I am 32 and max out my retirement savings every year through 401k and IRA. I also save an equivalent amount that I put into savings/investment accounts. How should I think about trading off between maximizing my contributions to retirement accounts versus putting less in my retirement accounts so I have more liquid assets to put towards a downpayment?
The bottom line is my net worth is now divided equally between liquid and illiquid (retirement) accounts. I would like to buy property, and I need more cash for a downpayment on my dream home.
It's all about priorities. If the dream home is a priority for you, you will need to calculate out how long it will take you to get there under your current savings plan vs. how long it will take you if you diverted funds from retirement savings. The trade off is, it is possible you may need to work longer to accumulate enough retirement savings to feel comfortable later in life. If that is not something you are willing to risk, then retirement is a higher priority for you and it may take you a few more years to save enough for the dream house.
One thing to remember is that putting money down on a home IS an investment, a concentrated investment in one piece of real estate. It is different than spending it on a vacation or a big screen TV. Much like the funds you are investing in your 401k and IRA, the value of your house can go up or down. The difference is, if you plan to live in this dream house for the rest of your life, your access to that equity might be limited.
A big factor in determining how much it will effect your long term retirement goals is what your ongoing expenses will be with this new house. Assuming they are higher than today, will that make this a permanent reduction in your retirement savings, not just a short term thing? If so, that could have a bigger impact on achieving your long term goals than a couple of years of lowering your 401k contributions.
I would suggest you at least maintain up to any matching contribution amount that your employer provides in the retirement plan.