 Question concerning my 401k money? |
These are tough times for just about everyone. I know that many of you who answer this question will try to convince me not to do this but......I do have a few questions:
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Rich F | Is it ok to lower my 401k contribution if I am saving for a house? |
I am currently contributing 15% to my 401(k). However, I would like this lease I sign to be the last lease I sign. Should I lower my contribution to 10% so I have more income to save this year so I can afford a down payment next year? If I do that, I should be able to afford a 15% downpayment, rather than 10%. |
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Real Estate Guy
 |
You didn't say how old you are.
However, I WOULD NOT lower the 401k amount. Even a little amount over the long hull will hurt you.
Lets assume you make 75,000 a year. You put in 15% or 11250 a year (TAX FREE). You lower this amount to 7500 for 3 years and then increase again to 11250 a yr. At the end of 25 years, you LOST $142,000 income!
It doesn't make sense. I would put the 10% down and do it this way.
ALWAYS fund your 401K plan FIRST and ALWAYS to the MAX. |
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ironwood9
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That's a tough one - you really might be best served to consult a tax expert, but kudos for "maxing out" your 401K - one of the only times I did that, I was making 55k salary, and socked away about 6k in my 401K in just one year.
401K's are one of the greatest things ever - you're a fool not to participate - we created a nice little nest egg and later when we had some rainy days, the $$$ really came in handy, and the penalty was not that severe (for early disbursement).
You putting the 15% in is such a great thing that I can't believe the benefit of the lowered monthly payment would offset the downside of reducing your 401(k) contribution.
Remember, your 401(k) deduction means you reduce your tax liability - bottom line, that's like money in your pocket. And in the early years of your loan, you will have more interest to write off, so that will further reduce your liability if you itemize.
Good luck ! |
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Gray
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The 401K is just for retirement. Either you save that money for your retirement or you save it for the things you hope to have available prior to retirement. Entirely up to you. |
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jmorritz
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How much of a return are you getting on your investment in the 401k? If that return is MORE than the interest you'd be paying on the loan, which is should be if you're investing correctly, then you'd be better off keeping it in the 401k.
ie, if you're getting a 10% return on your 401k, then keeping your money earning that interest would be better in the long run than putting a bigger down payment on your home and saving 5-7% on mortgage interest. |
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chiflatha777
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Read your 401k rules...If I'm not mistaken...you can borrow from your 401k for the purpose of your 1st mortgage purchase (for downpayment of course). So, you don't need to reduce your contribution. And if you should choose to borrow against your own 401k...find out what the rate would be and the terms such as 12 months, 24 months, and so on. If you borrow, the payment plan will be payroll deducted but you have the option to select all of the above. You do have a choice. Look into it first for options, then decide. Good plan either way. |
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Boy
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Yes ! |
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Nvr2soon
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If it is a last resort. You're losing a lot of earning power by reducing the contribution. 10% is not bad and avbove the national average, however. Under no circumstance go below the per-cent your company matches.
You are also using this money for a great investment a home, which helps make the decision easier.
Good luck |
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bud68
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Everyone has to balance nonretirement goals (like a house purchase) with retirement saving. If you have a firm plan in mind to purchase within a few years, then you are better off temporarily reducing your 401(k) contribution rather than max'ing it, then borrowing from it like so many foolishly do. |
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ok
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It's your money. Use it when you need it. |
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GG
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thats actually a good idea. 5% isnt a bad drop either. good luck |
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ramseysii
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If your 401k is an IRA you can actually use it to get a discount on your taxes, provided of course that you are a first time home buyer. |
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