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Buy a Home or Save for Retirement: Can You Do Them Both?

Posted by Joe Samson on Thursday, February 27th, 2014 at 11:34am.

Saving for House vs. RetirementThe ultimate goal for most people is to retire by the time they reach their 60's and have their home fully paid off as well. This will ensure they can spend their income how they please, whether it's golfing around the world or helping their kids with college. But, is this dream really something that's achievable? After all, if you want to save up for a down payment on a home, then how are you supposed to save up for retirement at the same time? Pensions are laughable for most people, and that means picking and choosing which goal is most important to you.

Saving for Your First Home

Let's say you decide you want to buy a home. If this is the case, then you are going to have to prepare in your 20's because you'll want to buy in your 30's. The average minimum down payment for a home is just around $25,000 (in Calgary). In order to have enough money by the time you reach your early 30's, you will need to save around 10%-15% of what you make annually, assuming you make around $40,000 as your gross income. Don't forget, you'll also need a high-interest savings account so you get the most money for your money. If you do that, then you'll be ready to buy within 5-10 years, which gets you right on track towards your goal of paying off your home by the time you're around 60.

Before you think that everything will be smooth sailing, don't forget about your student loans. These should be top priority to pay off, because you don't want to pay a lot of tax over time. If you have a lot of debt, then you might not be able to think about buying a home just yet, which is understandable. By focusing on this debt alone, you will be able to put all your money towards saving for a home, and won't have the tax using up more of your paycheck.

Buying Your Home and Saving for Retirement at the Same Time

If you're a go-getter and want to save for retirement AND buy your first house, then there is something you can do. This involves putting money into a registered retirement savings plan. Down the road you can take out up to a maximum of $25,000 This can be done using the Home Buyer's Plan, which is a government program that requires you to put that money back into the RRSP. Fortunately these payments can last up to 15 years, meaning you don't need all the money at once. If you use this option, you are not alone. It's been used over 2.6 million times since it was released in 1992!

Is this the right plan for you? Maybe. Maybe not. Each person has different goals when it comes to their future, and some want to buy a home before they ever put a penny away for retirement. Some people even rent their entire lives because they want to have a huge RRSP by the time they retire. Whatever you choose, you need to make sure that you start investing for retirement and planning well ahead of time.


Calgary, AB Real Estate Blog

 

I am a licensed member of the Real Estate Council of Alberta since 2005 - proudly representing CIR REALTY, Calgary’s largest real estate brokerage. I enjoy keeping my readers up to date with real estate related information that they can easily understand and use for their own benefit. I welcome feedbacks and comments equally from first-time visitors to my blog, past clients and also from my fellow REALTOR® colleagues. Thanks for stopping by!

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