Announcement

Collapse
No announcement yet.

Save for home down payment vs 401k contribution

Collapse
X
Collapse
First Prev Next Last
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Save for home down payment vs 401k contribution

    Hi everyone,

    I am a recent grad and just started my new job as an attending. I was working with a reputable financial advisor and based on my situation, he thinks I can forego putting money in my 401k my first few years and save cash for a housing downpayment (also coming up is a wedding). I did mention to him that I'd like to buy in the next 2-3years, but I don't know if I want to pay more taxes and lose time in the market given the importance of compounding interest. Do you think this is a horrible advice or is it reasonable? The following is my situation:

    - No student loans, making about 380k combined w/ spouse. Projected to increase as I make partner

    - Combined, we have about $150k saved in cash. Looking to purchase a home about 1.2-1.4million (due to location). Hoping to save up 20% for downpayment. so another 100-150k

    - We don't have much in retirement accounts (we both have a roth ira but thats about it)

    - If and once I become partner in 3 years: in addition to my 401k, I can start contributing to a keogh plan, which will allow me to contribute another 30k or so every year (or something like that, totalling to about 51k towards retirement for pretax contributions). In addition, though it is not guaranteed (i.e. bankruptcy), I have a pension plan.

    - there is NO 401k match

    It would be nice to buy in the next 2 years, but not at the cost of chipping away substantially at my retirement. Any advice? Thank you in advance!

     

  • #2
    Your financial advisor is an idiot. Unabashedly this is a bad idea.

    Comment


    • #3
      What makes you call him 'reputable'? There's no reason you can't max your pre-tax accounts and save for a down payment. @Peds calling him just an idiot was actually being very kind on his part.

      Comment


      • #4
        Why ty @cord.

        Comment


        • #5
          He was listed in the WCI blog lol

          Comment


          • #6




            He was listed in the WCI blog lol
            Click to expand...


            Ouch.

            Comment


            • #7
              You only have a set amount of retirement space during your career, and once you missed investing in the space, it is gone forever.   The 19K you are putting in your 401K will only cause you to have 12 K less per year to direct to your house fund (ie will save you 7K in taxes that you would have had to pay this year and not gotten anything more for it).   You should be able to maintain a low enough lifestyle (living almost like a resident) for 2-3 years more years to amass a large enough fund to have enough for a down payment.   Even if you are short on the downpayment, there are always doctor loans if you are so inclined.    Sometimes I think that the average "adviser" is not used to giving high income people advise so they just give whatever advise they give someone with an average income to you.   Not contributing to your 401K and saving for a house for a few years may actually make sense if you make 50K per year based upon your tax bracket (ie not that much in savings) and the ability to avoid pmi with a larger down payment.

              Comment


              • #8
                let me expand as im not on mobile now.

                no, you absolutely max retirement space. 2x 401k, 2x bdrIRA. then top off taxable to hit 20% towards retirement.

                then comes the loans. figure out a 2-5 year pay off plan.

                then comes the rest: house, vacation, wedding, etc.

                you make 400K.....its literally a nonstarter talking about skipping the 401k. youll still have 360K after 2 of them....i think you can plan a house down payment on that.

                 

                also also: if this FA is charging AUM...and these funds are going into an account with them first for the house....

                Comment


                • #9
                  Ok thanks for the response. I was definitely surprised myself. I thought maybe my situation is a little different since I have a pension plan, which at max can lead up to 150-200k/year if I stay at my job for very long. As above, I should also be maxing out my back door roth as well?

                   

                  Thanks!

                  Comment


                  • #10




                    As above, I should also be maxing out my back door roth as well?
                    Click to expand...


                    Yes, for both you and your spouse. You should also be maxing your HSA if available to you and you and your spouse are healthy.

                    Comment


                    • #11
                      Let me just say I agree with the advice given and the shade thrown.

                      Comment


                      • #12


                        It would be nice to buy in the next 2 years, but not at the cost of chipping away substantially at my retirement. Any advice? Thank you in advance!
                        Click to expand...


                        This says it all. Your priority is your retirement savings, which I believe is appropriate

                        However, I will not presume to substitute my general recommendation for your specific goals. Iow, if your FA, who is a “recommended advisor” on WCI, gave you this advice after much discussion and a deep understanding of your long-term goals and resources, I would give him (at this early stage, at least) the benefit of the doubt. I am simply not creative enough to consider all of the possible permutations of your decision and there may be something omitted from this fact pattern that would change the whole course of this line of reasoning. Iow, and with total respect for our candid and much beloved @peds, I am not (quite) ready to attach the label of idiot at this point.

                        To be specific, it does not appear, based on your post, that your FA is benefitting from your savings in cash equivalents for the next 2-3 yrs in pursuit of the goal of purchasing your house. I may not agree with your goals and priorities, but that would be a topic for a different thread.

                        HOWEVER, if this person is, in some way, gaining any financial benefit from this recommendation, please ignore everything I have just typed and report him to WCI. You will not only do yourself a favor, but also help protect your colleagues.

                         
                        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

                        Comment


                        • #13


                          It would be nice to buy in the next 2 years, but not at the cost of chipping away substantially at my retirement. Any advice? Thank you in advance!
                          Click to expand...


                          This says it all. Your priority is your retirement savings, which I believe is appropriate

                          However, I will not presume to substitute my general recommendation for your specific goals. Iow, if your FA, who is a “recommended advisor” on WCI, gave you this advice after much discussion and a deep understanding of your long-term goals and resources, I would give him (at this early stage, at least) the benefit of the doubt. I am simply not creative enough to consider all of the possible permutations of your decision and there may be something omitted from this fact pattern that would change the whole course of this line of reasoning. Iow, and with total respect for our candid and much beloved @peds, I am not (quite) ready to attach the label of idiot at this point.

                          To be specific, it does not appear, based on your post, that your FA is benefitting from your savings in cash equivalents for the next 2-3 yrs in pursuit of the goal of purchasing your house. I may not agree with your goals and priorities, but that would be a topic for a different thread.

                          HOWEVER, if this person is, in some way, gaining any financial benefit from this recommendation, please ignore everything I have just typed and report him to WCI. You will not only do yourself a favor, but also help protect your colleagues.

                           
                          Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

                          Comment


                          • #14





                            It would be nice to buy in the next 2 years, but not at the cost of chipping away substantially at my retirement. Any advice? Thank you in advance! 


                            However, I will not presume to substitute my general recommendation for your specific goals. Iow, if your FA, who is a “recommended advisor” on WCI, gave you this advice after much discussion and a deep understanding of your long-term goals and resources, I would give him (at this early stage, at least) the benefit of the doubt. I am simply not creative enough to consider all of the possible permutations of your decision and there may be something omitted from this fact pattern that would change the whole course of this line of reasoning. Iow, and with total respect for our candid and much beloved @peds, I am not (quite) ready to attach the label of idiot at this point.

                             
                            Click to expand...


                            I could very well be under thinking this but I fail to see a logical scenario where a high income professional with no debt shouldn't be maxing their pre-tax space.

                            Comment


                            • #15
                              Maybe if he owed the mob money and they were going to break his thumbs.

                              Oh wait you said no debt. Nevermind.

                              Comment

                              Working...
                              X