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401k is meant to be retirement savings but you can also take a loan out of it.
However, if you know you will need the money in 5 years then what you're doing is a good approach.
A broad market index such as VTSAX is very well suited for long term 401k investments, IMO.
Look for the MF equivalent of VUG. Your 401k should have a description of funds available to invest in.
What you’re doing is fine if you need to save up cash for a home which seems to be the case based on your comments. You’re contributing to your 401k to get the match so that’s good as well. I would diversify your mutual funds instead of just buying the same one over and over again but that’s just me. Once you buy the house though and have an emergency fund, increase your 401k contributions and/or contribute to a Roth 401k or Roth IRA. Generally you want to avoid taking loans against your 401k. Overall at 24 you’re doing great just thinking about these things so nice job!
You should max out the 19500 in your 401k
Even if the interest is 8%, you’re paying it to yourself. It’s like increasing your savings rate. That money gets invested in whatever allocation is setup in the 401k, so it’s not a horrible deal. I believe that rates for 401k loans are around 5%, but that may be subject to plan terms.
Chief
I’m going to disagree with many here. You don’t provide your salary. If your goal is to buy a house and you can’t afford to fully fund your 401k and save for the house, then I think you are doing the right thing. Several people advocated for 401k loans but generally 401k loans are a bad idea. First you are selling those shares so your 401k is no longer invested in the market. Second, you have to pay back the loan if you leave your company, so if you take a big loan, that could be an issue. You approach is solid. I suggest that each time you get a raise you increase your savings rate and one you get the house fund your 401k more.
Chief
Not true. Your shares are sold. https://www.creditkarma.com/personal-loans/i/how-401k-loan-works. It’s not really a loan collateralized by your asset (who do you think is granting you that loan?). You are selling shares which you have to repay in order to avoid a taxable event.
I’m doing something similar but VTI. Planning to buy a house in a few years
Why not fzrox in taxable?
Not sure I am following is the 1500 all going into a taxable account and you are putting nothing into a 401k?
I think everyone should have a mix of some sorts, but I live in NYC and the tax savings are 40+% on 200k income by investing in a traditional account. I’m not sure your math works out when you account for investing the tax savings in a regular brokerage account. 20k in traditional 401k (or whatever it’s at now) + 8k in tax savings that can now go into my brokerage account. If you’re assuming that the 8k is just thrown into the abyss, I agree, but it’s not really the same argument.
Roth conversion ladders are also one way to move traditional funds into a Roth account with a low tax burden, especially if you are planning on retiring early.