How do you balance retirement investing with saving for big purchases?

[rtr]

I asked a question (here) about the order in which you should put your money, and the answer is (1) pre-tax accounts (in some order) (2) after-tax accounts.

I am finding that if we max out all pre-tax accounts (401k, 403b, HSA, IRA), I am not going to have a big chunk going toward the rest. I was super excited that by saving around $2400/mo (the net amount we see our take home pay lowered by), we would end up putting away over $40k/yr into pre-tax accounts. My wife didn't share my excitement when she asked how we are going to get to that money to buy a house a few years down the line.

How do you balance where you save when factoring in big purchases like this? It was a big revelation to me to see how the pre-tax savings route effectively gives us $12.5k/yr of free money, and when you add that into the compounding interest machine, how quickly you could be FI. So I think I know the answer is you just save for the big purchase using after-tax accounts, but it's hard to admit it.

So is the answer to just put however much is required into after-tax accounts? And if so, do you stick it in a risk-free account or does it go into your index fund bucket?

[frugaliknowit]

Besides retirement savings, you need to have in your budget:

1.  Emergency savings.
2.  "Buffer" savings.

This could be in the same zero risk account, or a separate account.  If it is the same account, you need to keep a record of what your balances are in each of the categories (excel or the like).

What is the buffer for and what is the emergency savings for?  Example of emergency:  You lose your job.  Example of use of Buffer account:  You need $450 for a new alternator on your car.  Then you don't have any repairs for 6 months, then someone throws a rock at your window, voila $200 for a window.  Another example is you are planning to replace your dryer (or any large purchase) next year so you add $30 per month to your buffer account.

In your case, you are saving for a new house, so you need to have a down payment and closing cost account either separately or virtually (spreadsheet).  If you have not budgeted for this, you need to reduce your retirement savings for now.  This needs to be in a zero risk account.