I’m 24, debt-free, and earning my first steady salary. My dream is to own a house — but I’ve heard I should max out an IRA before building up a down payment. Which path do I choose?

Pros and cons of maxing your IRA

Opening and contributing to an IRA in your early 20s is one of the most powerful moves you can make for your long-term financial security. Thanks to the magic of compound growth, even small contributions made early can grow into significant savings by retirement.

Upsides of maxing your IRA

• Early growth = less pressure later. A dollar saved in your 20s has decades to grow. For example, if you invest $6,000 at age 24 and earn an average annual return of 7%, that single contribution could grow to nearly $45,000 by the time you’re 65.

• Tax benefits. Depending on the type of IRA you choose, you could see tax advantages now (traditional IRA) or in retirement (Roth IRA).

• Flexibility with Roth IRAs. If you choose a Roth IRA, you can withdraw your contributions (not your earnings) at any time without taxes or penalties. That gives you some wiggle room if you later decide to use the money for a down payment.

That said, using an IRA as a piggy bank for home savings isn’t ideal — and comes with major risks.

Downsides of maxing your IRA

• Market volatility. Unlike a high-yield savings account, your IRA is invested in the market. If you plan to buy a home in the next few years, a market decline could drop your savings just when you need them. Remember, with investments, you don't truly "lose" money until you withdraw.

• Retirement money should stay retirement money. Even if you technically can pull Roth contributions early, you shouldn’t unless you absolutely have to — if, say, you’re facing eviction or medical emergencies. The earlier you raid retirement accounts, the harder it is to rebuild your savings.

• Complex withdrawal rules. While the IRS does allow you to withdraw up to $10,000 from an IRA for a first-time home purchase without penalty, it only applies under certain conditions and may still involve taxes.

The takeaway? An IRA is a powerful tool for long-term financial growth but it’s not a substitute for a short-term house fund. Use it to set up your future, not to float your present.

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Other factors to consider

Before deciding whether to max out your IRA or focus on a home down payment, it’s important to look at the full financial picture. Buying a house matters but so does your financial foundation.

• 1. Do you have an emergency fund? If you don’t have at least three months of expenses saved, hitting pause on both home and retirement savings might be smart. An emergency fund protects you from dipping into retirement accounts or taking on debt when life throws you a curveball.

• 2. What’s your timeline for buying a home? If your goal is to buy a house in the next three years, your savings strategy should be conservative. A high-yield savings account or short-term CD may be better than investing the money, since it avoids market risk. But if homeownership is five or more years away, splitting your savings between a Roth IRA and a house fund could make sense.

• 3. Are you carrying high-interest debt? Paying down credit cards or other high-interest loans can offer a guaranteed return — often more than you'd earn investing. It also improves your credit score, which can impact the mortgage rate you'll pay when you do buy a home.

• 4. Are you taking advantage of employer retirement plans? If your job offers a 401(k) match, prioritize that before the IRA. It's essentially free money your employer is contributing to your retirement. After that, any leftover savings can be divided based on your goals.

• 5. Why is buying a home important to you? Buying a home is a major milestone, but it’s not the only one. Saving for retirement in your 20s means you won’t have to play catch-up later. On the flip side, if owning a home will provide stability, reduce rent costs, or serve as a stepping stone toward building equity, it may be worth focusing on.

Ultimately, there’s no perfect answer. But if you’re asking these questions now, that’s not a sign you're on the right track.