re: Cashing in 401k to put down on a house

Personally I wouldn't bank on any pension for retirement. It's an antiquated model that's set up for failure. They're pretty much Ponzi schemes. Just my opinion.

As some others have said, is a bigger mortgage an option? Surely you can get over 4% ROI from your 401k, so I'd leave it put. Now, PMI is another thing to consider I suppose.

If you need money to put down on a house and you don't have it in the bank, then you really have no choice. If you're asking our opinion... Think about it like this: You're going to face a 10% penalty and have to pay at least 20% in taxes, but that's based on your income. You could actually be in a higher tax bracket. So, let's say you've got 100 K in your 401. You pay 10,000 for your penalty and 20,000 for your taxes (Probably more like 30,000). You take home $60,000 and lose $40,000. It was designed for you to defer your taxes. That way, your money continues to grow until you reach the actual retirement age. Once you retire, you're not going to have to pay the penalty and you're going to be in a lower tax bracket than you are now. That means more money for you. Good luck in whatever you choose though.

Basically everyone except for TIGERLillie (or whatever his name is) thinks this is a shitty idea.

There is a lot of wisdom in this thread, a lot of these guys know what they are talking about, SO PAY ATTENTION.

You do not NEED a house, you WANT a house. You've got house fever, and you NEED to think about the next 5 years instead of the next 5 months. If you WANT a house that bad, you NEED to find another way to come up with the money.

If I WANT something bad enough, I find a way to save up and pay for it without hurting my future. Before I pull from retirement and take a penalty, pay tax, and lose the opportunity cost, I'd pause contributions short term and save the money instead.

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Wouldn't it be smarter to roll the 401K into an IRA account?

I think a one time 10K home down payment from an IRA account is permissible without penalty.

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On a Roth IRA, not a traditional IRA.

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On a Roth IRA, not a traditional IRA.

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Well in that case, open a rollover roth IRA. You'll have the tax event but you at least won't incur the 10% penalty.

If 10K plus whatever he already has saved up for a down payment isn't enough then he's probably biting off more than he can chew anyway IMO

Short-term it's a good move. Long-term it's a lousy move.

What about rolling the 401 to an IRA and then taking a distribution for the down payment?

*doh

The IRA down payment is only for first time home buyers...

He wouldn't be able to exercise that option.

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Haha, glad you figured this out on your own.

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So the only smart move here is save the money, and be patient. Pretty simple idea. But I have a feeling he's gonna ignore all the good advice ITT, and listen to Tigerlee and 5 years from now be kicking himself for being childish.

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So the only smart move here is save the money, and be patient. Pretty simple idea. But I have a feeling he's gonna ignore all the good advice ITT, and listen to Tigerlee and 5 years from now be kicking himself for being childish.

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I agree with this

I'm not planning on buying a house until I have 20% for down payment and a huge emergency fund. And I'm more concerned with paying into my retirement accounts than I am with "owning" a house.

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Taking a penalty just to have a nicer house, not out of necessity seems like a bad idea, but maybe I'm just a dumb college student

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It is not just about the penalty. Everyone knows that 401k monies are taxable as regular income, but some people are throwing that around as if paying taxes now and paying them in retirement are the exact same. In the vast majority of cases, your tax bracket tends to be significantly lower when you are retired.