The Down Payment Versus the Retirement Account

Fill this year’s tax-advantaged space first, then save the down payment, and buy the house a year later if that is what it takes. The asymmetry that settles this is not about returns — it is about reversibility. Retirement contribution room is granted annually and vanishes at year end: the $24,500 elective deferral you skip in 2026 to build a down payment is not deferred, it is destroyed, and no future income can buy it back. The house purchase is a timing decision you can make in any year for the rest of your life. When one side of a trade is permanent and the other is merely delayed, you do not need a spreadsheet to know which one yields.

That principle survives the obvious objection — “but I need the house now” — because the honest version of that sentence is “I want the house now,” and section “Making the Call” already told you what to do with a want: price it. Skipping three years of a maxed 401(k) at $24,500 a year to accelerate a purchase costs you those contributions plus everything they would have compounded into. At 7% over the thirty years to retirement, three years of forgone deferrals is roughly $520,000 of terminal wealth, before the employer match you also walked away from. That is the purchase price of buying earlier. It may still be worth it. It is never free.