I NEED YOUR CRITICISM ABOUT MY 401K

[Justin O'Malley]

Hey BPers,

So I've been brainstorming about how to start stacking up my finances to come up with a down payment and I came across something. I'm freshly out of school and I have a good paying job but it still takes some serious time to save up for a down payment on a home in the Denver area. I was think about everything I own down to the shirt on my back to see if anything to get me into a new property. I have a nice truck but I can't sell it because I use it for work and it's nice having a car nice enough that I don't have to worry about it starting up everyday.

I came to this realization....the only considerable amount of money to my name is what I have been putting in my 401k. I've set contributions to the max because A) I want a nice back up retirement plan in case I don't hit it big in RE and B) who doesn't hate watching all their money go to uncle sam.

I came across an option to take a loan out of my 401k. I did some research and found that my 401k provider allows loans up to 50% of your account value at a 7.5% rate. This intrigues me because for a 10k loan my payments would only be about $90 per month. To get a 3% down payment on a $300k house this could work perfectly and I would mind the $100/mo payment because it wouldn't hurt my numbers too much.

My question to you is this...accounting for all the negative effects ($100/mo loan payment, missed opportunity cost of taking my money out of the 401k, and the banks knowing I have an additional loan in my name) is this idea remotely feasible to speed up the clock on my savings account and get my name on a house hack title.

Feel free to tell me I'm dumb for even considering it or if I shouldn't be contributing to my 401k at all at my age but keep in mind that my company has a very competitive match program.

Thanks for reading!