{"id":45602,"date":"2023-08-07T19:33:06","date_gmt":"2023-08-07T23:33:06","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/my-wife-and-i-are-turning-50-we-have-800k-in-our-401ks-and-iras-should-we-withdraw-100k-to-buy-our-dream-home-for-retirement\/"},"modified":"2023-08-07T19:33:08","modified_gmt":"2023-08-07T23:33:08","slug":"my-wife-and-i-are-turning-50-we-have-800k-in-our-401ks-and-iras-should-we-withdraw-100k-to-buy-our-dream-home-for-retirement","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=45602","title":{"rendered":"My wife and I are turning 50. We have $800K in our 401(k)s and IRAs. Should we withdraw $100K to buy our dream home for retirement?"},"content":{"rendered":"
\n

Dear Quentin,<\/strong><\/h2>\n

My wife and I are months from turning 50 and have $800,000 combined in our 401(k)s and IRAs saved for retirement thus far. We recently capitalized on an opportunity to buy our dream property where our final retirement home will eventually be built in 5-10 years, almost draining our other savings for the down payment.\u00a0<\/p>\n

I\u2019m afraid that the house purchase might eventually become a financial burden without the savings cushion to fall back on. Should we consider dipping into our retirement for $100,000 (before penalties and taxes) to pay it off, since it is eventually going to be the home we live in during our retirement years?<\/p>\n

\n

We live in southern New Mexico.<\/p>\n

Related: <\/strong>\u2018I can\u2019t sustain this pace\u2019: I\u2019m 61, single and have an MBA. I\u2019m draining my savings after losing my job. What\u2019s my next move?<\/p>\n

Dear Planners,<\/strong><\/h2>\n

Your dream house is still a sandcastle in the sky. Your retirement accounts are making money for you while you sleep.\u00a0<\/p>\n

I can understand how you think that making a withdrawal from your 401(k) or IRA will make your dreams come true faster, but it could have the opposite effect. There\u2019s increasing evidence that inflation and debt is pushing more people to dip into their retirement savings \u2014 sometimes as a short-term loan, which they may or may not be able to pay back.\u00a0<\/p>\n

You are under no such pressure. You want to build your dream home, and you have obviously set your heart on this decision, but making financial decisions for emotional reasons, especially fear, is more often than not a no-no. You write that you have \u201crecently capitalized\u201d on this opportunity. I assume (and hope) you have not made any irreversible decisions yet.<\/p>\n

You will be forced to pay a 10% penalty on withdrawing from your 401(k) before 59\u00bd and, if that wasn\u2019t bad enough, you will be required to pay income tax on your early $100,000 withdrawal. So you would have to withdraw a lot more than $100,000 to meet your needs. The Internal Revenue Service has made every effort to deter you from taking such an action.<\/p>\n

<\/p>\n
\n

\n \u201c<\/span>\u2018You want to build your dream home, and you have obviously set your heart on this decision, but making financial decisions for emotional reasons, especially fear, is more often than not a no-no.\u2019\u201d<\/span>\n <\/p>\n


\n \u2014 The Moneyist<\/span>
\n <\/small><\/p><\/div>\n<\/p><\/div>\n

You don\u2019t say whether you have a traditional IRA or a Roth IRA. With a Roth IRA you contribute after-tax dollars. A traditional IRA is funded with pretax dollars, and you pay tax on your withdrawals in retirement. For this reason, Roth IRAs are good options for younger people because investors in their 20s and 30s tend to have a lower tax bracket.\u00a0<\/p>\n

According to the IRS: \u201cGenerally, early withdrawal from an Individual Retirement Account (IRA) prior to age 59\u00bd is subject to being included in gross income plus a 10 percent additional tax penalty. There are exceptions to the 10 percent penalty, such as using IRA funds to pay your medical insurance premium after a job loss.\u201d<\/p>\n

Withdrawals from a Roth IRA may, in some cases, be taxable. They may also incur a penalty, though that depends on a number of factors. Withdrawals must be taken after 59\u00bd, for instance, and after a five-year holding period. Exceptions to this early-withdrawal penalty include first-time home purchase \u2014 does this apply to you? \u2014 qualified education expenses, and birth\/adoption fees.<\/p>\n

Vanguard saw a rise in hardship loans: in 2022, 2.8% of people with a retirement plan initiated a hardship withdrawal, up from 2.1% in 2021. But Fidelity said outstanding 401(k) loans and average loan amounts are trending downward: those with a loan outstanding dropped to an all-time low of 16.6% in the first quarter of 2023, down from 21% five years ago.<\/p>\n

Think twice before you dip.\u00a0<\/p>\n

<\/p>\n
<\/p>\n<\/figure><\/div>\n

Readers write to me with all sorts of dilemmas.\u00a0<\/em><\/strong><\/p>\n

By emailing your questions, you agree to have them published anonymously on MarketWatch. By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties<\/em><\/strong>.<\/p>\n

The Moneyist regrets he cannot reply to questions individually.<\/em><\/strong><\/p>\n

More from Quentin Fottrell:<\/strong><\/p>\n

I had a date with a great guy. I didn\u2019t drink, but his wine added $36 to our bill. We split the check evenly. Should I have spoken up?<\/p>\n

\u2018I\u2019m living paycheck to paycheck and I feel drained\u2019: My fianc\u00e9 said he would pay half of the mortgage. Guess what happened next?<\/p>\n

\u2018We live in purgatory\u2019: My wife has a multimillion-dollar trust fund, but my mother-in-law controls it. We earn $400,000 and spend beyond our means.<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Dear Quentin, My wife and I are months from turning 50 and have $800,000 combined in our 401(k)s and IRAs saved for retirement thus far. We recently capitalized on an opportunity to buy our dream property where our final retirement home will eventually be built in 5-10 years, almost draining our other savings for the […]<\/p>\n","protected":false},"author":1,"featured_media":45603,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-45602","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-news","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nMy wife and I are turning 50. We have $800K in our 401(k)s and IRAs. 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