F It, probably won't make it to retirement. Cashing out retirement to buy a house

[johng1968]

@symph wow, finally a stipulation not meant to fuck us!

edit. I missed a letter. The letter was "a" in-between finally and stipulation.

 

[sam26]

@symph Ya that’s not true. You can take a loan against your 401k and have a limited time to pay it back.

 

[symph]

@sam26 No, well in Texas for me, you are allowed to withdraw your 401, if it is to buy a home with NO PENALTY.

 

[sam26]

@symph Not familiar with anything special in Texas. Did you do it as a part of the CARES act which expired end of 2020 or did you do a hardship withdrawal used towards home purchase? Seems the second one is limited to 10k.

Do you have a link to what you used?

 

[alex3]

@rustedspurs4 This is this can be tricky! My first house I bought was $10,000 duplex and it was that cheap for a reason! I had no capability or funds to fix it like I needed to - it was pretty rough for the 5 years I lived there- no heat, no hot water, rotted floorboards that I fell through more than once, upsetting neighbors, pipes froze at least once every winter- pure luck they never burst. Eventually the roof gave out.

Right when I was just about at my wit's end and I'd moved back in with my parents for the last chunk of the winter because it was dangerously cold, a development company made me an offer right before Christmas and bought it without an inspection. I felt like I was in a Hallmark movie! It was like having this massive weight lifted off of me.

It is possible to buy a fixer upper and have a good experience and build value, but I think you have to have a lot more useful knowledge and ability to set and reach goals than I do.

 

[baytown]

@rustedspurs4 Good idea. OP can also rent part of the house to get some money coming in.

 

[stephenjsheridan]

@rustedspurs4 Not feasible for a lot of people unless they move. Those places with decent condition $60k houses tend not to have a lot of good jobs within a reasonable commuting distance.

 

[resjudicata]

@blecap1 Ha! I’m 61F, awful divorce 3 years ago, haven’t been able to get my footing back after all he stole…Tired of living anywhere I can to save money. I just emailed my broker to tell him I’m done. I need a place that’s mine. Wing and a prayer.

 

[thebibleman]

@resjudicata You go, girl! 53f here. Went through my own rough divorce about 15 years ago. Took a decade to crawl out from it financially and mentally. Hang in there because it's all uphill from here! It will be so soul nourishing to have your own place. Good luck!

 

[mmryan720]

@blecap1 That withdrawal will be taxed (and potentially penalized and taxed extra). Make sure you have enough to pay taxes.

 

[sue1215]

@mmryan720 I got my 401k out free and clear due to Covid. Not sure if that option is still on the table.

 

[symph]

@mmryan720 No. You are allowed to withdraw from retirement if it to purchase a home

 

[missgiver]

@symph …is that documented anywhere? My friends have said the same but I can’t find that written anywhere. How do I ensure it isn’t penalized?

 

[dan2804]

@missgiver You can avoid the 10% penalty on $10,000. You still pay ordinary income tax on the $10,000. Any amount withdrawn above $10,000 is taxed as ordinary income + 10% penalty.

 

[symph]

@missgiver You have to contact your plan issuer and talk to them or I think they do tax it but at the end of the year, you claim it back I’m not sure on that part. I just learned it through real estate school

 

[blecap1]

@mmryan720 Yup, I am assuming I'll only get 50% after taxes and fees.

Thanks for the heads up

 

[lgd]

@blecap1 Bear inind, depending upon whom you are invested with as well, they may cash you out the entire amount and it will be up to you to put the taxes to the side and pay them come tax time. Expect to lose at a minimum 40% of that.

Look into another avenue which is "Borrowing" from your 401k. This is an option, and you just pay it back. https://www.investopedia.com/articles/retirement/08/borrow-from-401k-loan.asp

 

[michellebenahayah]

@blecap1 In canada im pretty sure you can cash in and use it for a house at full value. (rrsp). i assumed it would be like that there too.

 

[comelordjesus]

@michellebenahayah Some retirement accounts are like this. I had some set up by my mom that I can only withdraw for a home purchase, or retirement, without major taxes

 

[vf6cruiser]

@blecap1 Please get an inspection done. I've heard of a ton of people bypassing the house inspection recently and ended up with a terrible experience because they rushed. For the sake of your finances, get an inspection