Should withdraw retirement funds for down payment on house?
May 28, 2020 5:11 AM Subscribe
Is it wise to take out penalty free retirement funds for house down payment?
My husband lost his job due to to Covid and the CARES act is allowing people to withdraw money from retirement plans without imposing any fees (other than treating it as taxable income.) We have every reason to believe he will get a new job and would like to finally buy a house after years of renting. We are thinking about withdrawing money from his retirement account (I have my own) to have a down payment as we do not have much without doing this. So the plan would be, withdraw the money now, put it in our savings for access, so that once he has a job again we could go house buying. Other than taking a hit on our retirement account and paying income tax, what are the downsides to this plan?
My husband lost his job due to to Covid and the CARES act is allowing people to withdraw money from retirement plans without imposing any fees (other than treating it as taxable income.) We have every reason to believe he will get a new job and would like to finally buy a house after years of renting. We are thinking about withdrawing money from his retirement account (I have my own) to have a down payment as we do not have much without doing this. So the plan would be, withdraw the money now, put it in our savings for access, so that once he has a job again we could go house buying. Other than taking a hit on our retirement account and paying income tax, what are the downsides to this plan?
I did this! I think it's hard to make a recommendation without knowing the specifics of your savings otherwise, your general approach to money, your salaries, etc., but I can walk you through why it was the right choice for me.
1. I had a secure, well-paying job in a stable field.
2. I didn't have a lot of cash on hand because I was diligent about paying off school debt and contributing to my retirement.
3. I withdrew about 20% of my Roth IRA account, which is about 10% of my overall retirement savings.
4. Renting had become more expensive than buying for me, at least on a monthly basis.
5. I did the math, and even with my withdrawal, if I continued my general rate of saving, I would still have very healthy retirement funds.
6. I was 30 and had ample time to rebuild my retirement accounts (I think this is key. If I'd been 40 or 50, this would have been a bad decision, probably.)
It worked out okay. While my retirement savings will obviously never be the same as what they would have been, I continued to be diligent about saving and they're healthy. Everything worked out okay and I'm glad I did it.
WHICH IS NOT TO SAY you should do this. The landscape is a lot different than it was 5 years ago. If I were faced with the same choice in 2020, I would not doing it, due to the uncertainty about everything, especially the job market. I would do the math on this very carefully - look at the retirement calculators and plug in your numbers to see how this will affect your net savings in retirement.
If you do this, pay attention when you're doing your taxes! I'm not sure how the CARES act affects actual tax filing, but I reported my withdrawal incorrectly, so I had to go back and forth with the IRS a bit.
posted by punchtothehead at 5:44 AM on May 28, 2020 [5 favorites]
1. I had a secure, well-paying job in a stable field.
2. I didn't have a lot of cash on hand because I was diligent about paying off school debt and contributing to my retirement.
3. I withdrew about 20% of my Roth IRA account, which is about 10% of my overall retirement savings.
4. Renting had become more expensive than buying for me, at least on a monthly basis.
5. I did the math, and even with my withdrawal, if I continued my general rate of saving, I would still have very healthy retirement funds.
6. I was 30 and had ample time to rebuild my retirement accounts (I think this is key. If I'd been 40 or 50, this would have been a bad decision, probably.)
It worked out okay. While my retirement savings will obviously never be the same as what they would have been, I continued to be diligent about saving and they're healthy. Everything worked out okay and I'm glad I did it.
WHICH IS NOT TO SAY you should do this. The landscape is a lot different than it was 5 years ago. If I were faced with the same choice in 2020, I would not doing it, due to the uncertainty about everything, especially the job market. I would do the math on this very carefully - look at the retirement calculators and plug in your numbers to see how this will affect your net savings in retirement.
If you do this, pay attention when you're doing your taxes! I'm not sure how the CARES act affects actual tax filing, but I reported my withdrawal incorrectly, so I had to go back and forth with the IRS a bit.
posted by punchtothehead at 5:44 AM on May 28, 2020 [5 favorites]
Other than taking a hit on our retirement account and paying income tax, what are the downsides to this plan?
