Since saving for a home was competing with retirement, I had to decide which I'd put first. I chose to put the nest before the nest egg, but I now regret it. I temporarily suspended my 401(k) contributions so I could the money together to buy a house during the housing bubble. After buying the home for $183,000, I continued to put off saving for retirement because of the high mortgage and hidden homeownership expenses. I missed out on purchasing stocks during the Great Recession. I could have bought shares in companies that were essentially "on sale," instead of sinking the money into my house.
Dropping my nest egg
Although I'll never know how much money I'd have in my retirement nest egg if I had contributed to it instead of buying a home, I know it would have been a substantial amount. In the past 8 years, I estimate I've paid at least $135,000 into my house. My estimate does not include landscaping, home repairs, higher utilities, maintenance or even home owner's association fees. Using a Dave Ramsey investing calculator, I figured out that if I took that $135,000 today and invested it at a 5 percent rate of return, I'd have $267,290 in about 14 years. I chose 14 years because that's when my mortgage is scheduled to be paid off.
Catching up on contributions
It's still difficult to come anywhere close to maxing out my retirement contributions, although I am saving 6 percent of my income. Like a lot of people, I don't feel secure about my retirement. According to Employee Benefit Research Institute's retirement confidence survey, 28 percent of workers were not at all confident in having enough money for a comfortable retirement. Fifty-five percent of the workers said they had a problem with their debt level. Although experts always say mortgage debt is "good debt," I feel it's standing in the way of my retirement goals. I just can't catch up to where I need to be at the age of 40.
Making the most out of my mistake
Some of the options I have is to tap my home equity or to get a reverse mortgage when I'm retired. Since I don't like the idea of turning my home into a debt trap, I will simply learn to live on less in retirement. On the plus side, I won't have to pay a mortgage in 14 years. Also, I was able to lock in a low interest rate of 2.75 percent when I refinanced to a 15-year mortgage so I won't be paying as much in mortgage during the final years as I was in the beginning years.
A lot of people are rejoicing now that the value of homes are back up. I might even be able to sell my home for the price I paid during the housing bubble. But if I did that, it would be like I paid extremely high rent for the past 8 years. If I could go back, I'd have purchased a less expensive home when the market was not so inflated so I could afford to save more for retirement.
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