Photo courtesy laughlin
There is a ton of information on the web covering every topic imaginable. In some respects, the amount of information can be a positive. If you need some help, a quick internet search can net you the best recipe for grandma’s homemade biscuits or help you replace your car’s canooter valve. The problem is, while the advice may be good advice, it’s not necessarily the right advice for your situation.
For example, here is some advice from Suze Orman in an article on Oprah’s website:
3. If I’m saving for a down payment on a house, does it make sense to sock away the maximum IRA contribution?
In time, the house will give you better tax write-offs than the IRA, not to mention a roof over your head. One exception, says Orman: “If your employer offers a 401(k) with matching contributions, I wouldn’t pass up the free money.”
This may be correct for some people, but for the vast majority of people, I would say no. She adresses only the tax situation. What good is a tax write off today if you’re broke tomorrow? You should be putting away 10 – 15% of your income toward retirement before focusing on your down payment. Time is the biggest factor in retirement savings, so you don’t want to delay it a single day unless your focusing intently on getting out of debt. Yes, having a paid for house is an important tool in your retirement plan, but if you don’t have the money to pay the taxes on the property, or to buy food and medication, it’s not going to help you.
Now if you’re putting away 20% toward retirement and you want to divert some of that toward a down payment, then absolutely, divert away. That would be an appropriate action to take.
The main point here is that Suze doesn’t know your particular situation when she’s giving this advice. I don’t either in the posts I make. You need to take a broad view from several sources when you take in your information. Even better, consider hiring an expert in the topic who will look at your particular situation and develop a plan that fits your life. Don’t trust your future to the internet. Biscuits maybe, but not your future.