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I plan on taking an exempt distribution next year to use as a down payment on a home.

Exempt from what? Taxes? Penalty? My understanding is that one can take a hardship distribution in order to buy a home, but that the distribution would be subject to income tax and a 10% penalty unless over age 59 1/2.

Are the rules changing? Or are you talking about a loan?

I'm not disagreeing with your arithmetic, but you need to see if you would be paying taxes or a penalty on the withdrawal.

I get the feeling that the 6% contribution would be Foolish, while cancelling it would be....foolish.

Free money is free money.

Personally, I'd suggest you leave your 401k alone and come up with downpayment money some other way, or find a mortgage which requires little or no downpayment.

Good Luck,
JDOyster
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