saving for first home

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jezo
Posts: 47
Joined: Thu Jun 08, 2017 5:45 pm

saving for first home

Post by jezo » Wed Oct 17, 2018 11:55 am

I am trying to save for my first home. While I do this, do I continue to contribute $100/month to my ESPP? Do I drop my 401K contribution from 12%-10%?

Thank you for input.

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Meg77
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Re: saving for first home

Post by Meg77 » Wed Oct 17, 2018 12:06 pm

It's hard to say without more information, but in general ESPP plans are advantageous when they allow you to roll funds in and out at least quarterly. For example, you should max out your ESPP if they give you the standard 15% discount on the stock price, but you should not hold those funds long term. Sell every quarter while continually buying every quarter as well. In this way you are cycling the same funds in and out but taking advantage of the discounted stock price. Assuming the value stays the same or increases over time, you'll come out ahead. (Some people hold for a year before beginning to sell in order to benefit from long term capital gains tax rather than short.) The point is not to accumulate a large position in your employer stock though; it's just to take advantage of the price difference.

And yes I'd recommend reducing your 401k contribution to whatever will still max out the company match for you while you save for the home, especially if you'll only be doing so for a year or so. If it's going to take 4+ years to save for a home though, and if you're already behind on retirement savings and are over the age of 30, then you may not want to cut retirement savings that much.
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