Header Right

Retirement

How to Save for a House While Investing for Retirement

by

Selling housing for money or barter. Calculate the mortgage cost. Reduce maintenance costs.Saving for a house and investing for retirement are two of the biggest financial goals many people pursue—but trying to do both at the same time can feel like a balancing act. One requires upfront cash for a near-term purchase, while the other is a long-term investment in your future. How do you prioritize one without sacrificing the other?

The truth is, with the right strategy and discipline, you can save for a home while also building your retirement nest egg. Here’s how to make both goals work in tandem.

Step 1: Define Your Goals Clearly
Before you start juggling savings priorities, get specific about your targets:

  • Home goal: How much do you need for a down payment? When do you want to buy?
  • Retirement goal: How much do you want to retire with, and at what age?

Write these down and give each a timeline. This helps you stay motivated and make informed decisions about trade-offs along the way.

Step 2: Build a Budget That Reflects Both Goals
Treat both goals as line items in your budget. Your monthly income should cover:

  • Essentials (rent, utilities, groceries)
  • Minimum debt payments (if any)
  • Retirement contributions
  • Home savings contributions
  • Emergency fund (3–6 months of expenses)

If there’s not enough room to fund both goals, look for ways to cut expenses or increase income before you sacrifice your future savings.

Step 3: Start with Your Employer’s Retirement Match
If your employer offers a 401(k) match, prioritize contributing at least enough to get the full match. That’s free money—and passing it up is leaving part of your paycheck on the table.

Once you’ve captured the match, you can redirect additional funds toward your house savings.

Step 4: Open a Dedicated House Savings Account
Keep your house fund separate from your checking or emergency savings. This could be a high-yield savings account or money market account—something safe, liquid, and earning interest.

Avoid investing this money in the stock market if your goal is within the next 3–5 years. Market volatility could derail your plans just when you’re ready to buy.

Step 5: Automate Your Contributions
Set up automatic transfers for both retirement and house savings. Treat them like bills that must be paid every month. Automation removes the temptation to spend and ensures consistency.

Step 6: Consider Retirement-Friendly Ways to Fund a Home
If you’re short on a down payment but have money in retirement accounts, you may have options:

  • IRA withdrawal: First-time homebuyers can withdraw up to $10,000 from a traditional or Roth IRA without the 10% early withdrawal penalty (though you may still owe income tax on traditional IRA funds).
  • 401(k) loan: Some plans allow you to borrow against your 401(k) and pay yourself back over time, with interest. But tread carefully—if you leave your job, the loan may be due immediately.

These should be last-resort options. Withdrawing retirement funds early can hurt your long-term growth and future security.

Step 7: Reevaluate Regularly
Life changes—so should your plan. Every 6–12 months, revisit your goals, your progress, and your budget. If you get a raise, bonus, or reduce expenses, consider increasing contributions to both funds.

Also keep an eye on changes in mortgage rates, home prices, and retirement account performance.

Final Thoughts
It’s not easy to save for a house and invest for retirement at the same time—but it is possible. The key is to create a plan that honors both goals, stays flexible, and makes the best use of your financial resources.

Think of your future home as a stepping stone, and your retirement as the foundation for long-term freedom. With steady effort and smart planning, you don’t have to choose between them—you can build both, one dollar at a time.

An HSA Can Also Be Used to Save for Retirement

by

HSA, health savings account symbol. Wooden cubes with words 'HSA, health savings account'. Stethoscope. Wooden background. Medical and HSA, health savings account concept. Copy space.Health savings accounts (HSAs) were created as a savings vehicle to help people pay out-of-pocket medical expenses. If qualified, you can establish an HSA in much the same way you establish a traditional savings account or an individual retirement account. You can open one with a lump-sum payment or through regular contributions, usually through paycheck deductions.

What makes HSAs appealing is that they offer several valuable tax-saving features. For example, your contributions are excluded from deductible income, all account earnings accumulate tax free, and, as long as the medical expenses paid with HSA savings are “qualified” expenses for you, your spouse, or your dependents, withdrawals from HSAs are tax free also. It is these tax savings features plus the ability to invest contributions in longer term assets that can make HSAs viable as alternative retirement savings vehicles.

Before looking into how HSAs can be used to save for retirement, it can be helpful to explain how they actually work.

The Rules on Contributions

The maximum family contribution for 2024 is $8,300 plus a $1,000 maximum catch-up contribution for participants who are age 55 or more. For self-only coverage, the maximum contribution for 2024 is $4,150 plus a $1,000 catch-up contribution for those participants age 55 or more. The limits will be adjusted for inflation in future years. An individual’s employer or family member may contribute as long as the total contribution amount does not exceed the annual limit.

