26, 55k, maxing Roth/401k, drawing from brokerage (300k, 2x 200% gain) to buy house. Good strategy?

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January 27, 2025 at 3:09 pm #121432 Reply
USER
I am 26, making 55k, maxing Roth and putting 40% of my salary in 401k and drawing 1500 a month from my brokerage account to lower my income so I can take some capital gains from my brokerage account to buy a house in the next 3 years.

My brokerage account has 300k and 2 stocks have over a 200% gain. Is this a good strategy.

Was told from my cpa it would be the best to try to do this.
January 27, 2025 at 3:10 pm #121433 Reply
Sarah
I’d focus on getting your income up FIRST. I would not be spending time pulling any money out of your brokerage acccount. Keep investing and do not touch it, and save up towards a house.

It is too soon for you to pull money out of your investment accounts.

It is all about time IN the market, not timing it. Your three biggest tools are

1. more income

2. Low housing costs

3. Saving as much as you can on cars/transportation. House hack, rent, find a job that gives you a company car, and focus on making more.

If you want to really “lower” your taxable income, focus on adding money to tax advantaged accounts like 401K, IRA, HSA until you are able to max them out.

Also, read set for life by Scott Trench or the Simple Path to Wealth — it will change your life. Park any savings for a house in a HYSA.
January 27, 2025 at 3:10 pm #121434 Reply
Scott
It may be time to fire your cpa. Let’s assume you made 0 401k contributions for discussion purposes. At 55k you are paying 12% on your income after your standard deduction.

Long term capital gains taxes is 15% so no, it’s a bad idea.

You should be contributing to your 401k up to match, continuing to max your Roth and putting what you can into a money market for your house fund. You should not be drawing down your brokerage.

The math just ain’t mathin.even if it’s short term gains and taxed at your ordinary income rate it’s a wash, and now all that money is trapped in your 401k when you’re trying to save for a house.
January 27, 2025 at 3:11 pm #121435 Reply
Lauren
If you’re looking to buy a house check out state and local programs – there’s a lot of city/state programs that’ll help you with a down payment at 0 or very low interest while your income is low enough.

I wouldn’t put all my money in 401k like that but that’s me.

Good luck!
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