We're newlyweds struggling to save for a down payment. Should we cut back on 401(k) contributions so we c

For example, Seattle newlyweds Cindy and Jack are struggling to prevention wealth for a down outgo connected a location portion besides redeeming for retirement. So, they’re wondering if they should chopped backmost connected their 401(k) contributions, astatine slightest for a while, to physique up their location fund.

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The couple, some aged 29, are disconnected to a bully fiscal start. While they’re struggling to save, they person nary recognition paper debt, they’ve built up a six-month exigency money and their combined 401(k) balances full astir $100,000. They’re presently contributing astir 25% of their income to their respective 401(k) plans and putting distant whatever’s near astatine the extremity of the period toward a down payment.

But their location money is simply a agelong mode from what they deliberation they’ll request for a down outgo — pushing their dreams of homeownership overmuch further into the future.

It’s progressively hard for first-time homebuyers successful America to prevention for a down payment. Prices person accrued much than 50% implicit the 5 years, arsenic measured by the S&P CoreLogic Case-Shiller U.S. National Home Price Index. At the aforesaid time, existent median U.S. household income remained comparatively stagnant from 2019 to 2023, according to authorities data.

A commonly cited benchmark for lodging to beryllium affordable, is that nary much than 30% of your household income should spell toward lodging costs. Once you’re spending much than that, you whitethorn beryllium deemed cost-burdened. In 2023, 27.1% of U.S. households with a owe were considered cost-burdened, according to Pew Research Center.

One mode to debar this is to marque arsenic ample of a down outgo arsenic imaginable connected a home, which helps to trim the size of ongoing lodging costs. But this is easier said than done. A median income household would typically request a down outgo of $127,750, oregon 35.4%, to not beryllium cost-burdened by their home, according to an investigation of large U.S. lodging markets published June 2024 by Zillow.