House vs 401K

No-Tomorrow8150 · 2024-10-14T19:32:35+00:00

I hope our conversation on pros and cons helps others going through it.

Plastic_Canary_6637 · 2024-10-12T20:04:33+00:00

You guys are missing 1 big part of the discussion….leverage. There’s a big difference between 400k equity in a 1M house vs 400k in equity in a 2M house. Lets say that that your house appreciates 10%, you’re 1m house is worth 1.1m and you’ve made 100k on your 400k equity or 25%. If your house is worth 2m you’ve made 200k in your 400k or 50% ROI. This can change the equation significantly bc there is no leverage on your 401k. Sure, the S&P returns more in an annual basis but once you account for leverage it may not outperform the house. Since we don’t know the value of the house it’s impossible for us to compare it to the S&P

Add in the fact that a 401k is pretax and subject to taxes when you take it out and that 400k 401k is not the same as 400k of home equity.

Given that you still need to pay for housing, if you can swing the mortgage payment id take the house.

ZigMasterFlash · 2024-10-12T15:16:37+00:00

Fun discussion. In the middle of divorce, you just want the shit split and over with. Hopefully this helps somebody think strategically about it. Each situation is unique.

SomeVeryTiredGuy · 2024-10-12T14:57:34+00:00

I'm in the middle of this decision and chose the house. Here are my reasons:

1) financial: the particular neighborhood I'm in has undergone a major wave of gentrification which raised the value. However, there's a second wave coming that will boost it more. Basically, I live in one of the hottest neighborhoods in Atlanta (an already hot real estate market) so I'm confident the equity will continue to grow.

Yes, we can sell the house and split the equity but it would pain me to pay rent to a landlord every week when that money should be going back into an asset.

2) emotional: I wanted an anchor, both for my kid as well as myself. Too much change is happening so I think we both need this.

I'm doing a refi to pay out the equity to the STBXW. I almost offered up more of my retirement but our financial advisor talked me out of it. Once the retirement is gone, it's gone, while a loan can always be re-negotiated.

It's going to suck for several months; going to be house poor and my monthly cash flow will slow to a stop. But I'll get a bonus next year and a raise. My financial situation will keep improving which is why I chose the house.

dukeofthefoothills1 · 2024-10-12T14:56:15+00:00

Sale of retirement asset is taxed more highly than sale of home. I didn’t want to live there and she really did, so we took that into account in the split.

This_Train340i · 2024-10-12T14:15:33+00:00

I'd rather have the $400k house because it is a tax free asset and liquid.

regertsrus · 2024-10-12T12:02:05+00:00

I think it's equal. You can borrow more easily against your 401k. A house needs to be maintained also. Now is the time to rent, with rent being often much less than carried costs to own

Substantial-Slip2686 · 2024-10-12T11:22:46+00:00

I may be the odd men out here but I will always opt for cash. It gives me many more options. It doesn't tie me to one spot. It will not usually hit me with huge additional costs. (Roof. Plumbing, HVAC, Tax increases, etc.) Save a bit and buy a newer place when your life settles down a bit.

Particular_Mix_4160 · 2024-10-12T03:32:03+00:00

This is something of a trick question because if you make it to 59 and a half years old without touching it than of course: YES.

But the 400k from the house is liquid. You can use it to buy another house which will typically increase in value.

So if it was me at 40 with no options to split both the house and 401k, I think I would have to take the house. But again, I don’t know your situation. If you have other money stashed away so you have some liquidity, then yes I’d take the 401k. Again, trick question

Sad_Hamster_8504 · 2024-10-12T03:03:35+00:00

19 yrs of marriage, ex stays in the house w 3 kids the, as of now 250k will be split when she sells or buys me out by 4-26. 10 yrs alimony 300 month 311 child support youngest 13. She got half annuity 40k and 1/2 pension up until now 21 yrs Union ironworker. I’m cash poor so I gotta work and save as much as I can in two yrs so when she does sell or buy me out it’ll be I nice nest egg to build and begin something to leave my kids. But for me knowing I got 10+ yrs of loading up my 401k. I’d take the cash and invest a huge chunk and watch that grow over the yrs. All the best!!! who knows anymore 🤷🏻‍♂️

TonyPlush2 · 2024-10-12T02:54:18+00:00

I’m in a situation where I will get bought out of the house. She can have it - it needs a roof soon, our diy projects we did together are both a painful reminder of what once was and starting to show their amateur level of quality. I could make quite the list…but the house is a time bomb. It was a money pit to begin with.

