I am in my 20's and I am aggressively saving up to buy a new home. I also have the opportunity to invest in my company's 401k. My company matches $0.35 to the dollar and up to 10% of my compensation per pay period.

I know that I can only take up to $10,000 from a 401k/IRA account towards a first-time new home purchase.

Seeing that I am nowhere near retirement, should I chip in some money to my 401k or simply save that money up for my home?

I appreciate your feedback.

  • What are the costs to not buying a house? How much do you pay in rent? How much do you need to buy a house? How much can you save? You can express these in percentages of your income. Also, can you confirm that the maximum match is 3.5% of your income when you contribute 10%?
    – Brythan
    Sep 12, 2016 at 2:54
  • See also other questions discussing buying homes. Buying is not automatically the right thing to do, especialky early in your career when you are more likely to relocate without company assistance.
    – keshlam
    Sep 12, 2016 at 3:06

1 Answer 1


I'd not heard of being able to withdraw penalty free before. So I looked it up. It might be penalty free, but it's not tax free. So if your marginal tax rate is 25%, and you withdraw 10,000 from a regular IRA, 1/4 of the money will have to come from taxes.

Personally, unless you're in a huge hurry to buy the best screaming deal ever seen in your jurisdiction, I'd not touch the 401k... but I would slow down 401k investing to be the minimum required to maximize the match, and throw the rest to saving for the house.

Also, your pronouns are "I," not "We." If you'd like to be married, I would put off buying a home further, in case your future spouse doesn't like the home you pick.

  • I disagree about putting off the purchase of a home. Just make sure it is a home that you could potentially rent-out, assuming it is not sufficient for your family to grow into. Sep 13, 2016 at 15:05
  • Depending on the market, having a house your new spouse won't move into might be trouble. If you're willing to be a landlord, that can help, given market conditions. Renting gives you time and flexibility that purchasing a home doesn't give. Isn't current rule of thumb that you should own 5 years or longer to break even on a home, after cost-to-sell?
    – Michael
    Sep 14, 2016 at 20:09

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