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What next step should you take with surplus funds? This is an age old question that has been debated for years. Depending who you ask, you'll get a different answer. Our answer might surprise you.....
Save First for Home Down Payment, or Retirement?
Even if you feel you’re throwing about money on renting, it’s still better to put surplus funds first into retirement. You don’t necessarily need to max out all retirement options, but get started somewhere (401k, IRA, etc.).
With the availability of low down-payment home purchase options, you can get into a home without having to save a ton of money. So you can actually save for retirement, while still allowing yourself the opportunity to purchase a home. But, you can’t “finance” your retirement.
We suggest asking yourself this question: “If I wasn’t actively working, what would be my income?” Retirement means you can survive on that income without having to work to pay the bills.
Save First for Kids’ College Education, or Retirement?
Your kids would rather figure out how to pay for their own college (if they even go to college; this landscape is changing quickly), than figure out how to support you when you can no longer work.
Check out our full article on this topic at this link - https://www.chadpeshke.com/should-i-first-save-for-my-kids-college-or-my-own-retirement.html
Accelerate Mortgage Payoff First, or Contribute to Retirement?
If you have your home paid off, but have no retirement income, you might find yourself in trouble. Unless social security is enough to cover you, you’ll need other retirement sources. Also, with the retirement age increasing for social security, not having other sources forces a later retirement.
Pay Down Debt First, or Contribute to Retirement?
What? Yes, we said retirement! However, it’s more to get the habit in place, than it being a sound financial decision. So we’d suggest minimizing the retirement until you payoff the higher interest debt. But simply contributing to retirement will allow you to see that momentum building, and create that much more urgency to payoff the debt, so you can increase the retirement savings. If you don’t start contributing to retirement now, when will you?
Not that we like debt and financing, BUT…
…you can pay for a home while you own it
…you can pay for college while you attend school, and even after graduating
…you can pay for a car while you drive it
HOWEVER, you cannot pay for retirement while you’re in retirement!!
Feel free to email us your thoughts on this…we’d love to hear your opinion!