Should I Pause Retirement To Save for a House?

Summary

Ramsey Everyday Millionaires: Episode Summary

Episode Title: Should I Pause Retirement To Save for a House?
Release Date: March 12, 2025
Host/Authors: Dave Ramsey, Ken Coleman, Rachel Cruze, George Kamel, Jade Warshaw, and Dr. John Delony

---

Introduction

In this insightful episode of Ramsey Everyday Millionaires, the Ramsey Network tackles a common financial dilemma faced by many high-earning families: whether to pause retirement contributions to save for a home purchase. Hosted by financial experts Dave Ramsey and George Kamel, the episode provides practical advice to ensure financial stability while pursuing significant life changes.

---

Caller Background: Ted's Financial Situation

Ted, a resident of San Francisco, reaches out with three financial advice questions. Here's a snapshot of his current situation:

• Combined Income: $450,000 annually
• Family: Two-year-old child with another on the way
• Debt Status: Zero debt, no car payments
• Current Housing: Owned a condo with a fixed 2.5% mortgage rate, locked in four years ago
• Savings & Investments: Maxed out 401(k)s, established emergency fund, contributing to education funds, and has accumulated $400,000 intended for a home purchase

Ted and his wife are contemplating moving to Southern California to be closer to family and friends. However, rising mortgage rates and expensive housing markets pose challenges. They are considering whether to reduce their current savings to afford a new home Mortgage ranging from $8,000 to $9,000 monthly, which would increase their mortgage expense from 20% to 50% of their income.

---

First Question: Balancing Mortgage Payments and Savings

Ted's Concern:
With current mortgage interest rates and high housing costs, is it wise to reduce their 401(k) and savings to afford a higher mortgage payment that would consume up to half of their income?

Discussion Highlights:

• Excessive Mortgage Burden:

  • Dave Ramsey (00:35): "That's a lot of your income going toward a mortgage."
  • George Kamel (00:36): "I would never do that."

• Ideal Mortgage Percentage:
  The experts suggest keeping mortgage payments within 25% of income to maintain financial health.

• Potential Solutions:

  • Waiting to Purchase: Delaying the home purchase to save more.
  • Assessing Housing Needs: Considering a smaller home or a move-in-ready property to avoid renovation stresses.

• Savings and Equity Analysis:

  • Current Savings for House: $400,000
  • Equity from Condo Sale: Approximately $200,000 to $250,000
  • Projected Down Payment: Combining savings and equity could amount to $600,000, potentially increasing to $800,000 with additional savings over the next year.

George's Advice on Prioritizing Peace:
At [04:12], George emphasizes the importance of peace over financial metrics:

"I want you and your wife to imagine over the dinner table, what if we solved for peace? Not for maximum comfort, not for best ROI... What would peace look like in our house for the next five years while we have two toddlers, two kids under two."

Dave's Reinforcement:
At [04:56], Dave supports the focus on peace and financial freedom:

"Your life is more than just a set of numbers. You got a family you're trying to take care of... We sold our house... we want peace. We want to get to total debt freedom faster."

Key Takeaway:
Avoid overextending financially by keeping mortgage payments within a manageable portion of income. Prioritize family peace and financial freedom over aggressive home buying.

---

Second Question: Managing Significant Savings

Ted's Inquiry:
With $400,000 currently in a high-yield savings account, should it remain there, or is it advantageous to invest this sum?

Expert Recommendations:

• Maintain High-Yield Savings:
  Dave Ramsey (06:00):

  "Market funds, I think High Yield Savings would have equal, if not better rates right now. So I don't think it's worth switching to the money market or even putting it in a CD because you're talking about a year timeline that's just too short to be messing with things that lock up your money or invest your money."

• Rationale:
  Given the short one-year timeline before the planned home purchase, keeping funds liquid and accessible is paramount. High-yield savings provide safety and flexibility without the risks associated with investments.

Key Takeaway:
For short-term financial goals, such as purchasing a home within a year or two, maintain significant savings in high-yield accounts to ensure accessibility and security.

---

Additional Advice: Timing Major Decisions

George's Cautionary Advice:
At [07:22], George advises against making significant financial or life decisions during unstable periods:

"I would not make any big major purchases, moves, job decisions or anything until your second child is born and healthy and you'll know the road ahead. Too many people... make major decisions when pregnant and life just happens, man."

Recommendations:

• Stabilize Family Situation:
  Wait until after the birth and stabilization of the second child before committing to large financial changes.

• Allow Cash to Accumulate:
  Letting savings continue to grow without interruption enhances financial readiness for future decisions.

