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I come from a healthcare operations background, have my Masters in Health Administration and 3+ yoe in large hospitals/headquarters. I am now learning sql on my own, proficient in excel and tableau.
I would like to know the best way to get into large tech companies like Google for non tech roles. Should I consider trying to work at a Tech company for a few years before switching back to healthcare? Google Amazon Accenture AbleTo CVS Health
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@A1 No - the point is to defer taxes and grow a nest-egg via investment on tax-deferred dollars.
Taking a loan requires you pay yourself interest (albeit lower than the market typically yields) for the life of the loan. Not as awful as it sounds.
OP:
1). Do not withdraw from your 401k. You will be taxed on the withdrawal as current income, and you will also incur a 10% early withdrawal fee. You will also be giving up a retirement asset that could accumulate on a tax deferred basis for decades.
2). If you borrow against your 401k, and you lose your job or change employers, you will have to repay the loan within 60 days or it will be treated as a withdrawal. Not a great idea. Way better however, than an outright withdrawal.
3). There is no need for you to take a 15 year loan to save 25 or 50 basis points on a fixed rate loan. Take a 30 year loan, as it gives you the flexibility to make lower payments monthly (than the 15 year loan) if you need to because of unexpected expenses. You can still choose to pay off the 30 year loan more quickly if you wish, and even use a 15 year repayment schedule, to build equity more quickly and save yourself interest over the long run. The idea here is to retain the option to pay off more slowly.
4). It's not a great idea to use every last speck of cash to get to closing on a home purchase. You need a rainy day fund for job loss, unexpected expenses for repairs, special assessments by the condo association, etc. Also, you will have many one time expenses when you buy a place (window treatments, painting, etc). Better to make a smaller down payment and then pay off the loan more quickly later if you are able.
5). A 20% down payment will enable you to avoid Private Mortgage Insurance (PMI), but it's not the end of the world to incur this temporarily in order to preserve cash. You will stop paying PMI when you get down to 80% loan-to-value (LTV) through appreciation and through paying down your mortgage.
6). If you have the option to close this month vs next month, and you are asking which is better tax wise, the answer is that it makes very little difference and shouldn't be a driver either way for you.
Timing taxes seem to be the least of your issues if you're going with that strategy
So much wrong with that. 10 to 20% down will get lowest rate, no need for 30. No need to do a 15 yr the spread to 30 is tiny with how flat the Curve is now.
Skip the 401k just use the cash. Save to 20 if you need.
@pwc1 👏👏 for a thoughtful and well explained response
Dumb move all around. Dont buy until you have cash. No tax implications
Why are you withdrawing from your 401k?
Dont do that either. If you cant save the Cash you arent ready to buy
My rent rigjt now is more than the mortgage payments I will be making
Pwc2 all american mortgage are penalty free prepayment
Kpmg1 bad advice is baaaaad
I second what PWC1 said.
OP, Im going through something similar and are putting down 20%, 30 yr fixed @ 4%. Will look to refinance to a 15 yr or 7 yr loan in the next few years after income increases :)
Don't worry about why they are withdrawing from the 401k. That is not your concern. Your concern is the question. AGREE try and wait until after Jan 1 so it is taxed based upon next year.
Or take a loan from 401k. Don’t take a distribution!!!
Thanks PwC 1!
Suze Orman says, you can't afford it. DENIED!
Meh to all the negativity for using a 401k loan like this. It can be the right move when factoring in appreciating home value (both in terms of increasing difficulty to buy a place and in appreciating investment) and tax savings (at least for now). You shouldn't use 401k for remodeling your home or a vacation but for getting into a home it isn't always bad.
The only way to prove it is to model it. It either is or isn’t a good idea it’s not a matter of opinion.
Also E1 - I think you’re wrong - prepayment penalties are allowed for first 3 years of some conforming loans of 2% of loan for first 2 yrs and 1% for 3rd year. They always have to offer an option without penalty too. No?
Also for the record, mortgages with prepayment penalties are now illegal.
False. IRA gives $10k to first time home buyers penalty free, NOT 401k.
OP, it's clear you're not ready to buy a house especially when you've added so many layers of complexity. Just save for 20% down, get a fixed rate 30 yr mortgage and move on. Putting 30% down is dumb as hell. You should take the money and put it somewhere else that will yield much higher returns than residential real estate. Focus on cash flow. Take a basic personal finance class.