22 year old - Should I focus more on saving for a house or retirement?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
chocoyogurt
Posts: 48
Joined: Sun Feb 02, 2020 3:17 am

22 year old - Should I focus more on saving for a house or retirement?

Post by chocoyogurt » Tue Feb 04, 2020 1:28 am

I live in Seattle where housing prices are skyrocketing. I’m 22 and currently making $100,000 a year income. I’m debating whether I should max out 401k and Roth IRA, or just put 15% into my 401k and put the rest into a condo/house down payment (since I have very good 401k plan that has a Vanguard 2065 target retirement fund with 0.08% expense ratio). I work as a mechanical engineer.

Debt: $0
E-fund: $10,000
401k balance: $5,000 invested in Vanguard 2065 fund
Roth IRA: N/A for now until I decide what to do
Rent: $1,465 a month
Utilities: around $100 a month
Total expenses is usually around $3,500 a month, so if I max both accounts I can save around $700 a month

Pros of house (can maybe include Condo too):
- It’s dope to have a cool house
- Good investment in Seattle
- My parents could never afford one, and I want to be able to get one

Cons of house:
- I guess less money into retirement?
- No plans of getting married anytime soon so I’m not sure why I would need a big house within the next 5 years. Maybe a condo would do?

Another option is to anyway just put 15% instead of maxing out my 401k, and doing neither and enjoying life. But I feel like I make so much money that I can enjoy life on less. But maybe not I don’t know. Would love to hear some people’s advice/opinions!

Edit: don’t care about retiring early since I expect life expectancies in the future to be a lot higher
Last edited by chocoyogurt on Tue Feb 04, 2020 1:42 am, edited 1 time in total.

Goal33
Posts: 1232
Joined: Sun Apr 12, 2015 12:30 pm

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by Goal33 » Tue Feb 04, 2020 1:34 am

Funny I remember making the same decision like it was yesterday. Turns out it was 6 years ago. I maxed my 401k at the time and my justification was that it saved me 35% or so in taxes and I could access 50% of the money up to 50k with a 401k loan if needed to make up the short fall for a downpayment. After my 401k hit 100k, the 50k was capped out, but between the 50k and my taxable, I can make any downpayment I need, so I continue to max out. Now my taxable is big enough that I’d only touch my 401k loan to avoid capital gains in the brokerage.
A man with one watch always knows what time it is; a man with two watches is never sure.

BFive55
Posts: 36
Joined: Sun Jan 22, 2017 8:21 pm

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by BFive55 » Tue Feb 04, 2020 1:47 am

So you can save $8,500/year. You're 22 years old.

Your rent is not outrageous. Is it a single bedroom apartment and is it a decent apartment? Are you happy living there?

I guess you would also need to look at the housing prices in Seattle, which are insane. While having a home would be awesome, you'd need to see if it is financially worth it and if you want to be there in X number of years. Would you consider moving to a lower cost state? If so, I would say save, save, save because you won't need such a big down payment.

Part of it will also be how much you want to spend on a condo/home, which goes back to the initial part about housing prices. If you're looking at a $500,000 home/condo then you could have a 20% down payment probably by the time you're 30-32 (I'm assuming you'd get raises and you'd be putting more into savings).

But if you buy a condo factor in condo fees. I was looking at a single family versus town home and if the town home is $20,000 cheaper but has $100/month fees then it's cheaper overall for the house.

Unladen_Swallow
Posts: 779
Joined: Tue Dec 10, 2019 6:12 pm

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by Unladen_Swallow » Tue Feb 04, 2020 2:36 am

I would ALWAYS max out savings first. This is my philosophy, hope you might find it helpful.

- Dont buy a house because it is "dope".
It isn't. It is useful when it makes sense. You are 22, the money you save/invest at this age goes further than mo ry invested at 30, 40, or 50.

- Don't buy a house because it is an investment.
It isn't. It is where you live. Buying real estate outside of your home as an investment is entirely different.

Max your retirement savings, and put some away for down payment. You can do both, even if the the downpayment savings is small. Your salary will increase. And by the likes of it, it will increase quickly. You will have plenty of extra money towards a house very quickly.
"I think it's much more interesting to live not knowing than to have answers which might be wrong." - Richard Feynman

Dyloot
Posts: 164
Joined: Mon Oct 14, 2013 8:04 am

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by Dyloot » Tue Feb 04, 2020 3:13 am

If it were me, knowing what I know now, I’d open the Roth IRA tomorrow and set the $500 monthly purchase of VTSAX. I’d bump the 401k contribution up enough to max out the annual 19k. And then I’d adjust my lifestyle to having less money each month.

It won’t be long until you don’t even notice the difference, and the compounding earnings of four decades will put you in a very good place down the road.

Owning a house can be dope, but it comes with tons of costs. You pay closing costs when you buy it. You pay taxes on it. You pay to maintain and insure it. When you sell it, you pay a Realtor a commission. And, especially early on, most of your monthly mortgage payment is paying down interest vs. principal.

I think it comes down more to understanding the renting vs. buying question more than the retirement savings vs. buying question.

You’re in a great spot. I’d recommend easing into a lifestyle that includes maxed retirement accounts, then evaluating the housing question when you’re comfortable living with the $25,000 investing annually.

mwkohout
Posts: 1
Joined: Sun Sep 15, 2019 11:48 am

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by mwkohout » Tue Feb 04, 2020 4:19 am

I bought a condo the year after I graduated college for many of the same reasons you did.

What a horrible mistake. If I would have put that money into savings/investment, things would have turned out much better for me.

Through my 20s and 30s my income kept growing, so I could have purchased something more in line with my long term tastes.

Also, when I got married my wife wanted to choose where we lived.

Also, condo buildings can be...difficult places to live. Often times they are poorly run by little tyrants. And even if the one you're considering isn't like that now-they can change into that in just a couple of years.

Selling that place and renting after I eventually got married was the best real estate decision I ever made.

basspond
Posts: 1325
Joined: Wed Nov 27, 2013 4:01 am

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by basspond » Tue Feb 04, 2020 6:45 am

Your older self will thank your younger self that you maxed out your 401k. Still save for a house, who knows what your future life partner will like and they might be saving for a house too.

goblue100
Posts: 1214
Joined: Sun Dec 01, 2013 10:31 am

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by goblue100 » Tue Feb 04, 2020 7:34 am

I wouldn't save money for a house or a condo, I would save money that could be used for a house or a condo. What's the difference, you may ask?
Money you are saving for a house or a condo should be in an extremely conservative investment. If you are just saving money in a taxable account that might be used someday, it can be invested more aggressively. If the investment does well AND I decide I want to buy a house, great. I'll have more to put down. And of course, once I do decide I want to buy that house in two years, I'll need to move that investment to something very conservative.

