February 25, 2008 • June Walbert
Q: My wife and I are looking to buy a house in just
a few short years. We need the best return on our investment, and I have
heard rumors that I can put funds into IRAs and 401(k)s and withdraw them to
buy my primary residence without paying penalties although I will have still to
pay income taxes).
My wife says that retirement plans are for
retirement, and suggests investing house funds into secure and insured
investments. Do you think this is the right path to take?
-Kevin, Haslett, MI
A: Your wife needs to help me write this column! She’s a smart lady! And I’m glad she’s sharing
her wisdom with you. You’re right. – there
is an option to withdraw up to $10,000 from an IRA without penalty if you’re a
first time homebuyer. You may also be
able to take a loan from your 401(k). However, the best option is to start to stash those funds away,
now. Since you’re only a “few short
years” from buying your home, I would recommend you start building a “house
fund” that is invested conservatively. Set aside as much as you can each month in a money market fund or high
yield savings account. You can use this
fund for your down payment, closing costs, and all of the inevitable unplanned
expenses that come with a new home (furniture, carpets, curtains, etc.). At the same time, you should continue to fund
your retirement plan and IRAs, if eligible (to keep your smart wife happy and
build your retirement nest egg). Before
long you may have the best of both worlds: a new roof over your head and the
beginning of a nest egg!
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June Walbert is a CERTIFIED FINANCIAL PLANNER TM practitioner with USAA Financial Planning Services, one of the USAA family of companies.
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Great advice and protects both there retirement and gives growth for there house buying in near future.
Posted by: Real Estate For Sale In North Georgia | March 18, 2008 at 12:46 PM
Taking a loan out from your 401(k) sounds pretty risky.
Posted by: Military.com | February 29, 2008 at 10:20 AM