Should I Save More for Retirement or Put Money Toward a Down Payment?

Close up of man holding pink piggybank while woman putting coin in it.
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For most people, owning a home and saving enough money to retire top their lists of financial goals — but it’s easy for both to feel impossibly out of reach. In fact, many people feel that their only chance of success is to focus on just one of those goals. But is it more important to own a home or to save for retirement? GOBankingRates spoke with a variety of experts to help make the decision less painful. 

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Good News, You Don’t Have To Pick One Over the Other

First thing’s first — picking between buying a home and saving for retirement doesn’t have to be an either/or type of choice. 

“The decision is not mutually exclusive,” said Anthony Watson, CFA, CFP, and founder and president of Thrive Retirement Specialists. “A home can be a key part of a well-constructed retirement plan and can even be set up to pay you monthly income while still providing you with a place to live through a reverse mortgage in retirement.”

Retire Comfortably

Keep in mind that homes are expensive to own and retirement accounts are not — never let an investment in the former prevent you from investing in the latter.        

“A home can be a fantastic investment and a way to build wealth, but homeownership brings with it many costs, such as utilities, taxes, maintenance, and furnishing,” Watson said. “Buying a home is a great first step, but be sure to consider these other expenses so they do not prohibit you from also being able to start saving for retirement.”   

The Stock Market, Not the Housing Market, Is America’s Wealth-Generation Machine

Unless you’re really skillful or really lucky, your home is not going to appreciate as rapidly as the S&P 500. 

“The stock market has much higher returns in the long run than the housing market,” said John Marsano, CEO and president of Inheritance Advanced

Also, to access the money in your home, you have to tap into your equity. That’s not the case with income-producing investments like bonds and dividend stocks.

Retire Comfortably

“Having passive income post-retirement is a huge help to living comfortably and most people don’t realize this because retirement always seems too far away,” Marsano said. 

There Is, of Course, No One Right Answer for Everyone

In reality, every person and household will walk a different path to the sensible choice. 

“Whether someone opts for a down payment or saving for retirement depends entirely on how individuals perceive long-term financial stability,” said Giovanni Braghieri, CEO and co-founder of MyConsultingCoach. “To some, having a hefty retirement fund is the main predictor of long-term financial stability. Personally, they value long-term investments over quicker and more tangible gains. To them, saving for retirement is going to be an obvious choice. On the other hand, some see long-term financial stability as an unattainable goal due to constant economic shifts and frequent downturns. It just doesn’t make sense to save for retirement in such a volatile and unpredictable environment, so people prioritize short-term investments. There’s nothing more tangible in the short term than buying a house, but there’s also a significant long-term value in it.”

It also has a lot to do with your type of work. 

“The most important factor that determines where your savings should go is your income source,” Marsano said. “If you work a corporate job, you’ll have to put more effort into your retirement savings and it would make more sense to save for it first. But if you’re a government employee or a war veteran, you don’t have to worry about your retirement and can save for a house first.” 

It’s Better To Be a Renter Who’s Saving For Retirement Than a Homeowner Who Isn’t

In the end, the choice of whether or not to buy a house is intensely personal — homeownership is not for everyone. The same can not be said for retirement savings, which everyone must have if they don’t want their golden years to be defined by poverty and dependence. In short, if you can’t afford to save for a down payment while also saving for retirement, then you’re probably not ready to own a home.

“For most people, it makes more financial sense to save for retirement before saving for a down payment on a house,” said Stephanie Genkin, a certified financial planner and founder of My Financial Planner, LLC, a registered investment adviser in Brooklyn, New York. “Long-term investing for retirement comes with a number of benefits. First, there are tax advantages in retirement savings accounts whether you choose pre-tax contributions or after-tax Roth contributions. Second, the compounding nature of investments packs a much bigger punch over decades supporting savers when they retire by providing cash flow to supplement Social Security. Besides the fact that a house is an illiquid asset, home values over the long run grow only a percentage or so above inflation. Meanwhile, an age-appropriate mix of stocks and bonds for retirement savers can earn much more than that.”

If you can only do one, save for someday. 

“Buying a home is a great goal but it should come after one is able to maximize retirement savings on an annual basis,” Genkin said.

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About the Author

Andrew Lisa has been writing professionally since 2001. An award-winning writer, Andrew was formerly one of the youngest nationally distributed columnists for the largest newspaper syndicate in the country, the Gannett News Service. He worked as the business section editor for amNewYork, the most widely distributed newspaper in Manhattan, and worked as a copy editor for, a financial publication in the heart of Wall Street's investment community in New York City.

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