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Chris Bell

Retirement Savings vs Home Investment: Which Should Millennials Prioritise?



One of the biggest conundrums facing millennials is the choice between a home investment and a retirement savings. Most understand the need to have a home of their own, so as to avoid paying rent in later life (and leaving pension incomes stretched thin). However, not many can afford to make contributions to their pension pots while fulfilling mortgage obligations.  Does this describe you? Which of them should you prioritise?

The definite answer to this question is dependent on your personal situation as different advisers will give different suggestions on where your priorities should lie. The key thing to remember is that you know your financial capability more than most, so choose an option that works for you.

The Case for Prioritising Home Investment

If property prices in your area favours owning a home instead of renting and you do not see any changes in your personal situation that can lead to change of location (such as a new job role) you should seriously give thoughts towards prioritising home investment. Some people can save up to £700 a month if they stop paying rent. Use a mortgage calculator to punch the numbers for your area. The extra money freed up by owning your home can be committed to improving your pension savings.  Apart from the financial stand point, you need to consider your disposition towards owning your home. For many millennials, owning a home is a chore and almost a burden. If this applies to you, prioritising home investments may not be the best choice for you.

The Case for Prioritising Retirement Savings

If you are not ready to settle down in a permanent place of residence for the next 20 years at the very least, you should consider putting away more money in your pension pot.  Here is an example: if the value of your property, originally worth £150,000 grows by 3.83% every year, it will take around 19 years for the value of the property to double to £300,000. Now if you put the initial £150,000 into a pension fund that tracks the US S&P 500 for example, and it maintains current trends, your investment will be doubled £300,000 to in just 10 years. If you leave the £300,000 invested for a further 10 or 20 years, you will have £600,000 or £1.2 million.  All of the growth, without any further investments on your part. Of course the calculation is dependent on the fund maintaining consistency with growth but so does any house related calculations. The property market will need to remain at current strength levels for you stand to stand a chance of growing the value of your home.

At the end of the day, your personal situation will determine where your priorities should lie. However, millennials that punch the numbers early enough and do the barest minimum required for their pension pot and home investments stand a higher chance of avoiding mistakes that could bite hard down the line. Invest for retirement but take out a mortgage!


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