401k, pre-tax or after-tax?

[Passions]

Alot of people told me to do pre-tax since you get more money (taxable income is lower), but now I've heard that if I plan on buying my first home to do after-tax, since I can take a loan against the 401k and the money is already taxed. The penalties are lower also for after-tax. Hmmm...any tips?

 

[Ameesh]

pre-tax, only chumps put post tax

 

[FeathersMcGraw]

Originally posted by: Ameesh
pre-tax, only chumps put post tax

Uh-oh, I'm about to agree with Ameesh.

 

[StageLeft]

pre

 

[spidey07]

um....why in the world would one want to pay taxes on a 401k?

pre-tax. They are still your assets wether they are taxed or not.

 

[bunker]

Pre-tax.

I took a loan from my 401k to help with the down payment on our house and had no issues.

 

[trmiv]

Pre-tax.


Damn, I wish I could get a 401k, but my company doesn't offer any.

 

[MattCo]

You will be taxed when you cash out from a 401k when you retire, but you are ususally at a lower tax bracket so it isn't as bad.


-MC

 

[DaveSimmons]

401K pre-tax, for at least the % that your employer will match. Then put more money into INGDirect for your house.

You need to get into the habit of saving more / spending less if you're going to be able to afford to live in that house without switching to an all-ramen diet. If you can save up the down payment while still putting a good amount into your 401k then you're really ready to buy. If you can't, you might have trouble making mortgage payments while also paying for taxes and maintenance (and paying back the 401k if you borrow).

 

[J0hnny]

If you go after-tax, you might as well just put money into a Roth IRA instead (although it's limited to 3K per year).

 

[DaveSimmons]

Originally posted by: J0hnny
If you go after-tax, you might as well just put money into a Roth IRA instead (although it's limited to 3K per year).

That's the best choice for after-tax long-term investments, but I think (not sure) that you have to cash out funds for buying a house instead of just borrowing against the IRA.

Either way, if you have to borrow/cash out your retirement money to get the house, perhaps you can't really afford it yet.

 

[CPA]

Whoever told you to do it after-tax is an idiot.

You can still take a loan out on pre-tax contributions.

You only pay penalties if you withdraw and it doesn't sound like you were going to do that.

 

[djNickb]

Money you roll into a 401k is pretax money now -- however when you retire and draw money from it, it is taxed as though it was income and not capital gains or unearned income. So yes you defer paying taxes now but would still pay more taxes when you withdraw than if you had invested in other investment vehicles.

edit.


But investing in a 401k is better than not investing at all

 

[IGBT]

Bad move to use 401k for anything but retirement..my pretax 401&457 save me a bunch...money that I would otherwise loose in taxes is now mine. And the limit goes up next year so I can save even more and pay less payroll taxes. Join a credit union for some of the best deals on first time home buyers and saving plans.

 

[tooltime]

pre