Investing Contributions

As a participant in an HSA, you have the choice of keeping contributions in cash or investing them in other assets, such as stock and bond mutual funds.* Money not spent on qualified expenses during the year is rolled over for subsequent years. If you are in fairly good health and underutilize medical and health services, you could potentially build up a relatively large balance in the HSA account over several years.

Making HSAs Work as Retirement Savings Vehicles

If you currently maximize contributions to all tax-favored retirement accounts and also save in taxable accounts, you could treat the HSA as one more option to increase your savings and do so in a tax-favored way. Essentially, you would treat the HSA as a retirement savings account and allow the assets in the account to accumulate for as long as possible while paying out-of-pocket medical costs with taxable funds. Of course, this approach does not work if you cannot fully fund all your tax-advantaged retirement savings vehicles.

Remember, each person’s situation is different and you will benefit from discussing this option — and other retirement savings options — with an experienced financial professional

A Checklist for Plan Sponsors

by

task list is ticked off in detailOnce a retirement savings plan has been approved and is in place, it’s tempting to sit back and adopt an “I’m done,” hands-off attitude. However, to ensure that a plan will continue to operate effectively, employers should periodically review plan provisions and features. Here are some points to check.

  • How the plan is presented. The more convinced employees are of the wisdom of saving for retirement, the greater the level of employee participation. The greater the participation, the more the plan can benefit all employees — including highly compensated ones. Regular meetings, newsletters, and handouts are effective means of communicating plan advantages. Check to make sure printed materials are up to date and easy to understand, and distribute them frequently.
  • Plan investments. Employers that sponsor participant-directed plans can limit potential legal liability for losses caused by employees’ investment decisions if plan investment choices meet certain requirements under Section 404(c). Very generally, where 404(c) protection is sought, a plan should offer at least three “core” investment choices, allow employees to switch investments at least once each quarter, and provide participants with adequate disclosure of specified investment information.
  • Administration. Participants and beneficiaries must be given a copy of the Summary Plan Description (SPD) within 120 days after a plan is adopted or within 90 days after becoming eligible to participate in the plan or receive benefits. Review the SPD to make sure it accurately describes the provisions of your plan. If changes have been made to the plan document — which is likely, given the recent tax law changes — then all participants must receive a notification of these changes within 210 days after the end of the plan year in which the changes were adopted. Generally, all participants must receive a copy of the SPD every five years.
  • Summary annual reports (SARs). Summary annual reports must be distributed to participants within nine months after the close of the plan year. If a plan receives an extension to file its annual report (Form 5500) with the IRS, then the SAR must be distributed within two months after the end of the extension.
  • Plan rollovers. Qualified plans must allow a participant to elect direct rollover of any eligible distribution to an IRA or another employer-sponsored retirement plan. Your plan should have procedures in place to handle direct rollovers.
  • Bonding. Generally, plan fiduciaries and others who handle the assets of a plan must be bonded. The bond must be equal to at least 10% of the funds handled by the bonded individual, but cannot be for less than $1,000 and need not be for more than $500,000.
  • Loans to participants. Loans that are not properly administered may be treated as constructive distributions resulting in taxable income to the recipients. Review loans to make sure that loan balances do not exceed the maximum limitations. Unless used to finance the purchase of a principal residence, all loans must be repaid within five years. A plan may impose more stringent conditions on loans than the law requires.
  • Plan forms. All forms should meet current requirements. Forms that may need updating include beneficiary designation forms, benefit election forms, and the notice of distribution options.

Your Plan Account Statement Can Reveal Valuable Information

by

Crop hand of cartoon employer with magnifier looking through candidates resume in searchIt’s smart to make a point of reviewing your retirement plan account statement in detail at least once a year. You’ll want to ensure that the information in your statement is accurate and assess whether you should make any changes in your contribution level or investments going forward.

Ensure Personal Details Are Correct

To start your review, check the following for accuracy:

  • Personal information (e.g., name, address, phone, etc.)
  • Hire date (since it can affect vesting)
  • Contribution amounts (yours and your employer’s, if applicable)
  • Investment instructions
  • Beneficiary designation

Review Your Investments’ Performance

Any large change — up or down — in one investment market can impact your portfolio’s overall asset allocation.* Consider rebalancing** your portfolio at least once a year so that the percentages you have invested in stocks, bonds, and cash alternatives remain in line with your desired asset allocation.

As a retirement plan investor, your investment goals are typically long term. As such, you may decide to allocate a greater percentage of your portfolio to stock funds*** since a longer investing horizon gives your portfolio more time to recover from any short-term declines in the stock market. However, if there have been changes in your financial situation — for example, you have experienced a job loss, or you have had to deal with large, unexpected expenses — you may have less tolerance for investment risk than before. If that’s the case, you may choose to lower your exposure to higher risk investments in your portfolio.

