Retirement Accounts – Savings vs. Disbursements

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    I remain a little unclear on how retirement accounts are treated.

    1) I am contributing to my company’s 401k. I was told this can count as savings for Payment Shock.

    2) My cobuyer is eligible to take disbursements from her retirement accounts as income. If she does, does that count -against- our savings then? Even though it should be withdrawn as income and could be saved in other ways? That seems to be unfair to retirees, so I hope I’m misunderstanding.


    Hello BakerTheBaker,

    First thing I need to do here is share a little advice with everyone about the Forum in general.

    As everyone knows, the Forum is my pride and joy when it comes to my responsibilities at NACA. Over the past eight years I’ve been able to turn it around from a state of unbelievable chaos to a cohesive community of NACA members sharing their experiences and supporting each other. Nothing makes me happier to see a post from someone who has closed on their home and give credit to the Forum for helping them through the process. And especially flattered when I’ve been able to help in some fashion.

    That having been said, I am only one person, and the Forum is one of many responsibilities I have. It’s why I’m so grateful for the help I get from members like Pratik, KrisFraley, Southflorida, Rashad3000 and others. Just the same, if you are asking a question here specifically seeking an answer from me, please be patient. I unfortunately can’t dedicate as much time as I once did to the Forum. So if it takes me a bit to respond, please be patient. “Bumps” do nothing to help. I WILL get to the question, but probably not as fast as I used to. If it has been less than 24 hours or over a weekend, please hang in there with me.

    Also, if you have not done so already, please read the blog post “NACA SOCIAL MEDIA GUIDELINES – MUST READ BEFORE POSTING” right away. It contains the rules of the road for the Forum and the largely common-sense reasons for those rules. I promise it will go a long way toward helping me help you. It has become pretty clear lately that a lot of folks haven’t read it, hence the need for the “sermon”.

    Okay, climbing down off the soapbox now…

    With regard to retirement accounts, contributions to your 401k can indeed be counted as payment Shock Savings, although I highly recommend against it. Remember that Payment Shock is defined as the difference between your current rent payment and your desired mortgage payment. Payment Shock Savings is the proof that you can in fact make the higher mortgage payment each and every month without fail.

    By counting your 401k contribution toward Payment Shock, you are committing to stop contributing to your 401k when you close on your home since those funds are now committed to making your mortgage payment each month. You are potentially risking your retirement to get a bigger mortgage.

    Regarding your wife’s retirement accounts, I suspect you are over-thinking things a little. HER 401K has no bearing on YOUR 401k. They are totally separate accounts. If she is taking regular monthly distributions from her 401K, that is now strictly a source of income. It in no way affects savings any differently than a regular paycheck from a job. In other words, since you are still contributing to your 401k, it falls into a different category than one that is now a source of income instead (hers).

    Tim Trumble
    Online Operations, NACA

    • This reply was modified 1 year, 5 months ago by TTrumble.

    Hi Tim and thanks for all of your time in this forum!

    In regards to the above Retirement Savings being used as payment shock, when you say “they are committing to stop contributing to your 401K when you close on your home” are you stating that even after we close, we are to still show the payment shock amount in our savings???



    No brownfox152, as I understand it, it means in order to have that cash available to pay your mortgage, you’ll have to stop contributing. It’s enforced not by NACA, but by the realities of the higher mortgage payment.

    And thanks very much, Tim. I had seen you go through several rounds of answers and the question was sinking, but I admit I somehow missed the all caps must read first post. I’ll definitely go read that now. >.>

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