Saving For Down Payment on First Home Roth IRA vs Taxable Account

[Anthony Markey]

Hello everyone,

I am in the process of saving for a down payment on my first investment property and am looking for some advice. Some background on my personal finances 

• I contribute the maximum amount that my employer matches on my 401k
• I am making contributions to a taxable investment account with a 40/60 allocation as a safety net. The contribution period will be 1 year, then I will have enough saved up to cover 3 months of expenses. 
• I have a little over $800 in my Roth IRA but have stopped contributing because I want to save for a down payment
• My Roth IRA is roughly 2.5 years old so it doesn't meet the 5-year exception of using funds for first time home buyers
• The rest of my money is in a 90/10 taxable account which is a long-term investment account. However, if I want to purchase an investment property in the next 1-2 years, the risk level is very high. I can move that money to a taxable account with a 35/65 allocation and use those funds for the down payment

Should I not be contributing the max to my Roth IRA if my purpose is to use the funds to purchase an investment property?I'd be able to contribute the max and have a little less than $5000 to contribute to a taxable account.

I am not sure if I am making the wrong decision by not contributing the max to my Roth IRA and contributing all my funds to the 35/65 taxable account v.s contributing the max and then contributing the leftover to the 35/65 taxable account. The only difference with this plan is that it'll take longer to purchase my first investment property.

More information:

1. I'm 22 years old, almost 23 
2. Very little student debt
3. Looking to purchase a property in  Wichita, KS  

[Jonathan R.]

Not sure if you have thought about this yet, you can take a loan out on your 401k, the Roth too. The interest rate is low and you are paying yourself that interest. You can borrow 50% of the money in those accounts, you can schedule to have it paid off over up to 5 years. You do want to stick with your employer until you pay the loan off or else you will be taxed if you don't pay it when you leave. My plan with Vanguard will let you have up to three loans and you can still contribute and get your company match while you have the loan out. Some people will tell you not to take a loan out on your 401k, and most of them will be working until they're 65. :) Good luck.