{ "media_type": "text", "post_content": "Feeling cash strapped - Just bought a home and feeling cash strapped. Thinking about stopping 401k contributions for a year or so to get more cash. My firm matches 25% up to 6% of my contribution, so I will also lose this. Thoughts???", "post_id": "6106357d174ec6002a470dc5", "reply_count": 15, "vote_count": 5, "bowl_id": "59064a3cb12379001006592c", "bowl_name": "Personal Investment Chatter" }

Feeling cash strapped - Just bought a home and feeling cash strapped. Thinking about stopping 401k contributions for a year or so to get more cash. My firm matches 25% up to 6% of my contribution, so I will also lose this. Thoughts???

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I'd look at other alternatives before stopping 401k. Maybe tighten up on other variable expenses first. Slowly build up a cash base which alleviate some anxiety.

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I would contribute 6% to get the full match. That is free money and it would take something very significant to give it up.

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Can you at least put in the minimum amount to get the company match? That's a lot of money you're leaving on the table otherwise. Of course I don't know where you are a Director, but I'm assuming that you should make enough to be saving at least 20% of your salary for retirement. Take a hard look at your budget and see where else you can cut first. My concern for you would be that losing out on an entire year of retirement savings will have a huge impact, particularly if you are many years from retirement. And if you're pulling back now, who is to say you'll be able catch up later? Will there always be a reason to reduce your contributions?

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Do the minimum contribution to get match. Make cuts elsewhere. Assume you make 200k. That’s 12k + 3k match that goes into retirement fund. If you don’t contribute you’ll end up only taking home 8-9k after taxes. Not worth leaving that cash on the table

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Agree about looking at other options. It’s not usually recommended but does your 401k allow a loan? Maybe you can keep contributing and know that if there’s some emergency, you may be able to take the money back out as a loan from your 401k to give you some peace of mind

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Think of it this way: if you have access to a sufficient amount of credit at less than 25% interest, then you’re better off taking the loan than foregoing the company match.

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Right 25% is the lowest because it ignores market returns too. I get antsy when I have less than $4k in my checking account after a large expense but my net check is $4,500 every 2 weeks so it builds back up quickly.

The question is, how much money is that going to give you? This is going to be taxed as well. Do you really need that extra money and is it a significant amount? If not just leave it and let that money grow and look at other temporary options like a small loan with low APR.

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Don’t stop contributing to 401k. As others said, check the contribution match limit to adjust your 401k. See the other sources to get the finance. If you have kids and contribute to their educational fund, you may pause that contribution.

Agree with sacrificing education funds first if applicable. As someone who paid my own student loans and is burdened by my parents reaching retirement age without a single dollar saved, I'm a huge proponent of giving your kids the gift of not having to care for you vs paying for their college.

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What are your numbers like? I would calculate how much you expect the 25% of 6% contribution to be? E.g. that is [1100] a year you are leaving? Now, how much money do you need to hit your mortgage/house payments? Is it 15k and you can get a 2% APY loan? You’ll be hitting $300 in interest payments. How does that side of the math: your contributions vs expected loan amount work out? Noting this can also take into account your expected rate of return on the 401k.

We need more specifics — do you have an emergency fund of 3-6 months of expenses? If not, then yes pause all other saving / investing until you have that saved. Once you do, 401k takes priority over all other saving and investing.

If there is NOTHING else you can cut back / reduce then stop 401k. But be very careful with how you spend the money that would have gone to 401k. The last thing you want is to be frivolous with that money. Once you save the amount needed to get comfortable then restart 401k contribution.

You’ll get used to it man. Always happens with a new house. As everyone said, don’t stop the 401K. Future you will thank you.

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