Aren't those enough downsides? Unless you have an enormous mountain of cash in your retirement savings, you should never dip into it, lack of penalties or not.
Instead of "retirement" savings, think of that money as "how will I pay to live the rest of my life, now that I don't have a regular income, and will have most of the same expenses, and might realistically live for another thirty years, possibly in ill health?" savings. You really should never touch it, unless doing so is, for instance, the difference between having a roof over your head and homelessness.
posted by Thorzdad at 5:47 AM on May 28, 2020 [11 favorites]
Aren't those enough downsides? Unless you have an enormous mountain of cash in your retirement savings, you should never dip into it, lack of penalties or not.
Instead of "retirement" savings, think of that money as "how will I pay to live the rest of my life, now that I don't have a regular income, and will have most of the same expenses, and might realistically live for another thirty years, possibly in ill health?" savings. You really should never touch it, unless doing so is, for instance, the difference between having a roof over your head and homelessness.
posted by Thorzdad at 5:47 AM on May 28, 2020 [11 favorites]
The downsides are that you may be taking a loss on the retirement funds - if you bought when the Dow was 27,000 and sell when it's 23,000 - that's a loss. Say for whatever reason you decide not to buy after all, and want to put those funds back into the market in a couple years, but now the Dow is 38,000; say it only ever briefly goes below 35,000 ever again. Your chunk has been on the sidelines and you've missed out on a good portion of the market gains you would have needed to retire.
The future is guaranteed for nobody. You're already down one job that I bet you didn't expect or plan for last year. Why do you think next year is going to go to plan? Or the year after? Or that what you think is normal is coming back? Finally - if you weren't able to build any downpayment at all through reducing expenses when you had two jobs, then you might struggle with paying for a house. It just plain costs more than you think it will.
posted by everythings_interrelated at 5:51 AM on May 28, 2020
The future is guaranteed for nobody. You're already down one job that I bet you didn't expect or plan for last year. Why do you think next year is going to go to plan? Or the year after? Or that what you think is normal is coming back? Finally - if you weren't able to build any downpayment at all through reducing expenses when you had two jobs, then you might struggle with paying for a house. It just plain costs more than you think it will.
posted by everythings_interrelated at 5:51 AM on May 28, 2020
Everything is going to depend on the specifics of your situation -- the questions that were raised above, about how much of your savings this represents, your age, etc. There isn't really a generic "yes" or "no" answer to this without diving into those details. (Just to be clear: I am not asking you to divulge more details, just saying that you will need to interpret answers given your specific situation.)
We looked at a version of this when we were house shopping the other year (borrowing from a retirement account) and for us, at that time, it didn't end up making financial sense. But I know people who have done this (both borrowing and early withdrawals) and it was the right thing for them, and they are very happy that they chose to do this.
My biggest concern is what was flagged above -- this is one thing if he is back to work quickly, but given the overall situation, that seems like a more risky gamble than it would be in a normal time. But again, this is going to depend on the specifics -- if his field is less impacted, then getting back to work soon is more likely than if he is in a field like event planning or travel that has been severely impacted.
posted by Dip Flash at 5:55 AM on May 28, 2020
We looked at a version of this when we were house shopping the other year (borrowing from a retirement account) and for us, at that time, it didn't end up making financial sense. But I know people who have done this (both borrowing and early withdrawals) and it was the right thing for them, and they are very happy that they chose to do this.
My biggest concern is what was flagged above -- this is one thing if he is back to work quickly, but given the overall situation, that seems like a more risky gamble than it would be in a normal time. But again, this is going to depend on the specifics -- if his field is less impacted, then getting back to work soon is more likely than if he is in a field like event planning or travel that has been severely impacted.
posted by Dip Flash at 5:55 AM on May 28, 2020
On the flip side, if you buy a house at a low price due to slow sales but the markets flounder for many years, you could conceivably come out ahead by doing this! Also lots of people sell their houses when they retire (sometimes at a considerable profit) and use those funds to move to a lower cost situation and have income. So buying a house can still be seen as part of your retirement plan. Likewise if you pay it off, living with no mortgage is something that many people would prefer over paying rent.