Having said all that - I assume u/ZigMasterFlash is now renting? That costs money too, and returns nothing. Rent can increase. Mortgages (unless you do an ARM) don’t. Taxes and insurance-yes but there’s still a cost to live somewhere if you give up the house

itoocouldbeanyone · 2024-10-12T02:30:50+00:00

As of now I’m getting bought out and our retirements are not getting touched. She wants it amicable and I want this blindside over with. I’m glad to have that money working for me and there’s uncertainty about her pension. Plus I’d hate to have my 401k a hit right now.

No-Tomorrow8150 · 2024-10-12T02:23:47+00:00

If you invested the 401k wisely like an index fund, I think you should easily do better. Once factoring in the house maintenance, expenses such as taxes the 401k should outperform easily unless it is a special situation. No brainer all else equal. You chose wisely. Studies show over long time frame a home returns about 2%, while the SP500 is over 8%.

Comfortable-Angle660 · 2024-10-12T01:58:05+00:00

Cash is King in my opinion, but to each their own. In my case, the ex has a larger pension, and you better believe it is getting liquidated.

RawDreadDawg · 2024-10-12T00:40:57+00:00

Depends on where your house is located and how your 401k was invested. And timing

FUMoney · 2024-10-11T23:51:21+00:00

401K is superior. You are investing in the economy, new businesses, new technology, cash and money flows. You made the right choice. Also note, even the major indexes include and drop companies as the economy changes, grows, and technology develops. Organic growth and development.

House just sits there. A house isn’t developing a fucking thing. It’s shelter, period. You also need to factor in all of the unavoidable expenses and fees. Right off the top, property taxes, insurance, and monthly utilities. Then tack on maintenance and upkeep — and if your house develops problems, that can be a huge fucking number.

I’d take the Gordon Gekko route every time: “I'm talking about liquid. Rich enough to have your own jet. Rich enough not to waste time. Fifty, a hundred million dollars, buddy. A player. Or nothing.”

Liquid is the way. Not a fixed asset with many recurring expenses.

AmbitiousHornet · 2024-10-11T23:36:40+00:00

I'll add that the real estate market has appreciated in the last 4-years or so a lot more than any 401K has.

Alswelk · 2024-10-11T23:32:53+00:00

I made the decision to keep the 401k and give her the house. It was almost a wash between my equity in the home and my 401k, maybe $15-20k in her favor.

But I also did all the maintenance on it and know that there's stuff coming (it'll need a new furnace, water heater, likely some plumbing attention, and it would be prudent to overhaul the electrical distribution [every breaker slot in the main box is full] in the next 3-5 years), so she'll have fun discovering that.

techrmd3 · 2024-10-11T23:27:29+00:00

REMEMBER - in actual value the price on your 401k is -20% + applicable taxes

So in actuality a 401k is not worth 1-1 of home equity

In any case you should sell the house. IF you keep it you have a house on your credit until she inevitably defaults on the loan and you get hit with a foreclosure on your credit

sell house - divide money, work on 401k separately

Title	House vs 401K
Author	ZigMasterFlash
Upvotes	11
Comments	42
Date	October 11, 2024 11:19 PM UTC (1 year ago)
Subreddit	Posted in /r/Divorce_Men
Original Link	https://old.reddit.com/r/Divorce_Men/comments/1g1mxgm/house_vs_401k/
Archive Link	https://theredarchive.com/r/Divorce_Men/house-vs-401k.1532924 https://theredarchive.com/post/1532924

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