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Message
Taking contributions out of Roth IRA to buy land
Posted on 2/1/24 at 3:13 pm
Posted on 2/1/24 at 3:13 pm
I have found a piece of land I might want to buy for a future home. Has anyone taken contributions out of a ROTH IRA for a purpose like this? With interest rates where they are, I have a hard time borrowing money right now.
I realize removing ROTH money is not generally a good idea until you are in retirement mode, but I am getting close to retirement, and this would equate to about 5% of my total retirement funds of which my current calculations show I would need 5% a year to live my current lifestyle, so generally I don't think this would hurt my retirement ability and the build would not cost me more than I could sell my current home, and I would have no mortgage on the new place if I pay for the land outright.
It's been a while since I looked at loan rates.
My current home is at 2.25%. Yeah I know, but I hate my neighborhood and the land I want has no HOA and no building restrictions.
I realize removing ROTH money is not generally a good idea until you are in retirement mode, but I am getting close to retirement, and this would equate to about 5% of my total retirement funds of which my current calculations show I would need 5% a year to live my current lifestyle, so generally I don't think this would hurt my retirement ability and the build would not cost me more than I could sell my current home, and I would have no mortgage on the new place if I pay for the land outright.
It's been a while since I looked at loan rates.
My current home is at 2.25%. Yeah I know, but I hate my neighborhood and the land I want has no HOA and no building restrictions.
3
Posted on 2/1/24 at 3:30 pm to kywildcatfanone
Hey it's your money and if your not happy with your current situation and you have the means to do something about it do it. Are you over 59 1/2 so that you are not hit with the Roth IRA penalty?
Posted on 2/1/24 at 3:37 pm to FLObserver
quote:
Hey it's your money and if your not happy with your current situation and you have the means to do something about it do it. Are you over 59 1/2 so that you are not hit with the Roth IRA penalty?
I don't think the 59 1/2 applies to contributions, which is what I'm talking about, only investment earnings, but I'm about 3 months shy of 59 1/2. And the account is over 5 years old.
This post was edited on 2/1/24 at 3:38 pm
Posted on 2/1/24 at 3:42 pm to kywildcatfanone
Contributions are yours to do with as you see fit.
30 years of tax free growth would make that a very difficult decision for me though, regardless of interest rates. You’ll never be able to put it all back is the frustrating part.
30 years of tax free growth would make that a very difficult decision for me though, regardless of interest rates. You’ll never be able to put it all back is the frustrating part.
Posted on 2/1/24 at 3:56 pm to kywildcatfanone
5% is a pretty aggressive withdrawal rate in retirement. Roth $ is best left untouched for tax free growth and so you can optimize taxes in retirement using Roth as tax free on top of other sources and to stay under income limits for benefit eligibility, tax brackets, SS taxation etc.
Do you have any cash or taxable investments you could use instead?
Do you have any cash or taxable investments you could use instead?
Posted on 2/1/24 at 4:07 pm to TorchtheFlyingTiger
quote:
Do you have any cash or taxable investments you could use instead?
Yes, I'm fully vested in my company plan (403b), as well as a private IRA I've had for 20 years. I have about 30% of the total in cash if I wanted to use it, but I really didn't want to use cash to pay for the land. I guess I just didn't want to deal with taxes on taking out a lump sum like that from the traditional account?
Is that a better move if I want to pull money out, pull it out of the taxable account?
This post was edited on 2/1/24 at 4:19 pm
Posted on 2/1/24 at 4:07 pm to slackster
quote:
30 years of tax free growth would make that a very difficult decision for me though, regardless of interest rates. You’ll never be able to put it all back is the frustrating part.
While I agree, I don't have 30 years left. Family history suggested maybe 15.
Posted on 2/1/24 at 4:19 pm to kywildcatfanone
I did it and regret it. Had to get the money just to survive at the time though.
If you decide to do it, make sure you have your numbers set up. It takes an insane amount to do a custom build. Financing isn't the same.
I'd sell, get into a rental, before ever taking $ out of retirement.
If you decide to do it, make sure you have your numbers set up. It takes an insane amount to do a custom build. Financing isn't the same.
I'd sell, get into a rental, before ever taking $ out of retirement.
Posted on 2/1/24 at 4:27 pm to Billy Blanks
quote:
I'd sell, get into a rental, before ever taking $ out of retirement.
Did that once, never again.
quote:
If you decide to do it, make sure you have your numbers set up.
I feel pretty confident that if I figure out how to buy the land separately then I will be able to build what I want, then sell my home and come out $0 on the end.
