401k or downpayment on house?

[Anonymous]

Anonymous wrote:You make 300k and can't save 18k for retirement?

The question is about prioritizing savings: does one prioritize saving for a down payment over saving for retirement?

In this case, the critical point is that there is not employer match. If OP was leaving money on the table it would be one thing, but OP is not. Therefore, I don't see how it is possible to distinguish retirement savings from the sum total of all owned assets at retirement. A primary residence is and should be a part of that equation. Even if it is not a great investment for historic returns, it is a forced savings vehicle.

Dear OP, don't listen to these people. Money is fungible. You are not leaving money on the table. Saving for a down payment is saving for retirement. Relax.

[Anonymous]

Anonymous wrote:

Anonymous wrote:You make 300k and can't save 18k for retirement?

The question is about prioritizing savings: does one prioritize saving for a down payment over saving for retirement?

In this case, the critical point is that there is not employer match. If OP was leaving money on the table it would be one thing, but OP is not. Therefore, I don't see how it is possible to distinguish retirement savings from the sum total of all owned assets at retirement. A primary residence is and should be a part of that equation. Even if it is not a great investment for historic returns, it is a forced savings vehicle.

Dear OP, don't listen to these people. Money is fungible. You are not leaving money on the table. Saving for a down payment is saving for retirement. Relax.

No. The fact op can't save 18k on 300k is a relevant question and a very serious one. How on earth can op even save for retirement if his or her finances are in such a wreck? How can op save for home repairs and unexpected expenses if he or she can not save 18k a year? Not to mention this is one of the few tax breaks op earns at her income level. My taxes were closer to 40 percent when living in NY. I put every penny I could in my 401k. It's a great deal to be able to save on a pretax basis.

Op needs to do some serious soul searching and number crunching and make some significant changes so that she has the money to save for retirement and purchase a home. Both are very important for long term financial health.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I would not stop contributing. In your situation, I would take loans from both 401(k)'s (the max of 50K or half the balance is allowed) as part of the down payment, and then use the relatively high income to pay back the loans quickly.

Clever.

Not that clever. The money would need to be paid back straight away if the employee loses or changes jobs.

It doesn't even make any sense, because OP doesn't get a match. Her retirement savings = whatever assets she can save until retirement and a primary residence is part of that. Whether OP saves that in a retirement account of through other means will only have tax implications, whether paid now or deferred. Buying a residence will also provide a tax deduction.

The 401k contributions are pretax. The mortgage deduction is limited by the amt. really the 401k, whether matched or not, should be a priority, especially if you're in a high tax bracket. Think of it this way:

Would you rather earn 18k and invest 18k in the 401k OR bring home 11k out of the 18k you earned and invest 11k in a brokerage account?

[Anonymous]

At OP's tax level, putting 18k into retirement is probably only costing her $11-12k...the other $6-7k would be going out the door in taxes anyways - why not get some benefit from that? I'd contribute to the 401k, and then take a loan from it if needed

[Anonymous]

We cashed out our 401k and our house tripled the investment over 8 years even counting for the penalty and taxes. 401k is crap.

[Anonymous]

Anonymous wrote:We cashed out our 401k and our house tripled the investment over 8 years even counting for the penalty and taxes. 401k is crap.

I don't think you understand what a 401k is.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You make 300k and can't save 18k for retirement?

The question is about prioritizing savings: does one prioritize saving for a down payment over saving for retirement?

In this case, the critical point is that there is not employer match. If OP was leaving money on the table it would be one thing, but OP is not. Therefore, I don't see how it is possible to distinguish retirement savings from the sum total of all owned assets at retirement. A primary residence is and should be a part of that equation. Even if it is not a great investment for historic returns, it is a forced savings vehicle.

Dear OP, don't listen to these people. Money is fungible. You are not leaving money on the table. Saving for a down payment is saving for retirement. Relax.

No. The fact op can't save 18k on 300k is a relevant question and a very serious one. How on earth can op even save for retirement if his or her finances are in such a wreck? How can op save for home repairs and unexpected expenses if he or she can not save 18k a year? Not to mention this is one of the few tax breaks op earns at her income level. My taxes were closer to 40 percent when living in NY. I put every penny I could in my 401k. It's a great deal to be able to save on a pretax basis.

Op needs to do some serious soul searching and number crunching and make some significant changes so that she has the money to save for retirement and purchase a home. Both are very important for long term financial health.

10:58 here. That's why I asked the question. There maybe a bigger issue with OP's $ management/spending habit.

[Anonymous]

Missing on retirement savings means missing out on the tax advantage to the future growth of that money tax free. My guess is that is more beneficial than one year of home ownership.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I would not stop contributing. In your situation, I would take loans from both 401(k)'s (the max of 50K or half the balance is allowed) as part of the down payment, and then use the relatively high income to pay back the loans quickly.

Clever.

Not that clever. The money would need to be paid back straight away if the employee loses or changes jobs.

Really? I thought it was treated in that circumstance as a distribution subject to tax and penalty. That's the TSP at least.

[Anonymous]

Anonymous wrote:We cashed out our 401k and our house tripled the investment over 8 years even counting for the penalty and taxes. 401k is crap.

Preach

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I would not stop contributing. In your situation, I would take loans from both 401(k)'s (the max of 50K or half the balance is allowed) as part of the down payment, and then use the relatively high income to pay back the loans quickly.

Clever.

Not that clever. The money would need to be paid back straight away if the employee loses or changes jobs.

Really? I thought it was treated in that circumstance as a distribution subject to tax and penalty. That's the TSP at least.

Yes, of course, but that's much worse than paying it all back.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I would not stop contributing. In your situation, I would take loans from both 401(k)'s (the max of 50K or half the balance is allowed) as part of the down payment, and then use the relatively high income to pay back the loans quickly.

Clever.

Not that clever. The money would need to be paid back straight away if the employee loses or changes jobs.

Really? I thought it was treated in that circumstance as a distribution subject to tax and penalty. That's the TSP at least.

Yes, of course, but that's much worse than paying it all back.

There are reasonable arguments against retirement loans; OP's very high HHI and need for a down payment makes her an ideal candidate for such a loan. In practice, a loan will accelerate the down payment by a few months, and then be easily repayable.

[Anonymous]

Anonymous wrote:You make 300k and can't save 18k for retirement?

Actually, combined they make $400K.