It's a small distinction, but one that could make you a lot of money over time.
Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns

User avatar
Sandtrap
Posts: 10640
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by Sandtrap » Tue Feb 04, 2020 7:39 am

Suggestions:

Concurrently (all at the same time in proportion to your comfort zone) . . . .

1. Solidify and maximize your existing income stream.
2. Diversify your income stream (over time).
3. Maximize your retirement contributions, especially if company income matching.
3b. Minimize debt and monthly debt payments. Don't make new debt (borrow/loan/etc).
4. Save for a down payment for a "condo" at a reasonable price that fits your needs. Deposit in short term savings (not invest). Do not buy a condo or house at this time until your do and figure out #1-6).
5. Spend time and resources for yourself and "self" development, etc.
6. Beware health, life, and lifestyle, "Black Swans". (Read: Life Code and Life Strategy by Dr. Phil - short/easy reads).

Good luck on your journey.
j :happy
Wiki Bogleheads Wiki: Everything You Need to Know

User avatar
galving
Posts: 153
Joined: Wed Oct 07, 2009 12:47 pm
Location: US Gulf Coast

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by galving » Tue Feb 04, 2020 8:10 am

Put the hammer down on the retirement savings options. Your future self will thank you.
A friend of mine (turning 40) never saved for retirement, and now realizes that his choice not to invest then has committed him to several difficult life style changes in the present. Retirement saving early gives you the freedom to choose in the future.

There's no immediate need for you to buy a house, unless you like regular maintenance items, fixing things, and upgrade projects.
Even if you do like these items, consider that your taste in real estate may change. Your future spouse may have an influence. . .

Good luck!

MotoTrojan
Posts: 9857
Joined: Wed Feb 01, 2017 8:39 pm

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by MotoTrojan » Tue Feb 04, 2020 8:15 am

Don’t rule out moving. I’m thrilled I left a VHCOL area.

Also if you do decide to save for the home I would put $6K/year of that savings in your Roth and leave it in a cash or low-duration bond instrument (money market, CD, ultra short term bonds, t-bills). You can always withdraw the contribution for a down payment but that way if your situation changes down the road, you have the valuable Roth space utilized and could always move the cash to equities for retirement.

Dottie57
Posts: 8533
Joined: Thu May 19, 2016 5:43 pm
Location: Earth Northern Hemisphere

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by Dottie57 » Tue Feb 04, 2020 9:05 am

goblue100 wrote:
Tue Feb 04, 2020 7:34 am
I wouldn't save money for a house or a condo, I would save money that could be used for a house or a condo. What's the difference, you may ask?
Money you are saving for a house or a condo should be in an extremely conservative investment. If you are just saving money in a taxable account that might be used someday, it can be invested more aggressively. If the investment does well AND I decide I want to buy a house, great. I'll have more to put down. And of course, once I do decide I want to buy that house in two years, I'll need to move that investment to something very conservative.

It's a small distinction, but one that could make you a lot of money over time.
This.

User avatar
Watty
Posts: 19316
Joined: Wed Oct 10, 2007 3:55 pm

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by Watty » Tue Feb 04, 2020 10:23 am

A few things;

Maxing out the Roth is an easy choice if you really need to you can always withdraw your contributions but not the earnings.

At this point in your career not owning a house is a really good thing since you are likely to change jobs several times in your 20's. If you buy a house then taking a great job in some other city could be difficult since you would have to sell the house and move. Even if you stay in Seattle if your next job is on the other side of town you could end up with a terrible commute. When you are interviewing for your next job you owning a house will likely come up and even if you are willing to have a bad commute the employer may not hire you because they think that you will not stay long because of the bad commute.

Over the years I have also seen job offers and promotions go to the person who could relocate the easiest. In one extreme example I saw someone get a great promotion on a Wednesday because he could be at the job 500 miles away on Monday to fill an unexpected critical opening. He came back a few weeks later to pack up his apartment.

When you get into relationships owning a home will make things complicated since the other person may live in a different part of the city or also own a home. If you buy a place and a boy or girlfriend lives with you then that will make it awkward if you break up when some future relationship feels funny about the prior person having lived there. If you get married then your future spouse might not want to live in a place where they know other people had spent the night even if they never moved in.

Another factor is that condos might not be so bad but houses require a LOT of time even if they are in pretty good shape. Until you have owned one it is hard to appreciate just how much time they take. Even if you hire people to do some of the work it still takes a lot of time to deal with them. When you are in your early 20s you should be out having fun, not spending your weekends dealing with things like moss that is growing on the roof(I used to live in the northwest :D )

Anyway that is a long way of saying that you should be in no hurry to buy a house before your late 20s so you have plenty of time to save up a downpayment. Five years from now you will likely be earning more which will allow you to save more for a house then.

Go on and Max out the 401k.
MotoTrojan wrote:
Tue Feb 04, 2020 8:15 am
Don’t rule out moving. I’m thrilled I left a VHCOL area.
+1

I am retired now but when I was your age and right out of college I lived in the Bay Area which has always been expensive. About the time I was 30 I was ready to buy my first house but the only type of house that I could have afford there was not only expensive but it would have been pretty dumpy and not someplace I would have wanted to live in.

There were other factors but I picked out a nice city where housing cost maybe a fifth of what it cost in the Bay Area, I found a job there and bought nice house as my first home a bit less than a year after I moved. My mortage payment was about what I was pay to rent a one bedroom apartment in the Bay Area. I not only could easily afford a nice home there but my quality of life was a lot better too. That was one of the best decisions that I ever made.

It is important to remember that in probably 80% of the country you can buy a nice house for maybe $300K or less, sometimes a lot less. When you are traveling make a point of checking out other areas to see if you can find some place affordable that excites you.

