Is Your 401k Better Spent on a Home?
Many people look at their 401k and they imagine all the things they could be doing now with that retirement money. Using use this money for all the mounding credit card debt, school loans or even a home down payment often feels like the answer to life's immediate problems. But is it?
When it comes to
home ownership, a 401k loan to help you achieve a 20% down payment could be to your benefit if you can afford to pay back both the loan and the new
mortgage because it will help you avoid costly mortgage insurance. It could also help you with closing costs so that you are not cashing out your entire savings right before you take on the potential hidden expenses of a new home.
In Short, The Math Always Wins.
A younger worker who has made a lot on stock funds in their 401(k) in recent years might want to temporarily tap that money to establish themselves as a homeowner. Or, some workers closer to retirement might find themselves retirement-plan heavy with their eyes on a retirement home. To buy it, they might have to sell investments and eat a sizeable capital gains tax.
Read More:
FINANCES |
HOME BUYING TIPS |
PLEASE SEEK APPROPRIATE ACCOUNTING AND LEGAL ADVICE BEFORE MAKING YOUR DECISIONS. Make sure you understand the rules and risks before tapping your retirement savings to pay for a home.
Sources:
http://www.msn.com/en-us/money/home-loans/should-you-tap-your-401-k-to-buy-a-house/ar-BB6Qmcl
http://www.kiplinger.com/article/real-estate/T010-C001-S001-borrowing-from-a-401-k-to-make-a-down-payment.html
