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Worth investing in non-matched 401k?

Worth investing in non-matched 401k?

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Old Aug 31st 2018, 5:03 pm
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Default Worth investing in non-matched 401k?

Interested if anyone had a POV on 401ks for temporary stays in the US?

I'm fairly certain my wife and I will return to the UK 2021 at which point our primary goal will be amassing a house deposit. Until then I'm comfortable saving just over 25% of my annual salary in the US.

So far 6% is saved into my work 401k and the remaining 19% was saved in cash to amass an emergency fund. Now that my emergency fund is completed.

So I'm debating either;
  1. Upping my 401k contributions to 15% and saving the remaining 10% in cash for a house deposit. Those contributions are not matched at all by my employer.
  2. Alternatively I'm considering making 0% contributions into the 401k and instead aggressively saving the full 25% as cash to serve as a house deposit.
I'm torn between both options currently and wondered if anyone else had encountered a similar decision?
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Old Aug 31st 2018, 5:12 pm
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Default Re: Worth investing in non-matched 401k?

The only reason to save in the 401K that I can see since you won't be staying in the US and will be using this money for a down payment on a home in the UK is that it is tax deferred money for the year contributed. But you will be paying tax on it, plus a 10% penalty for early withdrawal if you are under the age of 59-1/2, when you close the account and take your funds back to the UK. Do the calculations and see what you come up with? Lots depends on the market and how it is invested for your rate of return.
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Old Aug 31st 2018, 6:03 pm
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Default Re: Worth investing in non-matched 401k?

You're better off saving in a Roth IRA and then you can use the money for a house purchase
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Old Aug 31st 2018, 6:21 pm
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Default Re: Worth investing in non-matched 401k?

Thanks Rete, to clarify I’ll keep any money in the 401k until retirement. So there’s a philosophical angle about whether to save for retirement or pause for a couple of years whilst saving for a down payment in a house.
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Old Aug 31st 2018, 7:29 pm
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Default Re: Worth investing in non-matched 401k?

Originally Posted by mrken30 View Post
You're better off saving in a Roth IRA and then you can use the money for a house purchase
thanks I’ll look into that
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Old Sep 1st 2018, 12:08 am
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Default Re: Worth investing in non-matched 401k?

Originally Posted by GeneralPowerpoint View Post
Thanks Rete, to clarify I’ll keep any money in the 401k until retirement. So there’s a philosophical angle about whether to save for retirement or pause for a couple of years whilst saving for a down payment in a house.
Before you do that, check back on past posts. If you are no longer living in the US, the investment house might not allow you to keep the account in the US.
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Old Sep 1st 2018, 8:09 am
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Default Re: Worth investing in non-matched 401k?

Originally Posted by Rete View Post
Before you do that, check back on past posts. If you are no longer living in the US, the investment house might not allow you to keep the account in the US.
This was the case with myself and my son so we opened a Vanguard IRA before we left and then immediately rolled the 401k into an IRA after leaving the company. With my son last year the rollover took a few weeks, after he was in England, but that didn’t concern Vanguard since they support existing customers who then move overseas. I expect other brokerages also accept customers moving overseas.

If you use a Roth to save you can’t withdraw contributions without a 10% penalty until after 5 years and any gains will not be tax free before age 59.5
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