Here is a PDF of home prices in different metropolitan areas

https://www.nar.realtor/sites/default/f ... -11-07.pdf

From this web site.

https://www.nar.realtor/research-and-st ... ordability

Topic Author
chocoyogurt
Posts: 48
Joined: Sun Feb 02, 2020 3:17 am

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by chocoyogurt » Tue Feb 04, 2020 10:38 am

Dyloot wrote:
Tue Feb 04, 2020 3:13 am
If it were me, knowing what I know now, I’d open the Roth IRA tomorrow and set the $500 monthly purchase of VTSAX. I’d bump the 401k contribution up enough to max out the annual 19k. And then I’d adjust my lifestyle to having less money each month.

It won’t be long until you don’t even notice the difference, and the compounding earnings of four decades will put you in a very good place down the road.

Owning a house can be dope, but it comes with tons of costs. You pay closing costs when you buy it. You pay taxes on it. You pay to maintain and insure it. When you sell it, you pay a Realtor a commission. And, especially early on, most of your monthly mortgage payment is paying down interest vs. principal.

I think it comes down more to understanding the renting vs. buying question more than the retirement savings vs. buying question.

You’re in a great spot. I’d recommend easing into a lifestyle that includes maxed retirement accounts, then evaluating the housing question when you’re comfortable living with the $25,000 investing annually.
Should I do VTSAX if I’m doing target 2065 for my 401k?

quantAndHold
Posts: 4502
Joined: Thu Sep 17, 2015 10:39 pm

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by quantAndHold » Tue Feb 04, 2020 11:55 am

Some things, in no particular order...

I would only buy a house if I knew I was going to stay in it for at least 10 years. Houses are hard to sell, and when you inevitably want to move, he house will make that hard. Also, there will be periods of time that the value will go down. Those periods may last for several years. There will also be periods where nothing is selling, for any price, and those periods will coincide with times when jobs are scarce.

At 22, you can’t possibly know what the future will hold. Will you get a better job in the Bay Area? Topeka? Lose your job in a recession? Get in a relationship with someone who doesn’t want to live in that place? Hate your career and want to do something that doesn’t pay as well? Decide to chuck it all and travel?

What are your future income prospects? If you’re a fresh out of college techie, your income is probably going to double in the next five years. Right now you might be able to afford a tiny condo. In a few years you will be able to afford more. Selling and buying houses comes with a lot of transaction costs, so you don’t want to buy or sell more often than necessary.

On your income, I would still max out the 401k, and probably a Roth, too. If you decide you really want a house in the future, you can take the Roth contributions out and use that for a down payment. As you make more money, though, you’ll probably find yourself able to save in a taxable account, and you can use that for the down payment without tapping retirement funds.

But yeah, you’re 22 and have a good income. Make sure you enjoy some of that too.
Yes, I’m really that pedantic.

MotoTrojan
Posts: 9857
Joined: Wed Feb 01, 2017 8:39 pm

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by MotoTrojan » Tue Feb 04, 2020 12:03 pm

chocoyogurt wrote:
Tue Feb 04, 2020 10:38 am
Dyloot wrote:
Tue Feb 04, 2020 3:13 am
If it were me, knowing what I know now, I’d open the Roth IRA tomorrow and set the $500 monthly purchase of VTSAX. I’d bump the 401k contribution up enough to max out the annual 19k. And then I’d adjust my lifestyle to having less money each month.

It won’t be long until you don’t even notice the difference, and the compounding earnings of four decades will put you in a very good place down the road.

Owning a house can be dope, but it comes with tons of costs. You pay closing costs when you buy it. You pay taxes on it. You pay to maintain and insure it. When you sell it, you pay a Realtor a commission. And, especially early on, most of your monthly mortgage payment is paying down interest vs. principal.

I think it comes down more to understanding the renting vs. buying question more than the retirement savings vs. buying question.

You’re in a great spot. I’d recommend easing into a lifestyle that includes maxed retirement accounts, then evaluating the housing question when you’re comfortable living with the $25,000 investing annually.
Should I do VTSAX if I’m doing target 2065 for my 401k?
Until you have taxable investments as well and want to split your funds up more tax-efficiently, I would just hold the Target 2065 in your Roth to match your 401k. If you want to take a bit more risk (100% equity) then I would probably keep it simple and do VTSAX in Roth, and then hold US & ex-US in 401k and use the 401k to maintain balance. 20-30% International is a prudent choice in my view, I can't get on the 100% US bandwagon.

livesoft
Posts: 71400
Joined: Thu Mar 01, 2007 8:00 pm

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by livesoft » Tue Feb 04, 2020 12:08 pm

In our 20's, we lived in a VHCOL location in the 1980s. We saved for retirement. We didn't buy a home until we were in our late 30's, were married, and already had a child. That is, you can probably wait at least 15 to 20 years before you buy a house.
Wiki This signature message sponsored by sscritic: Learn to fish.

User avatar
rocket354
Posts: 363
Joined: Mon Dec 14, 2015 12:31 pm

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by rocket354 » Tue Feb 04, 2020 12:20 pm

The thing with being 22 is your life is very much in flux. You might change jobs at any time, you might get a serious GF and want to get married, you might just want to move somewhere new. If a headhunter reaches out to you with a great opportunity at double your current salary in a city with much better weather, are you going to say yes or no?

I say this because I know when I was 22 a year or a couple years still felt like a really long time. I think you'll find you're in a very, very different spot by the time you are 25, relationship-wise, friend-wise, preference-wise, and career-wise--even if it's still at the same company. Those are a lot of variables that tying yourself to a house can really hamper. Houses are e-x-p-e-n-s-i-v-e and hard to unload. If you think you even might want to move at any time in the next five years then you should not buy a house because renting will be a lot cheaper.

I understand the appeal of wanting a house. But houses aren't going anywhere, despite what the recent housing boom may suggest. Housing is a boom-bust market: there will be slow times. My recommendation is you save as much as you can in your 401k, IRA, and taxable otherwise. Then when you're a little more sure of your career, your relationship, and where you think you want to live--not to mention what you want in a house--you can much more confidently buy a house in your late 20's or even early 30's. And at that point you'll have plenty for a down-payment and you won't have tied yourself down and prevented yourself from taking advantage of the flexibility required to get the full benefit out of exploring all the different parts of life you should be exploring at your age.

wolf359
Posts: 2143
Joined: Sun Mar 15, 2015 8:47 am

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by wolf359 » Tue Feb 04, 2020 12:27 pm

Unladen_Swallow wrote:
Tue Feb 04, 2020 2:36 am
I would ALWAYS max out savings first. This is my philosophy, hope you might find it helpful.

