Savings: 401(k) or in your savings account?

[Gohabsgo_IHB]

<p>I am wondering if it is better to maximize your 401(k) or if it's better to keep as much money as possible in your savings account for future downpayment. However, I believe you should always put money in your 401(k) to your employer match. </p>

<p>Should you give yourself a time horizon for buying a home, estimate your salary at that time, calculate what loan you could get and what downpayment you need. Once you have this figured out, should you keep all the money you need to get to that downpayment in your savings account (or any liquid asset); then if there's any leftover put it in your 401(k)?</p>

<p>The problem with this is that you might not cap the $15,500 401(k) limit.</p>

<p>Toughts?</p>

 

[ElricSeven_IHB]

Contribute up to your matching % in a 401K and no more. 401K's are going to be taxed as ordinary income in the future and tax rates will be a lot higher. Outside of the account, invest long-term money in a broadly diversified, low cost index fund. Invest short-term money in an E-trade 5% rate savings account.

 

[reid_IHB]

<p>There was some discussion about this topic a few months ago:</p>

<p><a href="http://forums.irvinehousingblog.com/discussion/187/">http://forums.irvinehousingblog.com/discussion/187/</a></p>

<p>-Reid</p>