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alisha
LIF Adult
Member since 3/07 1199 total posts
Name:
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Opinions please: Would you cash out your 401k?
Please don't quote
As a downpayment on your home?
DH and I are both 30 years old and we have a nice sum in our 401k - would easily be a 20% downpayment after taxes & 10% penalty.
We have one DD and we are TTC for baby #2. We live in a large one bedroom apt now in Manhattan but we are running out of space. If/when baby #2 comes along, we will have to move out of our apt.
I don't believe in "timing" the market but prices are low as are interest rates. We make a good salary and can afford a mortgage payment and maintenance costs. Our issue is that we don't have the downpayment and even if we buckle down and save like mad, we are still at least 2 years from a 20% downpayment.
So what are your thoughts? Would you cash out your 401k to buy a home given our ages?
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Posted 12/7/10 12:26 PM  |
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Prudential Douglas Elliman Real Estate
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Katareen
5,000 Posts!
Member since 4/10 7180 total posts
Name:
Katherine
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Re: Opinions please: Would you cash out your 401k?
Aboslutely not! Having a decent amount in your 401K at 30 years of age is wonderful--that will allow it to grow and grow for the next 35/40 years. If you take it out now, I think its like starting from scratch which will only harm you in the future.
The only way I would cash it out was if I seriously didn't have a dime to my name and couldn't feed my children. Otherwise, let it grow and save seperately for a house.
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| Posted 12/7/10 12:41 PM |
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ave1024
I Took The Wrong Road
Member since 12/07 6153 total posts
Name:
That Led To The Wrong Tendencies
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Re: Opinions please: Would you cash out your 401k?
Need more specifics.
How much is a "nice sum" and how much would you need to cash out and how much would you be left with.
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| Posted 12/7/10 12:46 PM |
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Beth
The Key to your new home....
Member since 2/06 24849 total posts
Name:
Beth
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Re: Opinions please: Would you cash out your 401k?
there is really no need
you can get an FHA loan with 3.5% down and a very low rate - just had a client lock in at 4%
you can take $10k out of your 401K with out penatly to buy your first house
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| Posted 12/7/10 12:46 PM |
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Samson7256
LIF Infant
Member since 5/06 93 total posts
Name:
John
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Re: Opinions please: Would you cash out your 401k?
Posted by Beth
there is really no need
you can get an FHA loan with 3.5% down and a very low rate - just had a client lock in at 4%
you can take $10k out of your 401K with out penatly to buy your first house
I believe the 10k withdrawal penalty free is only from an IRA not a 401k.
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| Posted 12/7/10 1:08 PM |
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JDubs
different, not less
Member since 7/09 13160 total posts
Name:
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Re: Opinions please: Would you cash out your 401k?
i would not if it was me, but thats jmo
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| Posted 12/7/10 1:29 PM |
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Re: Opinions please: Would you cash out your 401k?
Generally no but given the current housing prices and 401K/tax laws, I would say go ahead.
My best friend did this a few years back, he w/drew 10% from his 401K to buy his home and it helped him get equity faster. There were 2 other bids on the house so he got it for a great price and even with the lower property values in his home, he has some equity in it now.
I also read somewhere that if you withdraw funds from a 401K for the purpose of buying a home, you aren't taxed as much as if the w/drawal was for something else..So either way, its not a terrible thing to do.
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| Posted 12/7/10 1:41 PM |
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CrankyPants
I'm cranky
Member since 7/06 18178 total posts
Name:
Mama Cranky
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Re: Opinions please: Would you cash out your 401k?
No, I wouldn't.
You can't get back that time.
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| Posted 12/7/10 1:52 PM |
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CrankyPants
I'm cranky
Member since 7/06 18178 total posts
Name:
Mama Cranky
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Re: Opinions please: Would you cash out your 401k?
Posted by BatGirl9910
Generally no but given the current housing prices and 401K/tax laws, I would say go ahead.
My best friend did this a few years back, he w/drew 10% from his 401K to buy his home and it helped him get equity faster. There were 2 other bids on the house so he got it for a great price and even with the lower property values in his home, he has some equity in it now.
I also read somewhere that if you withdraw funds from a 401K for the purpose of buying a home, you aren't taxed as much as if the w/drawal was for something else..So either way, its not a terrible thing to do.
10% is different from cashing out.
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| Posted 12/7/10 1:53 PM |
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annoyedTTCer
LIF Adult
Member since 4/09 3272 total posts
Name:
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Re: Opinions please: Would you cash out your 401k?
I would never cash out my 401k, you get hit with some high penalities and will lose 40% of your money.
How about a loan instead?
The only time I would consider cashing out a 401k is if it was a matter of being homeless if I didn't or someone close to me needed a serious operation that their plan wouldn't cover.
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| Posted 12/7/10 1:56 PM |
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CrankyPants
I'm cranky
Member since 7/06 18178 total posts
Name:
Mama Cranky
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Re: Opinions please: Would you cash out your 401k?
Posted by annoyedTTCer
I would never cash out my 401k, you get hit with some high penalities and will lose 40% of your money.
How about a loan instead?
The only time I would consider cashing out a 401k is if it was a matter of being homeless if I didn't or someone close to me needed a serious operation that their plan wouldn't cover.
ITA
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| Posted 12/7/10 2:04 PM |
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jilliibabii
Mrs. O'Connor
Member since 6/10 12821 total posts
Name:
Jillian
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Re: Opinions please: Would you cash out your 401k?
Posted by annoyedTTCer
I would never cash out my 401k, you get hit with some high penalities and will lose 40% of your money.
How about a loan instead?
The only time I would consider cashing out a 401k is if it was a matter of being homeless if I didn't or someone close to me needed a serious operation that their plan wouldn't cover.
