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Money, Business & Finance Ground >> withdrawing from roth ira to buy house?


4/15/12 8:23 AM
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microbiologynerd
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 hello. fiancee and i are considering withdrawing 10k from my roth ira for  mortgage down payment. ive done a little research and apparently there is no penalty or tax to do this? i understand that this is somewhat of a hit in the long term to our roth ira savings, but i also have a rollover ira from my last job, and a 401k with my current job. 

is taking $$ out of the roth ira for our 1st home a good idea, terrible idea, or something in between? any help is appreciated!
4/17/12 12:29 PM
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Snappy Whistleteeth
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Well, you're allowed to withdraw up to 10K penalty free as a first time home buyer.  Now, is it a good idea?   It totally depends on your situation but I would say don't fuck with your retirement unless you absolutely have to.  

4/17/12 6:18 PM
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Cookie Monster
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See if you can "pledge" your IRA instead of cashing it in. Pledging it is essentially using it as collateral in lieu of a downpayment or portion of a down payment.

I have pledged some stocks I own as part of a downpayment for an apartment building I bought a few years back.
4/17/12 7:53 PM
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LiveWire
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 Is that the only way you can get the cash for the downpayment?
4/17/12 8:20 PM
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microbiologynerd
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no, but fiancee and i also getting married this october.  

i also have a company 401k and a rollover ira as well as fiancee having a 401k.  while i know this will be a hit against retirement, i dont think itwill be that big. plus my fidelity rep said i could replace the 10k within 60 days and its like it never happened ... or something to that effect. 


4/17/12 11:05 PM
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LiveWire
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 Are you required to pay it back and/or within a specified time period?
4/18/12 12:39 PM
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disbeliever
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Loan on 401k imo You can take up to 50K i believe.

If you are young, this wont matter. If you are closer to retirement nm
4/18/12 12:54 PM
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microbiologynerd
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loan on 401k is better eh? I'll have to look into this
4/18/12 1:00 PM
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disbeliever
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microbiologynerd - loan on 401k is better eh? I'll have to look into this


I can;t say "better". I did this though 7 years ago when I bought my home. Took a 25K loan on my 403b. You just pay yourself back over an agreed time.

Downside is you're taking money out of your retirement fund, so it is not gaining value. You can still continue to contribute to your retirement, and as you pay the money back it goes right back into retirement. Also downside is if you don't plan on being with your company until the loan is repaid, its all due at once if you leave.
4/18/12 1:01 PM
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disbeliever
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Oh and also, at least 7 years ago, a retirement loan does NOT count against the value of home you can get like a credit card balance of 25K would
4/25/12 11:12 AM
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turducken
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money is growing tax free in your roth...that is the absolute last place i would take cash from.
4/28/12 10:58 PM
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Twelve Gage
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turducken - money is growing tax free in your roth...that is the absolute last place i would take cash from.

 I agree with this statement.  Also the bad part about borrowing from your 401k is you will pay double taxes on the money you borrow.  Meaning the money you pay back you loan will be from after tax money, then when you begin withdrawing from your 401K you will be taxed on that same money again.    Just something to consider.
4/29/12 7:44 AM
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microbiologynerd
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 ok. so out of my roth ira, rollover ira, and 401k, borrowing from the rollover ira ounds like the best idea
4/30/12 9:00 AM
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disbeliever
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Have you looked into 401k loans like I said? Best option by far if you will be at your job for a few years
4/30/12 2:54 PM
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microbiologynerd
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Not yet. I am not leaving this job anytime soon! Phone Post
4/30/12 2:55 PM
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disbeliever
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Then do what I suggested. I did, and its already paid back to myself.
5/9/12 10:17 PM
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microbiologynerd
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 borrowed against my rollover ira. closing july 13th !
5/22/12 10:31 AM
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kungfugrip
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why not wait a year or two and save like crazy with the two incomes. You should be able to get a good downpayment if you live right
5/22/12 5:17 PM
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microbiologynerd
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 we thought of that too- and decided that buying now while the market is at the bottom was the route to go instead of wasting another year's worth of $$ in rent. 
5/30/12 12:58 PM
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disbeliever
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As long as you are not close to retirement, or getting fired, borrowing money against yourself is not a bad idea. imo
5/30/12 4:27 PM
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microbiologynerd
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3.75 30 yr fixed too. Ka-blamo!! Phone Post

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