- Dont buy a house because it is "dope".
It isn't. It is useful when it makes sense. You are 22, the money you save/invest at this age goes further than mo ry invested at 30, 40, or 50.

- Don't buy a house because it is an investment.
It isn't. It is where you live. Buying real estate outside of your home as an investment is entirely different.

Max your retirement savings, and put some away for down payment. You can do both, even if the the downpayment savings is small. Your salary will increase. And by the likes of it, it will increase quickly. You will have plenty of extra money towards a house very quickly.
+1

You don't need a house until you need a house. You need a place to live, but you don't need to own it unless you need to stay in one place for a long time. That may be when you have kids, and want to keep them in a school district.

If you focus on long-term investment, you may build up excess after-tax investments. That could start out as being retirement, but you can divert it towards a home downpayment when the time comes. When you get married and have kids, your priorities change, and you may not be saving for a number of years. So knocking off as much of the saving as possible now gives time for compound interest to kick in, and reduces the amount you have to save later.

If you do a really bang up job, you may achieve financial independence. That doesn't mean you have to retire early, but it gives you terrific leverage during bad economic times, layoffs, and moments of stress at work.

Dyloot
Posts: 164
Joined: Mon Oct 14, 2013 8:04 am

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by Dyloot » Tue Feb 04, 2020 12:28 pm

chocoyogurt wrote:
Tue Feb 04, 2020 10:38 am
Dyloot wrote:
Tue Feb 04, 2020 3:13 am
If it were me, knowing what I know now, I’d open the Roth IRA tomorrow and set the $500 monthly purchase of VTSAX. I’d bump the 401k contribution up enough to max out the annual 19k. And then I’d adjust my lifestyle to having less money each month.

It won’t be long until you don’t even notice the difference, and the compounding earnings of four decades will put you in a very good place down the road.

Owning a house can be dope, but it comes with tons of costs. You pay closing costs when you buy it. You pay taxes on it. You pay to maintain and insure it. When you sell it, you pay a Realtor a commission. And, especially early on, most of your monthly mortgage payment is paying down interest vs. principal.

I think it comes down more to understanding the renting vs. buying question more than the retirement savings vs. buying question.

You’re in a great spot. I’d recommend easing into a lifestyle that includes maxed retirement accounts, then evaluating the housing question when you’re comfortable living with the $25,000 investing annually.
Should I do VTSAX if I’m doing target 2065 for my 401k?
That's what I would do--as long as your goal is to leave it there until you hit retirement age. This is really key--what's your plan? You should think through what you're doing, and then stick to it. When you change it, you should do so with the understanding of the consequences of your decision.

No one can predict the future, but in all my readings (both on this forum and in the various retirement books) I've learned that history has shown that over long periods of time the market will provide the greatest earnings potential. So, this is the buy-and-hold technique. Buy stock, and hold it for a long period of time. VTSAX is an excellent index fund, combining low costs with full exposure to the US Market.

If the market takes a 40% hit, don't panic and sell. Just keep buying. History has shown that the market will return, and those who stayed in fared much better than those who sold. Think of it this way: if the market goes up, your investments go up. If the market goes down, there's an excellent chance it will return AND you get to buy at a discount until that happens.

Most investors transition to more conservative investments as they age, but you're so young you won't even need to consider it for 15-20 years. As I mentioned above, you're in a great spot right now.

If you're not following the buy-and-hold technique, plan accordingly.

For example, if you're saving for a down payment via the Roth (you can withdraw your principal investment without tax penalty, but not the earnings), then you may want to stick with a more conservative investment. I wouldn't recommend this--the Roth, to me, is precious. If you have the time period for compounded earnings, and the ability to continually invest for the duration of that time period, your Roth will grow into a tax-free nest egg that will give you amazing flexibility in retirement--and even provide your heirs with a tax-free inheritance if you don't end up needing all of it.

The 401k, on the other hand, will not be tax-free on retirement--but that doesn't mean you shouldn't take full advantage of it. The tax-shielded contributions mean that you're investing your most heavily taxed income. At your income, I expect you'll be paying .70 cents on the dollar, so your $19,000 contribution will only reduce your take home by about $13,300.

The goal is have a huge 401k/IRA nest egg, and a large Roth IRA nest egg, as you near retirement. It will give you tremendous flexibility and opportunities as you decide when to stop working.

I'd suggest picking up a few books to better your understanding of different approaches. It'll give you a framework to navigate your investing strategy, and also prepare you for future events so you don't make bad, emotional decisions.

My two favorites:

The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns by Mr. Bogle himself

The Simple Path to Wealth: Your road map to financial independence and a rich, free life by JL Collins

I doubt you'll find any posters here who would argue against the first book. The second, by Collins, will fan both fans and critics. I think it's an excellent follow up to Bogle for any young person who is just getting started. What Bogle starts with philosophy, Collins continues with mindset.

Good luck, man! You're in an amazing spot. I wish I spent more time saving when I was 22 and less time spending.

Dyloot
Posts: 164
Joined: Mon Oct 14, 2013 8:04 am

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by Dyloot » Tue Feb 04, 2020 12:33 pm

MotoTrojan wrote:
Tue Feb 04, 2020 12:03 pm
chocoyogurt wrote:
Tue Feb 04, 2020 10:38 am
Dyloot wrote:
Tue Feb 04, 2020 3:13 am
If it were me, knowing what I know now, I’d open the Roth IRA tomorrow and set the $500 monthly purchase of VTSAX. I’d bump the 401k contribution up enough to max out the annual 19k. And then I’d adjust my lifestyle to having less money each month.

It won’t be long until you don’t even notice the difference, and the compounding earnings of four decades will put you in a very good place down the road.

Owning a house can be dope, but it comes with tons of costs. You pay closing costs when you buy it. You pay taxes on it. You pay to maintain and insure it. When you sell it, you pay a Realtor a commission. And, especially early on, most of your monthly mortgage payment is paying down interest vs. principal.

I think it comes down more to understanding the renting vs. buying question more than the retirement savings vs. buying question.