ITA. And the $10k no penalty is only for IRAs I believe.
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| Posted 12/7/10 2:08 PM |
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Charly
LOVE!
Member since 5/05 12578 total posts
Name:
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Re: Opinions please: Would you cash out your 401k?
Posted by annoyedTTCer
I would never cash out my 401k, you get hit with some high penalities and will lose 40% of your money.
How about a loan instead?
The only time I would consider cashing out a 401k is if it was a matter of being homeless if I didn't or someone close to me needed a serious operation that their plan wouldn't cover.
For all my houses I've always taken a loan out of my 401K. You are paying yourself back the interest - I believe its 5%. Depending on your plan you can usually borrow up to 50% of your vested amount.
One thing to ask if should you decide to quit or get terminated make sure you don't need to pay it back all at once. I ended up getting laid off, but thankfully that company plan allowed me to make monthly payments even as a terminated employee. My DH's company does not - if he gets terminated or quits we have to pay off the balance at that time.
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| Posted 12/7/10 2:12 PM |
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Blu-ize
Plan B is Now Plan A
Member since 7/05 32475 total posts
Name:
Susan
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Re: Opinions please: Would you cash out your 401k?
Posted by CrankyPants
Posted by annoyedTTCer
I would never cash out my 401k, you get hit with some high penalities and will lose 40% of your money.
How about a loan instead?
The only time I would consider cashing out a 401k is if it was a matter of being homeless if I didn't or someone close to me needed a serious operation that their plan wouldn't cover.
ITA
ita too
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| Posted 12/7/10 2:14 PM |
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lullabella
LIF Adult
Member since 5/05 2246 total posts
Name:
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Re: Opinions please: Would you cash out your 401k?
No I wouldnt do it, it will take years to recoup that money and you will loose the benefit of the compounded interest over time. Also with a home comes alot of expenses and most arent able to save like they did before for quite some time.
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| Posted 12/7/10 2:17 PM |
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alisha
LIF Adult
Member since 3/07 1199 total posts
Name:
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Re: Opinions please: Would you cash out your 401k?
Posted by lullabella
No I wouldnt do it, it will take years to recoup that money and you will loose the benefit of the compounded interest over time. Also with a home comes alot of expenses and most arent able to save like they did before for quite some time.
This is a really good point that I didn't consider.
I am really struggling with this - I am proud of the amount we have saved so far, and I don't want to tap into it.
I will look into the 401k loan option and the the FHA loan option.
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| Posted 12/7/10 2:23 PM |
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Faithx2
All good things in 2016!!
Member since 8/05 20181 total posts
Name:
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Re: Opinions please: Would you cash out your 401k?
100% yes. We have done it and don't regret it one bit. This is not our only retirement fund AND we were able to raise our allocations and replenish the money within 6 months of borrowing it. Every 401k works different but ours didn't tax us that much because it was money used to purchase a property.
Message edited 12/12/2010 3:09:53 PM.
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| Posted 12/7/10 2:50 PM |
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HeatherRose
Life is Good :)
Member since 11/07 6605 total posts
Name:
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Re: Opinions please: Would you cash out your 401k?
no way
go the FHA route and borrow what you can from it for a downpayment.
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| Posted 12/7/10 3:12 PM |
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b2b777
LIF Adult
Member since 9/09 4474 total posts
Name:
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Re: Opinions please: Would you cash out your 401k?
This is the only time I would ever consider taking $ out of my 401k.
Only if i was going to do the LOAN route and pay back with interest, and NOT pay a penalty.
You have to realize you are making a huge investment in owning a home, and a lot of your retirement will actually come from one day selling it.
If it comes down to taking advantage of these low asking prices, and low mortgage rates and being able to buy by using a small portion of the 401k -- id go for it.
Good luck!
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| Posted 12/7/10 3:22 PM |
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JDC112010
He's my hamball :)
Member since 10/10 1419 total posts
Name:
Jessica
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Re: Opinions please: Would you cash out your 401k?
Posted by HeatherRose
no way
go the FHA route and borrow what you can from it for a downpayment.
ITA with this.
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| Posted 12/7/10 3:59 PM |
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maybesoon
LIF Adult
Member since 9/09 5981 total posts
Name:
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Re: Opinions please: Would you cash out your 401k?
Posted by lullabella
No I wouldnt do it, it will take years to recoup that money and you will loose the benefit of the compounded interest over time. Also with a home comes alot of expenses and most arent able to save like they did before for quite some time.
ITA . to me, my retirement is more important then a house. just try and save the money (20%) otherwise you will be paying PMI. I would never borrow or draw from 401K unless it was a dire emergency
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| Posted 12/7/10 5:02 PM |
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OStewarts
LIF Adult
Member since 11/07 1096 total posts
Name:
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Re: Opinions please: Would you cash out your 401k?
Posted by HeatherRose
no way
go the FHA route and borrow what you can from it for a downpayment.
ITA!
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| Posted 12/7/10 5:03 PM |
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babyonboard11
In love with my little man!!
Member since 8/10 1841 total posts
Name:
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Re: Opinions please: Would you cash out your 401k?
As an accountant - I would say def not to do it to be honest. It is not worth it in the end.
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| Posted 12/7/10 5:25 PM |
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pickles16
Real Estate Professional
Member since 11/07 17227 total posts
Name:
Jen
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Re: Opinions please: Would you cash out your 401k?
No way
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| Posted 12/7/10 7:18 PM |
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curiousgeorge
LIF Adolescent
Member since 10/10 867 total posts
Name:
MAMA
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Re: Opinions please: Would you cash out your 401k?
I wouldn't!!!
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| Posted 12/7/10 7:38 PM |
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