since my husband doesn’t have any work advantages, I suppose he ought to put a most of $5,500 in the direction of a back-door Roth.

I don’t suppose I ought to do Roth as my future jobs might have decrease salaries. However, contributing to retirement reduces our down fee and places us in a place of paying PMI for longer.

How ought to we take into consideration these competing priorities, and does a Roth IRA for my husband and Traditional IRA for me make sense?

Tri asks:
I am 30 years outdated and I stay in Washington, DC. I’m self-employed, debt-free, and my internet price is $128,000. I max out my Roth IRA, Simple IRA, and HSA yearly, and my month-to-month bills are $1,270. I have two questions:

I would like to contribute greater than the $12,500 allowed in my Simple IRA. I’m considering of opening a SEP IRA or an Individual 401(ok) – which one would you advocate?
Can you give me a fast and soiled overview of taxable brokerage accounts, like how typically I must pay taxes on this account?

Ren asks:
This is the primary 12 months I’ve began contributing in the direction of the after-tax portion of my 401(ok) plan, and I plan to roll the additional cash over to a Roth IRA.

However, contributing this a lot cash has left me with round $300 in my paycheck, and I’m considering forward to when I may must liquidate my current funds in my brokerage account.

Should I promote the funds at about zero loss (so no capital acquire, no loss)? Is this a sound plan to observe to fund my mega-backdoor conversion? (Assuming that I’m not incurring any penalties on short-term or long-term capital beneficial properties.)

My second query is that this: my brother-in-law desires to switch his home to his mother and father. What’s the most affordable choice to do that? The house is price round $200,000. Does it make sense to switch it?

Hailey asks:
I’ve lastly determined that I need to pursue FI, however I don’t know the place to begin.

I’m 22 and making $80,000/12 months earlier than taxes, however I even have $54,000 in scholar mortgage debt. This debt is creating a psychological block for me.

Since I’m frugal, I have a lot of cash left each month to enhance my internet price, however I’m undecided if I ought to aggressively repay my scholar loans (half are at 6% and 7%), save aggressively, or do each carefully. With any of those choices, I really feel like I’m lacking out on one thing, and I can’t shake the sensation I’m not doing sufficient. What ought to I do?

Julie asks:
What occurs to the 401(ok)s I nonetheless have at earlier employers? What steps do I take to determine what to do with them? Do I put them collectively? Where?


Former monetary planner Joe Saul-Sehy and I reply these questions in at present’s episode. Enjoy!

Resources Mentioned:

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