Down payment blues
January 13, 2007 8:14 AM Subscribe
I am looking to buy a house in the next 2 years or so. Should I (a) suspend payments to my 401(k) and build up my after-tax cash reserves, or (b) keep making my regular contributions, and borrow against the balance when the time is right?
posted by Saucy Intruder to work & money (10 answers total)
I've been racking what's left of my brain trying to figure out what option puts me in a better financial situation. I think the basic tax implications are the same. If I assemble cash now, I do it on an after-tax basis. If I borrow against the 401(k), I repay the loan on an after-tax basis. So the solution, it seems, is that I should take the loan on the 401(k) so as to defer my tax liability for as long as possible. Right? Or should I try to aggressively invest my cash and beat the interest rate on 401(k) loans, which is currently 10.25%?