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

[miralha]

@savednocompromise

unless you intend on selling and using the proceeds to downsize or move to a LCOL area.

I already pointed that out.

 

[adaleow]

@championflyer That’s meaningless unless you’re considering CPI.

 

[championflyer]

@adaleow I disagree. You’re argument is that the capital gains are meaningless against inflation... $90000 -> $1.3M in 34 years is essentially an 8.1% compounded yearly return. Inflation is no where near that. In addition to this it produces rental income every month (~$80000 last year). Not a lot of people are able to get those returns in the stock market over a long period of time. FYI inflation exists no matter where you’re money is.

 

[sam_17]

@championflyer And they paid nothing in interest, property tax, maintenance, or anything else on their investment over that 34 years?

 

[nathanaelwang]

@sam_17 In addition to the above, be sure to factor in the opportunity cost of if the down payment was properly invested for 25 years (or whatever the duration was).

 

[championflyer]

@nathanaelwang Heres a scenario. House hack a multifamily or sfh with multiple bedrooms/basement that can be rented out seperately, with a 5% down payment, even if you’re just breaking even on the property your principal paydown should be greater than or equal your down payment within a few years. This is without factoring in appreciation. You’d also be living almost for free which is cool haha

 

[championflyer]

@sam_17 Yes plenty but also was able to tap in the the equity multiple times to use the money and build a multimillion dollar business. Keep in mind as well that property taxes and insurance are nothing compared to what you’d be paying in rent. They may be close at first but rents go up, your mortgage payment doesnt.

 

[adaleow]

@championflyer Then we agree to disagree

 

[championflyer]

@adaleow I would still love to hear your argument as to why the house is a bad idea if you care to share

 

[adaleow]

@championflyer This was an initial reaction based on what I currently know, which admittedly isn’t much. This comment Is strictly for educational purposes so I appreciate your feedback: I’m thinking the initial tax implications alone would be a huge deterrent here for liquidating the entire acct? Like sure you COULD make it work but would you recommend it to a client seeking sound advice? there’s a ton more you’d need to know on this scenario for it to be a “good” idea. Current income is a huge consideration, and any other savings/retirement accts. I think location is also a deciding factor here.

 

[thinkthesethings]

@blecap1 If you don't have enough to cover a full 20 percent down plus closing costs including multiple inspections and appraisal I highly encourage you to hold off for a moment. Rates are going up and the market is cooling in places. Renting is not throwing money away. Repairs and taxes are very real plus insurance and I promise insurance doesn't cover what you think it will.

 

[pipboi3000]

@thinkthesethings Yea I’ve been wondering how long it would take for the housing market to crash again or start cooling. Lo and behold, Zillow is in the news already trying to minimize losses. It never sounded sustainable to begin with. OP, I HIGHLY recommend waiting at least 6 more month and watching that news closely.

 

[nathanaelwang]

@thinkthesethings Not to mention if he has to have PMI because his down payment after his penalties, closing cost, inspections, etc. is not 20%.

 

[allthatisgood]

@blecap1 this is basically a dream of mine at this point. good for you for living it. good luck!

 

[curliqsue]

@blecap1 You’ll have a tax penalty for that, be aware.

 

[kcminneus]

@blecap1 USDA loan 0% down??

in some areas first time home buyers can get a $10k grant to cover down payment and closing costs, which, if it’s a USDA or FHA (3.5% down) it could cover all of them.

 

[thinkthesethings]

@kcminneus The zero down loan only goes in certain areas for certain property and is "out" of money normally halfway through the year. Don't forget inspections and being underwater from day one. It takes so long to build equity if anything happens you are in deep water.

 

[resjudicata]

@blecap1 This may actually be pretty positive. You can get a house now and build equity. This is probably a better route if all the numbers work so why pay rent when you can build equity?

You can still continue contributing into the 403(b) and let it build up. Having your house paid off and some investments built up might be actually pretty good enough during retirement

 

[omienjim]

@blecap1 Just because you own a home doesn’t mean you’re out of the woods yet. Have you looked at the costs of home ownership? You still have recurring expenses. There are property taxes and HOA fees that depending on where you live can be quite high. Also, what is the interest on the mortgage? You also have to pay back all back-taxes and an additional 10% penalty for withdrawing your 401k early.

I hope you have run the numbers and given this decision some thought.

 

[lukelight]

@blecap1 Is the loan you have to pay off for the house over the years higher than what you would have to pay in rent each month? And how long would you be paying off that loan? Until 65?

If you said "no" both times then go for it.