I had a 401K that I had to rollover into an IRA account because I left the company and started a new job. My new job only has a SEP program that I will be participating in on it's own (not related to my rolled over IRA.) I am not currently contributing to my IRA.
Can I use the money in my IRA for a downpayment on a home?
Take into consideration that I am not currently contributing to that IRA, and therefore would not necessarily be paying myself back on the loan that I would take out for a downpayment. Can I do this? Is it advisable?
2006-08-23 08:41:39 · 4 answers · asked by Cole 2 in Business & Finance ➔ Personal Finance
Yes, up to $10,000 can be withdrawn for a first time home buyer without the 10% penalty if made after five years (on a Roth), but the tax depends on what type of IRA it is. A Roth would be a non-taxable distribution, but a regular IRA would be fully taxable b/c the contributions you made were pre-tax when you contributed them to your 401(k). If you had a Roth, then the income tax was paid upon rollover from the traditional to the Roth.
If I were you, I would not withdraw money from the IRA b/c that money that is already put away & will be worth a lot more down the road. Personally, I believe the best option would be to wait a little longer to save the money & then get a loan without the PMI (required for <20% down payment).
This website has some info on the topic.
http://www.fool.com/money/allaboutiras/allaboutiras12.htm
Good Luck!!
2006-08-23 09:06:30 · answer #1 · answered by chh945s 2 · 0⤊ 0⤋
I believe the no penalty for early withdrawl only happens if you are a first time home buyer and certain IRA's will give you a time limit in which to return the funds before you get penalized.
2006-08-23 15:48:54 · answer #2 · answered by T L 4 · 0⤊ 0⤋
Yes. There are hardship rules which apply if you're buying a house, going back to school or caring for an elder relative, so there's no penalty for early withdrawal, but you'll still have to pay the taxes on the withdrawal.
2006-08-23 15:45:52 · answer #3 · answered by jim 6 · 0⤊ 0⤋
You can take the money out and use it as a down payment. You will, however, get a pretty heavy tax for taking it out. I did this last year to pay for a wedding.
2006-08-23 15:43:21 · answer #4 · answered by Anonymous · 0⤊ 0⤋