Should I Reduce 401K Contributions to Save for Real Estate Investment Property?

[Phillip R.]

I'm married, age 29, and make less than six figures. My wife stays home with our two kids. This year and last year we maxed out my 401K ($17,500 annually) and both our ROTH IRAs ($11,000 annually). This has allowed us to substantially increase our retirement savings, but it has severely limited our ability to save for the down payments of future buy and hold investments we'd like to make in the coming years.

With the assumption that we're not able to cut costs elsewhere, would you recommend we trim our retirement contributions, and if so by how much?

[Steven Hamilton II]

Originally posted by Matt Mason:

@John Thedford
Realize when you borrow from your 401k plan you end up paying taxes twice, because you will have to pay the loan back with after-tax dollars and then when you retire and take money out of the 401k, you will pay taxes on it again. That is why 401k loans are really seen as a last resort.

I like pulling his original contributions out of the Roth if he doesn't have funds to buy real estate. This way at least he doesn't run into this problem.

@Matt Mason ,

You are looking at it all wrong. You are borrowing those funds. All of your loan principal is paid back with after tax funds except when you are taking depreciation and keeping the property until death. You are writing off the interest no matter what. It is no different. The advantage is that you are paying yourself back.

-Steven