You’re in a great spot. I’d recommend easing into a lifestyle that includes maxed retirement accounts, then evaluating the housing question when you’re comfortable living with the $25,000 investing annually.
Should I do VTSAX if I’m doing target 2065 for my 401k?
Until you have taxable investments as well and want to split your funds up more tax-efficiently, I would just hold the Target 2065 in your Roth to match your 401k. If you want to take a bit more risk (100% equity) then I would probably keep it simple and do VTSAX in Roth, and then hold US & ex-US in 401k and use the 401k to maintain balance. 20-30% International is a prudent choice in my view, I can't get on the 100% US bandwagon.
And I'd be totally fine with that approach, too.

There's really no way to predict whether VTSAX or the Target 2065 will do better. All that really matters is that you pick one and contribute to it continually for your professional, working life.

almostretired1965
Posts: 213
Joined: Mon Nov 13, 2017 2:02 pm

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by almostretired1965 » Tue Feb 04, 2020 12:44 pm

In my opinion, at your age, with your marital/relationship status, the most important thing is to maintain flexibility. Buying a piece of property is a major commitment with significant sunk costs. Financially it may work out great or it may not over the medium or long term relative other investments, but in the short run, the overhead expenses will kill you. Now there are good reasons to buy a piece of property if you are committed to settling down in a community, but that is different matter.

Furthermore, owning your own place will encourage you to accumulate stuff ......... This in my opinion, is one thing you should try to avoid at this stage of your life. Your 20s is the time in your life where you want to take chances in your career, be able to jump at job opportunities across the country or the world that will help you build critical skills. Major, illiquid investments and possessions can really get in the way.

Topic Author
chocoyogurt
Posts: 48
Joined: Sun Feb 02, 2020 3:17 am

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by chocoyogurt » Tue Feb 04, 2020 3:05 pm

MotoTrojan wrote:
Tue Feb 04, 2020 12:03 pm
chocoyogurt wrote:
Tue Feb 04, 2020 10:38 am
Dyloot wrote:
Tue Feb 04, 2020 3:13 am
If it were me, knowing what I know now, I’d open the Roth IRA tomorrow and set the $500 monthly purchase of VTSAX. I’d bump the 401k contribution up enough to max out the annual 19k. And then I’d adjust my lifestyle to having less money each month.

It won’t be long until you don’t even notice the difference, and the compounding earnings of four decades will put you in a very good place down the road.

Owning a house can be dope, but it comes with tons of costs. You pay closing costs when you buy it. You pay taxes on it. You pay to maintain and insure it. When you sell it, you pay a Realtor a commission. And, especially early on, most of your monthly mortgage payment is paying down interest vs. principal.

I think it comes down more to understanding the renting vs. buying question more than the retirement savings vs. buying question.

You’re in a great spot. I’d recommend easing into a lifestyle that includes maxed retirement accounts, then evaluating the housing question when you’re comfortable living with the $25,000 investing annually.
Should I do VTSAX if I’m doing target 2065 for my 401k?
Until you have taxable investments as well and want to split your funds up more tax-efficiently, I would just hold the Target 2065 in your Roth to match your 401k. If you want to take a bit more risk (100% equity) then I would probably keep it simple and do VTSAX in Roth, and then hold US & ex-US in 401k and use the 401k to maintain balance. 20-30% International is a prudent choice in my view, I can't get on the 100% US bandwagon.
What do you think of VTSAX in Roth and Vanguard 2065 in 401k. Is that a weird combo?

MotoTrojan
Posts: 9857
Joined: Wed Feb 01, 2017 8:39 pm

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by MotoTrojan » Tue Feb 04, 2020 3:09 pm

chocoyogurt wrote:
Tue Feb 04, 2020 3:05 pm
MotoTrojan wrote:
Tue Feb 04, 2020 12:03 pm
chocoyogurt wrote:
Tue Feb 04, 2020 10:38 am
Dyloot wrote:
Tue Feb 04, 2020 3:13 am
If it were me, knowing what I know now, I’d open the Roth IRA tomorrow and set the $500 monthly purchase of VTSAX. I’d bump the 401k contribution up enough to max out the annual 19k. And then I’d adjust my lifestyle to having less money each month.

It won’t be long until you don’t even notice the difference, and the compounding earnings of four decades will put you in a very good place down the road.

Owning a house can be dope, but it comes with tons of costs. You pay closing costs when you buy it. You pay taxes on it. You pay to maintain and insure it. When you sell it, you pay a Realtor a commission. And, especially early on, most of your monthly mortgage payment is paying down interest vs. principal.

I think it comes down more to understanding the renting vs. buying question more than the retirement savings vs. buying question.

You’re in a great spot. I’d recommend easing into a lifestyle that includes maxed retirement accounts, then evaluating the housing question when you’re comfortable living with the $25,000 investing annually.
Should I do VTSAX if I’m doing target 2065 for my 401k?

Until you have taxable investments as well and want to split your funds up more tax-efficiently, I would just hold the Target 2065 in your Roth to match your 401k. If you want to take a bit more risk (100% equity) then I would probably keep it simple and do VTSAX in Roth, and then hold US & ex-US in 401k and use the 401k to maintain balance. 20-30% International is a prudent choice in my view, I can't get on the 100% US bandwagon.
What do you think of VTSAX in Roth and Vanguard 2065 in 401k. Is that a weird combo?
I wouldn't call it weird but it will allow your asset allocation to drift based on contributions/growth. Vanguard 2065 has a pretty healthy dose of International equities (40% maybe?) which is more than what most people like to have (20-30%) so in that token it actually works pretty well to do as you say, since the VTSAX in Roth will reduce your bond allocation and also tilt towards US equities.

For now I think it would be a good hands-off approach but at some point you should really pick an overall allocation (including US vs. ex-US) and start making a habit of sticking to it, no matter how either fund is performing.

Topic Author
chocoyogurt
Posts: 48
Joined: Sun Feb 02, 2020 3:17 am

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by chocoyogurt » Tue Feb 04, 2020 4:08 pm

MotoTrojan wrote:
Tue Feb 04, 2020 3:09 pm
chocoyogurt wrote:
Tue Feb 04, 2020 3:05 pm
MotoTrojan wrote:
Tue Feb 04, 2020 12:03 pm
chocoyogurt wrote:
Tue Feb 04, 2020 10:38 am
Dyloot wrote:
Tue Feb 04, 2020 3:13 am
If it were me, knowing what I know now, I’d open the Roth IRA tomorrow and set the $500 monthly purchase of VTSAX. I’d bump the 401k contribution up enough to max out the annual 19k. And then I’d adjust my lifestyle to having less money each month.

