By Alessandra Malito
Both financial goals may be important, and with a little math and patience, it may not be impossible to attain
Home buying during a pandemic, and now with higher interest rates and climbing inflation, is anything but easy. Add having to save for retirement, and it might feel impossible.
Retirement Tip of the Week: Saving for retirement and buying a home are expensive tasks, but it is possible to do both. Make a list of your financial priorities, analyze your current and near-future cash flow and do plenty of research.
As with most things in life, managing money is about striking a balance, even when it seems unachievable. And right now, buying a home in the U.S. is particularly expensive and stressful.
Since COVID upended where Americans live, many have competed to snare a home at asking price, let alone anything below asking price. Although that frenzy is cooling down, prospective buyers now face higher mortgage rates that in turn boost monthly payments. About 60% of U.S. households could be frozen out of the housing market by 2025, according to an S&P Global Ratings report, in part from the lack of affordability from higher monthly payments.
A house is no longer considered affordable when mortgage payments account for 25% of a household’s income, the report determined. It is likely even more difficult to stay below that bar in higher-priced areas such as New York City and San Francisco.
Read:Only 10% of new homes now sell for less than $300,000. Two years ago, a third did. It’s not just because of the pandemic
Of course, saving for retirement is also important. Many Americans interested in buying a home in their 20s and 30s also are at the prime time to be investing for retirement, as that money has the potential to grow with returns and compound interest for decades. People in their 40s and 50s are usually reaching the peak of their earnings years, and every dollar they can earmark for their old age is important, especially if they weren’t able to save as much when they were younger.
People who have already been saving for retirement are at an advantage, as they can back off their retirement savings for a while and build up the …….