One of the best ways to measure your portfolio’s performance is to compare your investments to benchmarks. Benchmarking helps put performance in perspective. For example, it can be disturbing when a fund you own has a negative return. However, it doesn’t seem so bad if the fund’s comparable index dropped by a similar percentage.

Likewise, if the overall market fell 10% while your fund only fell by 5%, you would understand that your fund did well in the circumstances. However, if your fund earned returns of 5% during a period when its benchmark rose by 15%, then you may want to examine whether continuing to hold that fund makes sense.

Portfolio Turnover Rate

The term portfolio turnover rate refers to the percentage of a mutual fund’s holdings that changes over a given period of time. Certain types of stock funds may have high turnover rates because they pursue aggressive or growth strategies. Other types — value funds, for example — may have lower turnover rates.

It can be a red flag if a fund’s portfolio turnover rate is much higher than that of other funds in the same style category and the fund consistently underperforms similar funds and its benchmark. Portfolio turnover rate is just one of the many factors investors should review when assessing funds in their portfolios.

Management Fees

Mutual funds charge management fees to help cover the expenses of operating the fund. Typically, management fees are used to compensate the investment managers who select and monitor the fund’s investments. Deciding whether to continue owning a mutual fund based on how much it charges in annual management fees is a subjective judgement. If the management fees are higher than those of other comparable funds and the fund’s performance demonstrates no appreciable difference, then it might be worth looking deeper into the issue.

Work With a Professional

Reviewing your retirement plan account statement can help identify strengths as well as deficiencies in your retirement planning and allow you to respond accordingly. Your financial professional can also be a valuable partner in ensuring that you are on the right track to a financially solid retirement.

How Your Choice of Business Entity Benefits Your Bottom Line

by

Clients with magnifier get e-invoicing and pay bills online. E-invoicing service, electronic invoicing, e-billing system and e-economy tools concept. Pink coral blue vector isolated illustrationSome small businesses develop gradually, transforming from a part-time hobby to a full-time operation. Others go from zero to a hundred in just a few weeks, as entrepreneurs turn ideas into profitable enterprises, seemingly overnight. In either case, it’s easy to overlook certain details, such as how the business is structured. After all, there are more pressing concerns in bringing a product or service to market.

Certainly, it is possible to run a business without making a deliberate decision on which business entity is best. The company defaults to a sole proprietorship or partnership. However, from a tax perspective – and a liability perspective – leaving your business structure to chance can be costly. Other options may offer better protection for your personal assets, as well as significant savings on your tax bill.

Weighing the pros and cons of each option can get complicated. Fortunately, your Certified Tax Coach can help. These experts think outside the tax box to guide you on selecting and implementing the business entity that benefits you most.

Simplicity vs. Tax Savings

Sole proprietorships and partnerships are the default business structure because they are so simple. A quick registration and minimal fees are all that you need to get started. The downside is that you might find yourself paying taxes twice on the same income. You owe taxes on any profits earned by your company, then you pay tax again when you file your personal returns. An additional concern that comes along with sole proprietorships and partnerships is liability.

For legal and financial purposes, you and your company are a single entity. Business creditors may be able to settle debts by going after your personal assets, and any legal claims against your company can be held against you personally. While the level of simplicity does make sole proprietorships and partnerships tempting, you might discover that the tradeoff of a higher tax bill is more than you are willing to pay.

Conquering Corporate Complexity

It’s true that C-Corporations are primarily reserved for massive companies with millions, or billions, in revenue. The cost of creating and maintaining such a business structure is rarely practical for smaller organizations. However, that doesn’t take the corporate structure off the table altogether. S-Corporations are much simpler than their larger C-Corporation peers, and they offer many of the same advantages.

One of the biggest benefits of a corporate business structure is how taxes are handled. Shareholders may pay capital gains taxes or taxes on dividends, but the issue with double-taxation on the same income is eliminated. Another important benefit to this type of business entity is the complete separation of personal and business assets. Financial and legal issues that come up for the business aren’t transferred to corporate shareholders.

The Best of Both Worlds

When a sole proprietorship or partnership isn’t quite right, but incorporating doesn’t make sense for your business, you do have another option. A Limited Liability Company, also known as an LLC, offers important features that keep taxes and liability low, without excessive fees and paperwork for setup and maintenance. This business entity is built to be flexible, so it adapts as your company grows and expands.

How you structure your business can be as important to your bottom-line profits as the amount of product you sell. The business entity you choose dramatically impacts your total tax expense, which can mean the difference between a good year and a great one. Partnering with your Certified Tax Coach to evaluate your options ensures your business is structured in a manner that makes sense with your total financial plan.

Learn more about choosing the best business entity for your company, minimizing your taxes, and building your wealth by working with a Certified Tax Coach.