Key Takeaway:
Postpone major financial decisions until after family milestones are achieved and the household is more settled, ensuring greater financial security and peace of mind.

---

Conclusion

In this episode of Ramsey Everyday Millionaires, the Ramsey Network provides comprehensive advice to Ted and his wife as they navigate the complexities of purchasing a new home amidst high incomes and rising mortgage rates. The experts emphasize the importance of maintaining financial freedom, prioritizing peace and family stability over aggressive financial maneuvers, and ensuring that savings are both accessible and adequately managed for short-term goals.

Final Thoughts from Dave Ramsey:
At [05:54], Dave underscores the holistic approach to financial planning:

"Your life is more than just a set of numbers... I don't want you spending it worrying about a property that's hundreds of miles away."

---

Notable Quotes:

• George Kamel (04:12):

  "What would peace look like in our house for the next five years while we have two toddlers, two kids under two."

• Dave Ramsey (04:56):

  "Your life is more than just a set of numbers... We want peace. We want to get to total debt freedom faster."

• George Kamel (07:22):

  "I would not make any big major purchases... until your second child is born and healthy."

---

By adhering to these principles, listeners can ensure that their financial decisions align with their personal values and long-term family well-being, fostering both wealth and peace of mind.

Transcript

[Ted]

Foreign.

[Dave]

This episode is brought to you by SmartVestor. Connect with an investing pro near you at RamseySolutions.com SmartVestor TED is gonna kick us off in San Francisco. What's going on, Ted?

[Ted]

Hey guys.

[George]

What up?

[Ted]

What's going on? Yeah, I have three financial advice questions I need from you guys. So let me give you the background about my history where I'm at right now. My wife and I, we make pretty good money in San Francisco. Our combined income is 450,000. We have.

[George]

That's basic minimum wage in San Francisco, right?

[Ted]

Pretty much.

[George]

Pretty much.

[Ted]

We have a two year old and we have another one coming in May this year. And we have zero debt, zero car payments. We locked in 2.5 interest at a condo about four years ago. So we're saving a lot, we're maxing our 401k, we have emergency fund, we're putting money into education funds and we finally have enough money saved up to buy a home. And we want to move to Southern California just because we have family friends there. We don't have anyone here. So we want to be close to family, get some help. But with the current, my first question, with the current interest, mortgage rates and how expensive houses are, what's your advice or like your thoughts on reducing our savings a little bit like our 401k, our normal savings and contain an expensive 8 to 9,000 mortgage which basically goes from 20% of our income to 50% of our income.

[Dave]

That's a lot of your income going toward a mortgage.

[George]

I would never do that.

[Dave]

So what does it take to get to that, you know, 25% parameter with the mortgage? Would that mean pausing, investing and waiting two years and stacking up cash?

[Ted]

Well, I mean we could go for a smaller home, but with, with two kids, like one coming, one kid now, one coming where we were. Want like a four bedroom place at least for like the best in our future. So everything in Southern California is really expensive. I mean we could maybe go cheaper and then renovate down the line. But yeah, we were just kind of looking for something that's move in ready. Because with the kid, we didn't want to renovate, we didn't want to do anything in terms of building our home.

[Dave]

And you're in a condo now with how many bedrooms?

[Ted]

It's a small two bedroom condo.

[Dave]

Okay, well for the first six months the baby's gonna be in your room probably, right?

[Ted]

Yeah, so. So we're probably gonna, so we're talking like 20, 26 to a year. Oh, sorry. What was that?

[Dave]

We're talking like 2026 for a home purchase would be ideal, I think.

[Ted]

So either end of this year or sometime in early 2026.

[Dave]

Okay, so if you paused investing, how much extra money could you stack up? If you guys just got real focused on a budget, cut the lifestyle down, how much could you save that 450 take home?

[Ted]

So right now our all in expenses is we need about 7,000amonth to survive. And so we're taking almost, roughly about 22,000. That's after putting 401ks.

[Dave]

So you have 15 to play with if you didn't pause investing.

[Ted]

Yeah, yeah, exactly.

[Dave]

And how much do you have saved currently for the house?

[Ted]

400,000.

[Dave]

Awesome. So you would add another 180k over the next year if you didn't make any changes.

[Ted]

Correct.

[George]

And you sell your condo. How much you get for your condo?

[Ted]

750,000. Okay, and what do you owe roughly? About 520,000. Okay. Okay.

[Dave]

You got about 200 equity?

[Ted]

Yeah, about like 200. Almost 250,000 in equity.

