Hello,

Title pretty much sums it up. My details:

~100k in std. 401k.

120k salary.

30k in roth IRA.

~10k in regular savings

28 years old

Live in Phoenix

My lease is up next August and I'm just struggling with the idea of continuing to pay rent. Would it be worth it to just take money out of my 401k to help pay for a down payment? I'm just thinking my rent money gains me absolutely nothing. Its a full net loss. Whereas my 401k(all index funds) will return what like 10% at best per year over my lifetime? I'm spending 20k/year on rent, so why not just take the 401k hit but actually contribute to a mortgage instead of just pissing money away in rent?

Comments

You must log in or register to comment.

AutoModerator t1_jae60i7 wrote on February 28, 2023 at 8:04 PM

#2,121,723

You may find these links helpful:

I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.

ategnatos t1_jae7wle wrote on February 28, 2023 at 8:16 PM

#2,122,372

you will lose a significant chunk of your down payment when you buy only midway through the crash.

IceCreamforLunch t1_jae8bbr wrote on February 28, 2023 at 8:18 PM

#2,122,525

Absolutely not. You can borrow money for a house (and just about anything else while you're working) but you can't take a loan for retirement.

Also:

>I'm just thinking my rent money gains me absolutely nothing. Its a full net loss.

That's not true. It buys you housing.

>Whereas my 401k(all index funds) will return what like 10% at best per year over my lifetime?

Which adds up to a LOT of money by the time you retire.

>I'm spending 20k/year on rent, so why not just take the 401k hit but actually contribute to a mortgage instead of just pissing money away in rent?

Rent isn't just 'pissing money away' and houses have a lot of costs that will also feel like you get nothing for, like taxes, insurance, maintenance and repairs, etc, etc.

NecessaryItch1452 t1_jaecvdx wrote on February 28, 2023 at 8:48 PM

#2,124,265

Never take money from your 401k. You didn’t even mention that you’ll have to pay a penalty/taxes to withdraw from your 401k so you’ll be taking out far more than you’ll be using.

Also, stop thinking of rent as throwing away money. It’s money that buys you housing. You can be much more flexible renting too. Move to a different neighborhood. Move to a smaller place to save money. Buying a house can be a hindrance in many circumstances and can come with many additional expenses. Just go to a home improvement store on the weekend and watch all the happy homeowners throwing away money on plants, mulch, ceiling fans, French doors, new knobs for the cabinets.

UnrealsRS OP t1_jaed3l4 wrote on February 28, 2023 at 8:50 PM

#2,124,350

Replying to NecessaryItch1452 (#2,124,265)

First time home buying is a penalty exception for withdrawing for your 401k - but yeah regardless seems like this is a bad idea, so I will continue to rent until I save up enough!

Super_Mario_Luigi t1_jaetjgf wrote on February 28, 2023 at 10:37 PM

#2,130,819

Never take money out of your 401k. If you can find a scenario worse than that, it would be during a market downturn, like now.

But I agree with you, get out of rent. It's a zero-sum game. Even if someone tries to justify it to you, in the long-run, you never win.