TLDR: What would you do if your two savings goals are for building a house and retirement? Where would you put your money?
My DH and I are on the same page about it being worthwhile to us to eventually build a house (aka it’s a joint dream). We go to open houses all the time and just can’t see spending that much to not get closer to what we want (we know no house is perfect). To that end, I am trying to think through how/where we should save our money and am looking for ideas that might be outside of the traditional financing box (construction loans with lots of strings). Timeline: Start build in 5 years or so, flexible on land purchase, hopefully within 3 years of now.
* This is something we value over travel and other ‘typical’ MMM luxuries, so please don’t comment on how building a home is costly/extravagant. We know we could spend less money if we wanted to settle, if we come across a good enough house with the land we want, we might, but for now we are going to shoot for what we want. *
Current Stats
Me & DH 28/29
One year old kid, potentially 3 more in the future if DH gets his way
Current Savings (approx)
401Ks - $170K
Roth IRAs - $40K
Taxable - $9K
Savings/checking - $10K
Home Equity - $125K – only considered savings since we would sell it to move into the built house
We currently max out both 401Ks, both IRAs, and a family HSA every year. We have 10 years left on a 12 year mortgage on our primary home with a great rate that puts plenty towards principle every month.
My thoughts are to put whatever we get from our 2nd house which is up for sale (conservatively $60K, most of which was our down payment) into a savings account as well as any savings we have after maxing out the retirement accounts every year. Thinking it would be best to pay cash for the land when we find it as it’s hard to get financing for land and we want to be able to snatch up the right one as well as be in a position of power when negotiating. We want to own the land for at least a year before building, to design a house perfectly suited for the site.
Now, building a house costs a lot of money if you don’t do it yourself. We are erring on the side of caution and saying we will be hiring people for most of it. I am trying to figure out whether I should keep stuffing our money into 401Ks and IRAs or if I should be doing something else to accomplish the above.
Musings: Depending on timing we could sell our current home and use the equity or use a line of credit from the home equity for some of the build. We could use some traditional construction financing as well. I don’t really want to take a loan from a 401K but that would be an option too. We also have the potential for the mega backdoor roth through my work.. so would it be better to save into that than a savings account? Would pulling money from Roth IRAs for this endeavor be better than leaving money in savings for years and years? What if we never build, would I regret not investing the money? Would I be crushed if the market goes down when I need the money? Do I care that much about having a mortgage at the end of the process, probably depends on the rates at the time? I am mostly concerned about construction loans due to the loss of control I think, I have seen how delays in funds being released causes huge problems with loss of time and more money.
I would welcome any thoughts concerning money strategy especially if you have built or are planning to! What would you do in our situation if your two savings goals are for building a house and retirement? Sorry for the length!