It won’t be long until you don’t even notice the difference, and the compounding earnings of four decades will put you in a very good place down the road.

Owning a house can be dope, but it comes with tons of costs. You pay closing costs when you buy it. You pay taxes on it. You pay to maintain and insure it. When you sell it, you pay a Realtor a commission. And, especially early on, most of your monthly mortgage payment is paying down interest vs. principal.

I think it comes down more to understanding the renting vs. buying question more than the retirement savings vs. buying question.

You’re in a great spot. I’d recommend easing into a lifestyle that includes maxed retirement accounts, then evaluating the housing question when you’re comfortable living with the $25,000 investing annually.
Should I do VTSAX if I’m doing target 2065 for my 401k?

Until you have taxable investments as well and want to split your funds up more tax-efficiently, I would just hold the Target 2065 in your Roth to match your 401k. If you want to take a bit more risk (100% equity) then I would probably keep it simple and do VTSAX in Roth, and then hold US & ex-US in 401k and use the 401k to maintain balance. 20-30% International is a prudent choice in my view, I can't get on the 100% US bandwagon.
What do you think of VTSAX in Roth and Vanguard 2065 in 401k. Is that a weird combo?
I wouldn't call it weird but it will allow your asset allocation to drift based on contributions/growth. Vanguard 2065 has a pretty healthy dose of International equities (40% maybe?) which is more than what most people like to have (20-30%) so in that token it actually works pretty well to do as you say, since the VTSAX in Roth will reduce your bond allocation and also tilt towards US equities.

For now I think it would be a good hands-off approach but at some point you should really pick an overall allocation (including US vs. ex-US) and start making a habit of sticking to it, no matter how either fund is performing.
I don’t mind doing Target for 401k because I really don’t want to tinker with it. With a Roth since I’m putting less money per year, I don’t mind taking a bigger risk. But idk if people do this (TRF for 401k and VTSAX for Roth)

SQRT
Posts: 1295
Joined: Sat Feb 05, 2011 9:44 am

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by SQRT » Tue Feb 04, 2020 4:13 pm

Everything in balance including living your life today. You’re only 22 and have lots of time.
Last edited by SQRT on Tue Feb 04, 2020 5:26 pm, edited 1 time in total.

MotoTrojan
Posts: 9857
Joined: Wed Feb 01, 2017 8:39 pm

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by MotoTrojan » Tue Feb 04, 2020 4:17 pm

chocoyogurt wrote:
Tue Feb 04, 2020 4:08 pm
MotoTrojan wrote:
Tue Feb 04, 2020 3:09 pm
chocoyogurt wrote:
Tue Feb 04, 2020 3:05 pm
MotoTrojan wrote:
Tue Feb 04, 2020 12:03 pm
chocoyogurt wrote:
Tue Feb 04, 2020 10:38 am


Should I do VTSAX if I’m doing target 2065 for my 401k?

Until you have taxable investments as well and want to split your funds up more tax-efficiently, I would just hold the Target 2065 in your Roth to match your 401k. If you want to take a bit more risk (100% equity) then I would probably keep it simple and do VTSAX in Roth, and then hold US & ex-US in 401k and use the 401k to maintain balance. 20-30% International is a prudent choice in my view, I can't get on the 100% US bandwagon.
What do you think of VTSAX in Roth and Vanguard 2065 in 401k. Is that a weird combo?
I wouldn't call it weird but it will allow your asset allocation to drift based on contributions/growth. Vanguard 2065 has a pretty healthy dose of International equities (40% maybe?) which is more than what most people like to have (20-30%) so in that token it actually works pretty well to do as you say, since the VTSAX in Roth will reduce your bond allocation and also tilt towards US equities.

For now I think it would be a good hands-off approach but at some point you should really pick an overall allocation (including US vs. ex-US) and start making a habit of sticking to it, no matter how either fund is performing.
I don’t mind doing Target for 401k because I really don’t want to tinker with it. With a Roth since I’m putting less money per year, I don’t mind taking a bigger risk. But idk if people do this (TRF for 401k and VTSAX for Roth)
Again, it isn't about risk in each account, it is about determining your desired overall allocation (across all accounts) and maintaining that in an expense and tax-efficient manner. By viewing your Roth and 401k separately you don't have an overall target allocation, which you should strive to get in the habit of having at some point.

If you just wanted to have higher growth assets in Roth (no bonds) then you may want to include some International stocks in the Roth as well, but without having an overall allocation you are trying to achieve, you'll just be guessing at which fund to buy (US vs. International).

So I think you'd be fine with just VTSAX in the Roth and TRF in the 401k, but if your reason for doing that isn't that it approximates your desired allocation, you may want to start there.

Topic Author
chocoyogurt
Posts: 48
Joined: Sun Feb 02, 2020 3:17 am

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by chocoyogurt » Tue Feb 04, 2020 6:36 pm

MotoTrojan wrote:
Tue Feb 04, 2020 4:17 pm
chocoyogurt wrote:
Tue Feb 04, 2020 4:08 pm
MotoTrojan wrote:
Tue Feb 04, 2020 3:09 pm
chocoyogurt wrote:
Tue Feb 04, 2020 3:05 pm
MotoTrojan wrote:
Tue Feb 04, 2020 12:03 pm



Until you have taxable investments as well and want to split your funds up more tax-efficiently, I would just hold the Target 2065 in your Roth to match your 401k. If you want to take a bit more risk (100% equity) then I would probably keep it simple and do VTSAX in Roth, and then hold US & ex-US in 401k and use the 401k to maintain balance. 20-30% International is a prudent choice in my view, I can't get on the 100% US bandwagon.
What do you think of VTSAX in Roth and Vanguard 2065 in 401k. Is that a weird combo?
I wouldn't call it weird but it will allow your asset allocation to drift based on contributions/growth. Vanguard 2065 has a pretty healthy dose of International equities (40% maybe?) which is more than what most people like to have (20-30%) so in that token it actually works pretty well to do as you say, since the VTSAX in Roth will reduce your bond allocation and also tilt towards US equities.

