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No. of Recommendations: 2
>>I am 25. I have about $33,000 in my 401(k) right now. I do not have any sort of IRA. My current salary is $70,000 (and I can make up to a 50% yearly bonus, but I am not counting on that). I put 15% (the max allowed) of my pre-tax salary into my 401(k) and plan on always doing so. I do not own a house.

I am wondering if I should put additional money into an IRA or if I would be better off keeping that money in an account that I can access before retirement. I am thinking I should not get an IRA yet so I can save up for down payments on a house and new car quicker, then looking into an IRA after I buy a house (within the next 5 years or so).

First, you are already in good shape if you are 25 and already have 33k in your 401k. The fact that you are 10 year younger and earn more than I do makes me hate you, but envey should never get in the way of Foolish advise. So as someone with a 401K, a Roth, and a condo, I recommend you...

Do all three.

Sure, why not. I am betting you pay around $1000 per month in apartment rent (unless you are one of those gen X'rs living at home), and you probably do not have a lot of expenses because you have one of those jobs that work you to death. If you can put away $250 a month for your Roth, and another $250 per month for your home, you can make your annual Roth contributions and build up a $9000 downpayment in just 3 years. Over 5 years it will be $15000. And each year as your salary increases, you can increase the amount put aside for your dream home.

Of course, there could be some other variables. For example, if you drive a luxary car and live at Park Place, you probably do have a lot of monthly debt. Or if your dream home starts at $200,000, a 5% down payment may not be your best bet.

But if a $100,000 home is acceptable and you drive a Ford instead of a Lexus, then putting 15-20% down now (or in 5 years) is the way to go.
Bottom line (and it has been a long line to get to the bottom of), decide how you want to live the next 5 years and what you consider to be a reasonable next life stage. Then plan to achieve all your goals. And watch the whole thing get washed a way when you fall in love, get married and have kids. Best of luck!

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