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Save for home down payment vs 401k contribution

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  • #31
    Anyone have any any thoughts about delaying taxable account contributions for 4-6 months (still maxing pre-tax accounts, HSA, backdoor Roth, etc) to hit 20% house down payment versus having 10% down (and paying PMI) and contributing 20% to taxable?



    • #32
      Why would you pay PMI? That's what Dr loans are for.


      • #33
        I have contacted multiple mortgage companies and the best rates seem to be from banks that do not fit my geographical location.


        • #34
          “For a lot of people, saving up a down payment takes a lot of time, and 401k can dramatically slow that down, keep people renting and cause you to feel like you are missing out on house opportunities”.

          Certainly true. But the light is flashing caution. The fact is, dipping into the retirement savings percentage has a substantial risk. Specifically, it is not a prudent path to take. Gross-taxes-retirement = spending is by far the best path. There will ALWAYS be more housing opportunities. The message the FA should deliver should be a recommendation to tinker with the spending. Tinker with the mortgage. Tinker with a planned refi. Playing the “catchup game” is difficult to win. Too many variables and it’s a poor financial strategy.
          No if’s, no but’s it takes time to be financially prepared for major purchases like this. Gunning it to beat that caution light is an unnecessary risk. The FA shouldn’t sugar coat the message. Buy a house when you are financially prepared and a strong preference for adjusting the spending, not the retirement component.
          By the way, catchup retirement contributions are age dependent. That choice will come many years later, purely a deflection from the decision on the table.

          I can see a cashflow for the very first month or two. Years is irresponsible from a planning standpoint. Retroactive or prospective “adjustments” don’t count. How your current retirement savings measure up is the meaningful decision.
          There may have been a communication issue. Some people choose not to pay taxes. That’s an option, not a good one either.

          The 20% isn’t the issue. It’s a rule of thumb regardless of the years spent in residency/fellowship and level of compensation or the cost of living. It works, physicians need to play catchup on retirement savings from the start. That’s the message the FA was paid to deliver, live within your means and fund your retirement savings appropriately. Easy message, loud and clear.