401k or downpayment on house?

[Anonymous]

DH and I are saving for the downpayment on a house. We have a two year old and another on the way. DH makes about 100k per year and we have been maxing out his 401k because he gets a matching contribution from his employer. I make about 300k.

I have stopped contributing to retirement in favor of helping us save faster for a downpayment because my employer does not match. I figure being able to buy a house in less than a year, rather than two or more years will be more financially beneficial to us and then I can resume retirement savings. Is this short sighted of me? I am 31 with 70k in retirement savings.

[Anonymous]

If your employer does not match, then I would probably do the same thing.

[Anonymous]

Anonymous wrote:If your employer does not match, then I would probably do the same thing.

+1 and it's only for a short time.

[Anonymous]

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.

[Anonymous]

70K in retirement savings for age 31 is in fact quite low. If I were you, I'd max out 401k savings and continue to save for downpayment. If you make 400K a year, you can do both.

[Anonymous]

Anonymous wrote:70K in retirement savings for age 31 is in fact quite low. If I were you, I'd max out 401k savings and continue to save for downpayment. If you make 400K a year, you can do both.

I live in NYC and to get into a house in a good school district next year will take a lot of scrimping and saving. Does that change your answer at all?

[Anonymous]

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.

[Anonymous]

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.

[Anonymous]

At you level of income, you can afford to put the money away in the 401 k. Your oldest doesn't start school for another three years at least.

There's always a "right now" need for money that seems more appealing than retirement money. Once you get the house, it will be a new roof, a replacement car, etc. Treat the retirement as a non-negotiable and have it taken out before you ever see your paycheck.

[Anonymous]

Not sure I agree with everyone here. FED is going to start increasing rates. If this is truly a short term reallocation then over a term of 30 years the OP might be better off getting into a house with a lower rate than the lost compounding on that reallocated money.

[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.

This isn't necessarily true.

[Anonymous]

Anonymous wrote:

Anonymous wrote:70K in retirement savings for age 31 is in fact quite low. If I were you, I'd max out 401k savings and continue to save for downpayment. If you make 400K a year, you can do both.

I live in NYC and to get into a house in a good school district next year will take a lot of scrimping and saving. Does that change your answer at all?

We said the same thing when living in NY. Now looking back we were fools who didn't save money. You should absolutely be able to save for retirement and a down payment. Move to a studio apartment for a year or two, get rid of your car and limit fancy meals

[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.

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.

[Anonymous]

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

[Anonymous]

We contributed less but didn't stop completely. It was worth it to buy our first place and now we can bump 401k savings back up.