For now I think it would be a good hands-off approach but at some point you should really pick an overall allocation (including US vs. ex-US) and start making a habit of sticking to it, no matter how either fund is performing.
I don’t mind doing Target for 401k because I really don’t want to tinker with it. With a Roth since I’m putting less money per year, I don’t mind taking a bigger risk. But idk if people do this (TRF for 401k and VTSAX for Roth)
Again, it isn't about risk in each account, it is about determining your desired overall allocation (across all accounts) and maintaining that in an expense and tax-efficient manner. By viewing your Roth and 401k separately you don't have an overall target allocation, which you should strive to get in the habit of having at some point.

If you just wanted to have higher growth assets in Roth (no bonds) then you may want to include some International stocks in the Roth as well, but without having an overall allocation you are trying to achieve, you'll just be guessing at which fund to buy (US vs. International).

So I think you'd be fine with just VTSAX in the Roth and TRF in the 401k, but if your reason for doing that isn't that it approximates your desired allocation, you may want to start there.
Hmmm maybe I should just do 70% FXAIX and 30% international in 401k, and 70% VTSAX and 30% VTAIX in Roth then? Or all in FXAIX/VTSAX for 401k and Roth respectively

beehivehave
Posts: 466
Joined: Thu Aug 08, 2019 1:21 pm

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by beehivehave » Tue Feb 04, 2020 7:04 pm

Whatever else you do, be sure to first max out your savings up to the maximum employer match. That's an immediate 100% return.

MotoTrojan
Posts: 9857
Joined: Wed Feb 01, 2017 8:39 pm

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by MotoTrojan » Tue Feb 04, 2020 11:54 pm

chocoyogurt wrote:
Tue Feb 04, 2020 6:36 pm
MotoTrojan wrote:
Tue Feb 04, 2020 4:17 pm
chocoyogurt wrote:
Tue Feb 04, 2020 4:08 pm
MotoTrojan wrote:
Tue Feb 04, 2020 3:09 pm
chocoyogurt wrote:
Tue Feb 04, 2020 3:05 pm


What do you think of VTSAX in Roth and Vanguard 2065 in 401k. Is that a weird combo?
I wouldn't call it weird but it will allow your asset allocation to drift based on contributions/growth. Vanguard 2065 has a pretty healthy dose of International equities (40% maybe?) which is more than what most people like to have (20-30%) so in that token it actually works pretty well to do as you say, since the VTSAX in Roth will reduce your bond allocation and also tilt towards US equities.

For now I think it would be a good hands-off approach but at some point you should really pick an overall allocation (including US vs. ex-US) and start making a habit of sticking to it, no matter how either fund is performing.
I don’t mind doing Target for 401k because I really don’t want to tinker with it. With a Roth since I’m putting less money per year, I don’t mind taking a bigger risk. But idk if people do this (TRF for 401k and VTSAX for Roth)
Again, it isn't about risk in each account, it is about determining your desired overall allocation (across all accounts) and maintaining that in an expense and tax-efficient manner. By viewing your Roth and 401k separately you don't have an overall target allocation, which you should strive to get in the habit of having at some point.

If you just wanted to have higher growth assets in Roth (no bonds) then you may want to include some International stocks in the Roth as well, but without having an overall allocation you are trying to achieve, you'll just be guessing at which fund to buy (US vs. International).

So I think you'd be fine with just VTSAX in the Roth and TRF in the 401k, but if your reason for doing that isn't that it approximates your desired allocation, you may want to start there.
Hmmm maybe I should just do 70% FXAIX and 30% international in 401k, and 70% VTSAX and 30% VTAIX in Roth then? Or all in FXAIX/VTSAX for 401k and Roth respectively
Hypothetical here but imagine your 401k has an S&P500 fund at a low expense ratio but only has a poor active managed international fund with high expenses. I’d try to hold as much of your S&P500 as you can in the 401k, even if it’s 100% S&P500. Then hold VTSAX and VTAIX in your Roth so your total allocation is still your target 70/30. No need to replicate 70/30 in each, although that is okay as well.

whunter3333
Posts: 40
Joined: Fri Jul 13, 2018 7:41 pm

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by whunter3333 » Wed Feb 05, 2020 2:46 pm

Thank you for writing these things. Mission creep in house owning is a very common issue (IMO). Maybe furnishings and renovations, and modernizations are optional, but almost everyone forgets to add those costs when they are evaluating rent vs buy. And every new piece of expense has a hidden opportunity cost.

Caduceus
Posts: 2671
Joined: Mon Sep 17, 2012 1:47 am

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by Caduceus » Wed Feb 05, 2020 2:52 pm

I would recommend saving for retirement. The reasons are fairly simple. Tax advantaged space when you're early in your career is extremely valuable - it has more time to compound and at your salary it saves you a fair amount of taxes. You're young, so you don't know - even if you think you do - where you will be in five or ten years time. You might meet the love of your life. You might find a new job. You might change industries entirely. Don't believe me? Go speak randomly to a group of people in their 30s and ask them if they predicted what they'd be doing just ten years ago.

Don't worry too much about not being able to afford a house in the early part of your career when being able to move might allow you to take opportunities as they come along.

You're young enough that I'm guessing you don't mind having roommates - sharing an apartment? If so, financially speaking, you'd definitely come out ahead by splitting rent with a roommate and saving aggressively for retirement.

User avatar
samsoes
Posts: 1452
Joined: Tue Mar 05, 2013 9:12 am
Location: Northeast Rat Race

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by samsoes » Wed Feb 05, 2020 3:13 pm

chocoyogurt wrote:
Tue Feb 04, 2020 1:28 am

- It’s dope to have a cool house
Dope? Does that mean Groovy?
"Happiness Is Not My Companion" - Gen. Gouverneur K. Warren. | (Avatar is the statue of Gen. Warren atop Little Round Top @ Gettysburg National Military Park.)

Topic Author
chocoyogurt
Posts: 48
Joined: Sun Feb 02, 2020 3:17 am

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by chocoyogurt » Wed Feb 05, 2020 7:18 pm

Caduceus wrote:
Wed Feb 05, 2020 2:52 pm
I would recommend saving for retirement. The reasons are fairly simple. Tax advantaged space when you're early in your career is extremely valuable - it has more time to compound and at your salary it saves you a fair amount of taxes. You're young, so you don't know - even if you think you do - where you will be in five or ten years time. You might meet the love of your life. You might find a new job. You might change industries entirely. Don't believe me? Go speak randomly to a group of people in their 30s and ask them if they predicted what they'd be doing just ten years ago.

