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My employer is offering a 401k plan where they match 4%.

I have no tax saving strategies setup yet, so no IRA, Roth, what have you (yet)

My plan is to buy an apartment complex by next year: this means that I have an interest in being able to come up with as large a downpayment as I possibly can

  1. Given that I will need a large amount of cash within the next year, will it be a good plan to sign up for the 401k with 4% match?
  2. Does a 401k (or a certain variant of it exists?) allow me to take out a loan against it or liquidate it without fees and penalties for circumstances like buying an apartment complex?
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The 401K as a source of down payment is limited.

Loan:

The maximum loan is 50% of your balance or $50,000 whichever is lower. It is still a loan so it won't help you qualify for the mortgage.

Withdraw:

If you are still employed by the company when you are buying the apartment, you can't easily withdraw funds. Most 401K programs limit withdraws to a specific list of hardships. Buying investment property isn't one of them.

If you quit the company you can get to the funds. But the matching funds from the company aren't automatically yours to keep unless you have worked for the company for a few years. It is a sliding scale so it would be someplace between 0% and 100%.

Unless you are over 59.5 years (or 55 when you separate from the company) when you withdraw funds your pretax deposits will have to be rolled into an IRA or you will have to pay taxes and penalties on the withdraw.

Summary:

Now a 401K is a great investment vehicle for a retirement fund especially with company match. It just generally isn't a good source of money you will need short term.

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The 401(k) will usually lend up to 50% of its value. A 10 year payback for a house purchase, 5 years for all else. This is an investment, not a home you'll live in, correct?

If you deposit $4000 (for example) and see it matched to $8000, you can borrow out $4000 again. That feels like a wash, but the $4000 was pretax, so it may have been $3000 out of pocket.

I'll acknowledge the disclaimer - 401(k) loans are a bad idea, lose you job and tax is due as well as penalty. They add yet another layer of risk to your life.

In the perfect scenario, you capture the match, have the same or more cash for your deal, and have $4000 leveraged in real estate growing far faster than your loan interest. There are anecdotes that offer the negative scenarios.

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