Posted on 2/1/24 at 4:45 pm to kywildcatfanone
Just got off the phone with the mortgage company. They said I could refi to between 5-6% and just increase my monthly payment. I suppose that is an option as well to consider. Of course doing that, I'm just rolling the land cost into a loan instead of buying outright with other funds.
Ugh, I hate this stuff.
Ugh, I hate this stuff.
Posted on 2/1/24 at 6:09 pm to kywildcatfanone
"They said I could refi to between 5-6% and just increase my monthly payment."
--
That's the rate for a cash out refinance?
--
That's the rate for a cash out refinance?
Posted on 2/1/24 at 6:27 pm to ItzMe1972
Thats what she told me.
Posted on 2/1/24 at 7:44 pm to kywildcatfanone
I wasnt suggesting using traditional retirement account. I meant any assets in a taxable brokerage or cash in non retirement accounts.
I'd consider cash before Roth because worst case you can always tap Roth contributions later like you would have the cash but this buys you time to replenish cash without depleting Roth.
Taxable brokerage (not tax deferred retirement account) may be a decent option if you have assets you anticipate using and woukd likely be in 15% LTCG bracket at that point. If you would likely be in zero bracket if you sell later or want to pass to heirs w stepped up basis then not so much.
Roth is typically the last bucket to tap unless used tactically to manage annual tax or benefit eligibility. It is too useful a tool to toss away unless a clear advantage doing so or a crisis.
I'd consider cash before Roth because worst case you can always tap Roth contributions later like you would have the cash but this buys you time to replenish cash without depleting Roth.
Taxable brokerage (not tax deferred retirement account) may be a decent option if you have assets you anticipate using and woukd likely be in 15% LTCG bracket at that point. If you would likely be in zero bracket if you sell later or want to pass to heirs w stepped up basis then not so much.
Roth is typically the last bucket to tap unless used tactically to manage annual tax or benefit eligibility. It is too useful a tool to toss away unless a clear advantage doing so or a crisis.
Posted on 2/1/24 at 7:51 pm to ItzMe1972
Might seller financing be an option? If the land isnt moving fast and/or the owner would like to quickly generate an income stream it could be a win/win. Cant hurt to ask.
Posted on 2/1/24 at 9:43 pm to kywildcatfanone
quote:
While I agree, I don't have 30 years left. Family history suggested maybe 15.
I can't think of a worse way to spend 18-24 months of my life than to do a custom home build, especially if it was likely I only had 15 left.
Absolute puke experience.
Builds can cause divorces. Are you married?
Posted on 2/1/24 at 9:51 pm to kywildcatfanone
"Thats what she told me."
--
I'd verify the cash out part with the lender. And ask about closing costs.
What about a HELOC?
--
I'd verify the cash out part with the lender. And ask about closing costs.
What about a HELOC?
Posted on 2/2/24 at 4:08 am to Billy Blanks
quote:
Builds can cause divorces. Are you married?
Building is a terrible overall experience. We have done it twice in our marriage, 2000 and 2020. It's a very difficult experience on my wife praticularly.
We can't find an existing home we want. The builder who build our current home lives across the street and would likely build out new one.
I really don't want to build, but am not finding anything remotely like what we would want.
Posted on 2/2/24 at 4:09 am to ItzMe1972
quote:
I'd verify the cash out part with the lender. And ask about closing costs.
She said the only closing costs would be fees for 3rd party (county, etc). But I didn't go deep enough in the conversation. She said to discuss it further with me she would need to do a credit pull.
quote:
What about a HELOC?
She said heloc rates are double digit.
Posted on 2/2/24 at 4:10 am to TorchtheFlyingTiger
quote:
Might seller financing be an option?
I could ask. Seller is a farm business which owns hundreds of acres behind this property.
They have a sod farm business and this property was part of that, so the ground is basically flat, another rarity around here for a 5 acre tract.
Posted on 2/2/24 at 10:41 am to kywildcatfanone
Seller financing would be best option.If not I would hit up the Roth if I hated where I live.
The only value of money is to make your life easier,more pleasant.
I would have been much better off financially to have stayed in my old house.We only had 1 year left on a 15 year mortgage but wife wanted to build in the country.
Only reason I agreed was some of the neighbors were making life miserable.
I was dreading the house building experience but it wasn’t nearly as bad as I anticipated.
It’s much better not having close neighbors or a HOA.
The only value of money is to make your life easier,more pleasant.
I would have been much better off financially to have stayed in my old house.We only had 1 year left on a 15 year mortgage but wife wanted to build in the country.
Only reason I agreed was some of the neighbors were making life miserable.
I was dreading the house building experience but it wasn’t nearly as bad as I anticipated.
It’s much better not having close neighbors or a HOA.
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