Don't worry too much about not being able to afford a house in the early part of your career when being able to move might allow you to take opportunities as they come along.

You're young enough that I'm guessing you don't mind having roommates - sharing an apartment? If so, financially speaking, you'd definitely come out ahead by splitting rent with a roommate and saving aggressively for retirement.
I do have a roommate (rent here is expensive )

aristotelian
Posts: 7396
Joined: Wed Jan 11, 2017 8:05 pm

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by aristotelian » Thu Feb 06, 2020 7:28 am

almostretired1965 wrote:
Tue Feb 04, 2020 12:44 pm
In my opinion, at your age, with your marital/relationship status, the most important thing is to maintain flexibility. Buying a piece of property is a major commitment with significant sunk costs. Financially it may work out great or it may not over the medium or long term relative other investments, but in the short run, the overhead expenses will kill you. Now there are good reasons to buy a piece of property if you are committed to settling down in a community, but that is different matter.

Furthermore, owning your own place will encourage you to accumulate stuff ......... This in my opinion, is one thing you should try to avoid at this stage of your life. Your 20s is the time in your life where you want to take chances in your career, be able to jump at job opportunities across the country or the world that will help you build critical skills. Major, illiquid investments and possessions can really get in the way.
+1. Rent is expensive but it is not throwing money away. You are preserving your freedom and saving countless potential opportunity costs that come with having a large percentage of your net worth tied up in illiquid propert with huge transaction costs. Financially, if renting vs buying is a break even proposition with cash, giving up retirement benefits is an additional cost that nobody factors.

Independent George
Posts: 734
Joined: Wed Feb 17, 2016 12:13 pm
Location: Chicago, IL, USA

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by Independent George » Thu Feb 06, 2020 9:45 am

22 is too early to think about buying a house (and probably a mortgage) that you will live in for years, but it is the perfect age to think about retirement savings. The way compounding works, this is the time you want to devote as much as you possibly can to investments. Given your likely income trajectory, the optimum order for tax advantaged contributions goes:

1. 401k until employer match
2. HSA (if it's available, and you have a high deductible health plan)
3. Roth IRA

Any employer match is free money, so you want to take advantage of that as much as possible. The advantage of an HSA is that it's tax deductible going in, and it will be tax exempt when you spend it on qualified medical expenses (which is a certainty in life). With your income and your 10k in emergency savings, you have enough to cover medical expenses in cash, while your HSA grows tax free for the life of the account. Just make sure you invest your contributions, instead of leaving it to the money market account that is probably set as its default. I didn't contribute to an HSA for the longest time because I didn't realize you could invest it. Not using an HSA is my 2nd biggest financial regret; my 1st biggest is buying a condo at age 30 (2007) because I was afraid of being priced out of the market.

The Roth IRA is taxable today at your current, relatively low tax rate, and then exempt from taxes from withdrawal. You can also withdraw up to your contributions (but not any appreciation) without penalty in case it's needed, but, obviously, we strongly recommend against going that.

Those first three should be your top priority in your 20s. It's ok if you don't earn enough to max out your Roth, but your goal should be to fill those buckets as much as you can as your income increases. Once you've maxed out your Roth, then it's ok to start evaluating where you want the rest of your money to go. The mathematically optimal thing is to keep putting money into your 401k until you can comfortably max it out, but realistically, it's perfectly reasonable to want to live without roommates, or buy a nicer car, or set aside money to eventually buy a house as your income increases. The important thing is to have a plan, be aware of where you're money is going, and avoid getting into a debt trap (especially with car loans, which is one of the biggest temptations for Americans). One thing you can do is to set aside 50%-80% of each pay raise to contribute to your 401k, and then use the remainder however you see fit.

vipertom1970
Posts: 769
Joined: Fri Jun 21, 2019 7:06 pm

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by vipertom1970 » Thu Feb 06, 2020 10:39 am

My daughter is 23 and making about the same $$$ as you and I recommended her to invest for retirement first and worry about buying a house later after marriage so at least with 2 incomes it’s less of a risk. We live in SoCal and even with 100k per year it’s still hard to qualify for a house in decent area.

bloom2708
Posts: 7734
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by bloom2708 » Thu Feb 06, 2020 10:44 am

Retirement first. Home way down the road at 22.

If you want to practice owning a home, go buy a 30 lb boat anchor. Tie a rope to your waist and drag the anchor everywhere you go. :D

Don't be tied down at 22. Homes are expensive. Even the cheap ones.
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead

mimn15
Posts: 19
Joined: Tue Sep 25, 2018 6:38 am

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by mimn15 » Thu Feb 06, 2020 10:47 am

The image below from Vanguard is very informative. Compounding with a long timeline has an outsize effect over retirement contributions closer to retirement.

You can choose a hybrid approach of prioritizing retirement and down payment savings (75/25, 50/50 or 25/75).

Image

Lee_WSP
Posts: 2364
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by Lee_WSP » Thu Feb 06, 2020 12:34 pm

Always, always, always, Max out the tax deferred accounts first. You do not get to makeup for missed contributions. In taxable, there is no difference between a house purchase some undefined period of time away and retirement some undefined time period away.

fasteddie911
Posts: 333
Joined: Fri May 16, 2008 3:13 pm

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by fasteddie911 » Fri Feb 07, 2020 7:28 am

Max retirement accounts, save the rest and keep renting and stay flexible. Life can and will happen. You may move for a job or spouse, go back to school, get married, have a kid, lose a job, etc.

FI4LIFE
Posts: 487
Joined: Sun Apr 28, 2019 9:27 am

Re: 22 year old - Should I focus more on saving for a house or retirement?

Post by FI4LIFE » Fri Feb 07, 2020 9:16 am

Don't buy a house until after you get married and start having children. If you buy a house now, you are purchasing yourself limited future options. Once those roots go down it's tough to move. You should spend your next 10 years maximizing income. This could mean picking up and moving to wherever the opportunities are.

Owning a house is not dope. It is another responsibility. You have to care for it, spend loads of money on it etc. Homeownership as a part of the American dream is a crock.

Post Reply