[Dave]

Okay, so let's call it 200 plus your 400 saved, that's 600. Let's say you save up another 200 over the next year. Now we're talking 800 grand as a down payment for the next house. Would that get you closer to that 25% mark?

[Ted]

Oh, I see. Well, the thing is, I mean. Okay, so I guess here's another question. Since we locked in such a good.

[Dave]

Rate, we were just not gonna go.

[George]

No, don't be that guy.

[Dave]

Don't get greedy on us, Ted. So now you want to hang on to the condo, use it as a rental while adding stress to your life as a long distance landlord.

[George]

Well also taking out a mortgage with two young kids, that is 50%. Right. When Sam Altman keeps tweeting out that he's changing everything in Silicon Valley by the minute, why would you do that to yourself? Here's what I want you guys to consider. Probably something you've most families in America have never considered. I want you and your wife to imagine over the dinner table, what if we solved for peace? Not for maximum comfort, not for best ROI and not for we got a good interest rate so we can keep what would peace look like in our house for the next five years while we have two toddlers, two kids under two. What would our life look like if we solved for peace? And by the way, that would mean you guys buying a two million dollar house. Wah wah.

[Dave]

Right?

[George]

Like it's not like, oh man, you get what I'm saying? Like, yeah, if you'll solve for a piece that way. If she says after kid one, I don't want to go back to work, or you have this conscious awakening. You're like, I want to be a stay at home dad. Like, whatever. Y'all can. You can do whatever you want. If you owe 50% of your. I promise you, you will regret that decision. I promise you. I promise you. I promise you.

[Ted]

Yeah, okay, thanks. And that's where our hesitation was coming from. We just wanted to see if that was even a possibility because we were getting kind of cramped in here. Okay, thanks. That's good advice.

[George]

I mean, how does that sound? Is that deflating? Is that like a. Do we just bum you out?

[Dave]

It's controversial in the financial world, especially Silicon Valley. Like, bro, that would be a great investment property. It's two and a half percent. You're basically robbing the bank here. Like, why would you. And we're going. Your life is more than just a set of numbers. You got a family you're trying to take care of. You got a life to live. And I don't want you spending it worrying about a property that's hundreds of miles away.

[Ted]

Okay?

[George]

And all we're telling you is what we would do in our own house.

[Dave]

And it's what I have done. We sold our house. We didn't hang on to it. We could have. We said, we're going to sell it because we want peace. We want to get to total debt freedom faster. And now we don't have a payment in the world. And so when my wife wanted to stay at home with our baby, it wasn't even a financial conversation. It was just an emotional one. If you're leaving your career. And so that's what I would love for you guys to have. Freedom, flexibility.

[George]

Or if suddenly podcasting, like, ended tomorrow, George. And like, we. It wouldn't be destitution. It'd be like, oh, this sucks. We got to figure out something else to do. George would start mowing lawns or something. He absolutely would not mow lawns. But you were saying. I know it's. I know it's super controversial to solve for peace and to live on less than you make, but.

[Dave]

Did you have another question?

[George]

Yeah. What was the other question?

[Ted]

I did. Yeah. So if we're currently that 400,000 is just sitting in High Yield Savings, just looking for advice between leaving it in High Yield Savings or investing in money.

[Dave]

Market funds, I think High Yield Savings would have equal, if not better rates right now. So I don't think it's worth switching to the money market or even putting it in a CD because you're talking about a year timeline that's just too short to be messing with things that lock up your money or invest your money. So a money market acts like a savings account. There's not many more benefits other than sometimes you get to write checks out of it or you get a debit card attached to it. So I would just leave it with a high yield savings account.

[Ted]

Okay.

[George]

And can I, can I, Ted, can I give you one more piece of advice? It's kind of, it's, it's dark tinged advice. Is that okay?

[Ted]

Yeah, please.

[George]

I would not make any big major purchases, moves, job decisions or anything until your second child is born and healthy and you'll know the road ahead. Too many people that I've talked to over the years make major decisions when pregnant and life just happens, man. Pregnancies are tough. There's so much that can be different than we thought it was going to be. Let this thing play out, baby, be born healthy, you and mom are rocking and rolling and then start making new decisions and let that cash just pile itself up, brother. Thanks for the call, man.

[Dave]

Thanks for tuning in to Ramsey. Everyday millionaires. Need help with your investments? Connect with a smartvestor [e-mail] smartvestor or click the link in the show notes. Ramsey Solutions is a paid non client promoter of participating pros. Learn [e-mail] SmartVestor.