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Max out 401k of save for house down payment?

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Eat a donut for breakfast or paint the walls beige?

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You should always max out your 401k! How much will you need for a down payment? Are you a first time home buyer? If so, you can transfer $10k to an IRA, and then take it out tax free as a first time home buyer. You can also take out a loan against your 401k (half the balance up to $50k) completely tax free as a first time home buyer. You would have to pay back the loan, but I did a repayment plan over 10 years. They “charge me interest”, but it’s interest that is essentially repaid to myself. Basically a way to make up for any dividends lost from the money I took out, so by the end of the 10 year repayment period, I will be back on track. So basically, if you’re a first time home buyer and have $110k+ in your 401k, you can take out $60k tax free. As opposed to cashing out your 401k. In a scenario with the same $110k+ you would probably end up losing half the money to early withdrawal penalty and taxes anyways.

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Wait, don’t take 401k loans and don’t divert retirement investments unless you REALLY need a home. It’s the worst investment you could every make

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Beige is out M1, go grey!

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Do both

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Or you could, GASP, wait a little longer and just save the cash down payment separately, so that your 401k is untouched and continues to grow. Not always a good idea to have your down payment savings invested in the stock market when your have a shorter time horizon. Even 1-2 years, it’s better to just put it in a higher-interest-bearing savings account or money market, to ensure you don’t lose any of it due to market volatility, especially when you the need cash to buy.

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A home is not an investment. It’s a place to live.

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Yes

That’s a strong “No No” if you talk to any FPA or Tax advisor.

How is the interest of your 401k loan repaid to itself?

Because I borrowed the money from myself. So the extra $125/month of interest is actually just going back into my 401k.

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