4 Reasons You Should Think Twice Before Dipping into Your Retirement Account to Buy a Home
What do you do when you want to buy a home but lack the money for a down payment? Dipping into your retirement savings by taking a withdrawal from a 401(k) or IRA may seem like an obvious answer, but doing so can come with serious drawbacks. Here, we cover four of the more serious issues associated with withdrawing money from a retirement account to purchase a home.If you take money from a 401(k) or traditional IRA before you hit age 59 1/2, you're likely to be hit with a 10% penalty. Let's say you withdraw $50,000. If you're not 59 1/2 yet, you'll owe a $5,000 penalty right away.There are exceptions to the 10% penalty even if you're younger than 59 1/2. These include plans that make allowances for certain first-time homebuyers as well as for qualifying hardship withdrawals.Continue reading
What do you do when you want to buy a home but lack the money for a down payment? Dipping into your retirement savings by taking a withdrawal from a 401(k) or IRA may seem like an obvious answer, but doing so can come with serious drawbacks. Here, we cover four of the more serious issues associated with withdrawing money from a retirement account to purchase a home.
If you take money from a 401(k) or traditional IRA before you hit age 59 1/2, you're likely to be hit with a 10% penalty. Let's say you withdraw $50,000. If you're not 59 1/2 yet, you'll owe a $5,000 penalty right away.
There are exceptions to the 10% penalty even if you're younger than 59 1/2. These include plans that make allowances for certain first-time homebuyers as well as for qualifying hardship withdrawals.
