decisions

[jrjan1]

Right now I am saving $400/mo in my 401k. I have another 9 years to pay on my mortgage, 5 years on a home equity and 4 years on a car payment.

I heard a financial advisor on TV suggest that instead of depositing into a401k that maybe people should divert that $400 towards my house payment, because in essence, a paid off house IS retirement security.

I did a spreadsheet and if I start on my home equity, I can shave 3 years off that, then after that is paid off, put that payment + my retirement on the house, will shave off another 3 years, meantime, my car will be paid off, so after all that, I will be completely debt free in a little over 5 years - if our other car holds out that long.

The only drawback I see is, 401K contributions are untaxed money, so my income taxes will go up. Both my husband and I are still working (keeping my fingers crossed on that) We have 2 kids in college, so the extra income that will be generated by not contributing to the 401K may decrease the amount of grant money they are entitled to as well.

Is this a good idea or not?

[sweeps]

Not a good idea, in my opinion. There are some people -- this site included -- that advocate this, but they're not looking at the big picture. You will be house rich and cash poor. And the last year notwithstanding, stocks easily outperform housing in terms of building wealth.

[kgloh_23]

It is better for you to stick to 401k plan. It can help you to save some tax payment. Besides, if you did't pay for you 401k plan, do you really will pay for your debt? sometime it may go some where else. Of course, if you have extra money, you can advance you debt payment. But it is not advise you to quit 401k, it is to secure your retirement plan. And I believe you actually already do your financial plan to pay off your debt before buying your house and car.
Please consider it.

K.G.Loh

[MonkeyMama]

What about the drawback of not having enough for retirement? I'd stick with the 401k as well.

[GREENBACK]

I agree. Having a paid off house is nice and I would like to pay mine off tomorrow but it's not really the best thing to do. You would using money that could otherwise be invested tax defered to pay for a mortgage that you can you get a tax deduction on. Pretty easy math to me. Not sure about the grant question.

[simpletron]

for federal aid, 401K contribution do not affect it either way because you have to add it back to your AGI for the income they use. keeping the 401K contribution may help with other aid if based on AGI only.

my goal is to have the house paid off by retirement, not necessary before or as soon as possible. so if you are planning to retire before 9 years and snowballing the home equity payment and car payment onto the mortgage isn't enough then I would consider taking some from the 401K, if there wasn't other options.(slight cut in spending else where, using pay raises to pay extra on the mortgage, or had more than enough already saved)

[jIM_Ohio]

How much is in your 401k now- enough to pay your expenses in retirement or not?