Should we use savings to max out our IRA's for '07 & '08, or use the funds for a down payment on our home?

Question

In the long run what would be more beneficial for my wife and me. To use savings to max out our IRA's for 2007 & 2008 or use that money as a 5% down payment on a new home? We are 27 & 25 and are already planning for retirement. The monthly payment difference would not be a concern at this time, but I want to make the best choice for the long-term. Thanks!!

Answer 1

Personally, with all of the problems in the sub-prime market right now, I would wait to buy a home. I'm fairly certain that banks will not excited to provide 95% ffinancing right now. And in terms of risk, 5% is not much of a cushion in the event prices fall further and you have to sell for one reason or another.

I would keep on investing in the IRA. Make sure it is a Roth. You are allowed to make a withdrawal from these accounts without penalty for the purchase of a home. When you can buy a house with more of a downpayment...do it!

Answer 2

well tax laws do provide for you to withdraw from your IRA's (not from your roth ira they must be funded for 5 years before you can take out the principal without any penalty) $10000 for first time homebuyer downpayment on a house without the 10% tax penalty normally associated

as for the house...the best investment one can EVER make is purchasing their first home....its yours that you will plan to live in for awhile and since one can agrue that housing prices are at a low right now or at least near a low (buy low sell high mentality) it is a good time to buy

unless you plan to live in the house for like a year i would go with the IRA thing but i fyou plan to live in the house for awhile, like years and years just buy the house, use any potential tax deduction form the interest paid on the mortgage as well as the closing costs and use the tax return if any to fund your iras each year

on your return you just say how much you are gonna fund into your ira's each tax year anyways and as long as you fund them by april 15th you are good, even if you send in your taxes in feburary

Answer 3

Good question, both are good things.

Good thing monthly difference is no concern.

But you sound like you've NOT put the down payment, so you've not bought the house yet, in that case, I'd totally hold off on buying a house as foreclosure boom is just around the corner.