‘Currently earn ~98k a year and my company puts 3% regardless if I match into my 401k and matches 6%.’ I want to save for a house, but not sure if I should use a Roth or brokerage account. What’s the best option for me?

Hi Money Minder,

I need some advice to avoid a finance advisor. I earn around 98k a year, with my company putting in 3% into my 401k and matching 6%. I don’t want to use my 401k for a house down payment and deal with a monthly loan. I plan to invest $800 a month for 4 years before my pay increase to around 138k/year. I’ll also put my profit sharing checks into that investment.

I’m torn between a Roth account and a brokerage account. My profit sharing checks alone exceed the 7k limit. Would it be better to invest in a brokerage account, dive into the stock market, and keep putting money in every month?

Looking forward to your advice!

Best,
Money Minder

Feel free to message back for any questions!

Response from THE MONEY MINDER:

Hello There,

Congratulations on your proactive approach to investing in a house down payment before your anticipated pay jump in 4 years! It’s great that you have a clear goal in mind and are taking steps to achieve it.

Given your current financial situation and goal to invest $800 a month for 4 years, along with profit sharing checks into that investment, it’s important to consider the most suitable account type for your needs.

In your case, since the profit sharing checks alone exceed the allowable limit for a Roth account, it may be more advantageous for you to consider a brokerage account. With a brokerage account, you have the flexibility to invest in a variety of assets, including the stock market, and continue to contribute money every month without limitations.

However, keep in mind that brokerage accounts do not offer the tax advantages that Roth accounts do. So, it’s essential to weigh the potential tax benefits of a Roth account against the investment options and flexibility provided by a brokerage account. You may also want to consult with a financial advisor to get personalized advice tailored to your specific financial goals and circumstances.

Overall, by diligently investing $800 a month and utilizing your profit sharing checks, you are on the right track towards building a solid foundation for your future home purchase. All the best from THE MONEY MINDER in reaching your goal!