I followed conventional advice and for years and always maxed out my 401k. Now I have over 250k retirement but less than 200k in liquid assets. I never thought it was an issue until I started looking for a home and I am stuck due to low amount of cash in hand. For the type of home my family is looking for we need at least 300k in down payment, which means we need to save for another year before we can make offers that will get accepted. I wish someone told me the importance of having liquid assets especially when you’re young and don’t own a home. I’m writing this as a PSA for youngins out there. It’s good to contribute to your retirement but also make sure you are saving up in liquid assets for major purchases in life. TC 220k
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At what point is using a financial advisor worth it?
Try Heloc
Just take a loan against your 401K. For a housing loan it should allow you to take half of your $250k.
Well withdrawn the amount you need from 401k, pay the 10% penalty. You would’ve made enough gains in 401k that 10% penalty is ok. This is nothing to fret over.
10% penalty is on top of the regular income tax they would charge based on your current income. Right now my marginal tax rate is 45%, which means for every 10k withdrawn I only get to keep 4500. No way Jose
Then lose the house and when interest rates drop; pay 2x the amount of the house next year. Your choice Jose
You can start also withdrawing from your 401k slowly though it will require you to pax tax. Won’t help for home down payment now. But could free up some liquidity for home renovation or 2nd car down the road. 1) You convert small pieces of your pre-tax 401k into a Roth IRA. If your company doesn’t allow you to convert partial portions of your 401k, you may need to rollover the pre-tax 401k to a Traditional/Rollover IRA. The goal in converting small pieces is to minimize your taxes. When you convert it is recognized as taxable income. 2) You have to wait 5 years 3) Then you can withdraw that converted amount from 5 years back with no penalty (10%) or additional tax (since you already paid tax at the time of conversion). - - - For withdrawal of Roth 401k (scroll down): https://uspersonalfinance.substack.com/p/mega-backdoor-roth-401k-34500-contribution
You can tap your 401k to buy a house. But honestly, don’t buy anything if $200k isn’t enough down… you can’t afford it
Tbf, OPs TC is 210k, but household could be quite a bit more.
All "conventional wisdoms" are created to get something from you. Do you think there are enough real resources to satisfy the "wealth growth" of everyone all these years. I do not always roll 401K accounts when I switch jobs. Sometimes I just pay a penalty and cash them out.
Finally someone with a brain... I don’t always have all my money in on US equities and people call me an idiot. They’ll let their account drawdown 20% and call it “market volatility”. I’ve found trailing a stop-loss to be a great strategy… on a retirement account you don’t even need to think about long-term/short-term tax problems.
So you pay a penalty and taxes to take out cash for what…? Why pay into a 401k in the first place?
401k is better than buying home at 7% Apr. wait an year to accumulate more than keeping holes into 401k (hard saved)
Just rent for a year, will make you appreciate your home more. Not sure what the f is getting into people that they want to buy a home NOW NOW at all fng cost
Why do you need a 300k down payment? If this is 20% of the intended home price you're spending way too much based on your numbers
U can take a loan for home , do u think u can take a loan during retirement?
Yes it’s called reverse mortgage. Also with my current career trajectory I know I will be multi millionaire by the time I retire anyways. I’d rather be able to buy a home one year early now than being slightly better off when I retire. What difference does it make whether you have 5 million or 6 million?
Yeah qwerty is dumb