Here's the situation-
will buy house sometime in next 2 years. dual objective : want to save money for downpayment and also reduce my income taxes for next 2 years. 401k at work so only spousal ira contributions possible. every dollar i invest in 401k/ ira saves me (fed + state combined) 25+8= 33% in taxes. so, if i don't save, i have
100-33 = 67 in hand. if i save, in the spousal ira, it is accessible upto 10,000 usd. but in the year that i withdraw it, it gets added to income. so i am left with just 67% ie 6700? so, all i benefit form is taxfree compounding for the intervening period? in the 401k, i can get a loan of upto 50% of balance. so, 50 vs 67 if i don't save in 401k. 401k is also advantageous wrt ira as no tax is due to access the funds in the form of a 401k loan? now, i don't like the fund choices in 401k. if i rollover the funds to an ira, fund access for home downpayment will be as per the ira withdrawal rules and i cannot rollback the funds to 401k to get a loan? to serve both objectives, this makes it seem like maxing out the 401k before putting into the spousal ira is the way to go? bodude
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