I can’t say yes or no, and nobody can say what the future holds; but that’s the sort of best case scenario to weigh against some of the worst cases above.
The challenge is figuring out the most likely case, and your level of risk tolerance.
posted by SaltySalticid at 6:11 AM on May 28, 2020 [1 favorite]
I can’t say yes or no, and nobody can say what the future holds; but that’s the sort of best case scenario to weigh against some of the worst cases above.
The challenge is figuring out the most likely case, and your level of risk tolerance.
posted by SaltySalticid at 6:11 AM on May 28, 2020 [1 favorite]
I would absolutely not withdraw the money while he is currently unemployed. You have confidence that he'll find another job--why not wait till he has the job and feels comfortably established there before you make this choice? Now seems like the worst time to do this--market low, unemployed, not planning to buy for a year anyway.
It might or might not be a good idea in the long run, but it sounds like a bad idea right now.
posted by gideonfrog at 6:29 AM on May 28, 2020 [7 favorites]
It might or might not be a good idea in the long run, but it sounds like a bad idea right now.
posted by gideonfrog at 6:29 AM on May 28, 2020 [7 favorites]
One other thing to consider- if the job market isn't as strong as you are anticipate, owning a home will tie your family down to a location more and limit your husband's job search to jobs within a commuting radius of the home you bought. Having more flexibility with your location could be a big bonus.
posted by Larry David Syndrome at 6:49 AM on May 28, 2020 [5 favorites]
posted by Larry David Syndrome at 6:49 AM on May 28, 2020 [5 favorites]
I withdrew money from a retirement account with penalties for a house down payment plus related moving expenses and it worked for us. We are very happy in our home, which has appreciated in value. (so far)
HOWEVER...we were both solidly employed at the time, had good credit, no children, had paid down most debt and there wasn't a global pandemic. We were 100% in a spot to buy a home except for that large amount we needed up front. I would not do it under today's circumstances and especially with one unemployed.
posted by kimberussell at 6:53 AM on May 28, 2020 [2 favorites]
HOWEVER...we were both solidly employed at the time, had good credit, no children, had paid down most debt and there wasn't a global pandemic. We were 100% in a spot to buy a home except for that large amount we needed up front. I would not do it under today's circumstances and especially with one unemployed.
posted by kimberussell at 6:53 AM on May 28, 2020 [2 favorites]
Is this a first-time home purchase? How much are you thinking of withdrawing? You can withdraw up to $10K from an IRA or a 401K for a first-time home purchase, penalty-free. So I don't really see the rush.
posted by Automocar at 7:14 AM on May 28, 2020 [2 favorites]
posted by Automocar at 7:14 AM on May 28, 2020 [2 favorites]
I did this. The money we are saving on rent and the equity we are gaining in the house, which we will sell later, made it a great investment that has us coming out ahead. The house itself is basically a retirement savings now, too.
posted by Pwoink at 7:16 AM on May 28, 2020 [2 favorites]
posted by Pwoink at 7:16 AM on May 28, 2020 [2 favorites]
I'm not a financial advisor, but consider what you pay in rent now vs what you'll pay on mortgage, taxes, insurance, and the unplannable but inevitable repairs. If owning the home means less outgo, then you can save more money for retirement or whatever as a homeowner.
But if the outgo of owning is more than rent, you can save/invest more money by staying where you are.
Now, there is the issue of inflation. Your rent will go up over time. Your mortgage will not (you are planning on a fixed rate loan, aren't you?) but the other costs of home ownership will go up over time. Historically the value of homes have gone up but that's not guaranteed and we've seen in the last two recessions long periods when house values have gone down.
This is a complex decision. Add to that complexity the current state of the economy which means home prices and loans rates may be at a lifetime low in absolute dollars. On the other hand, is your income assured?
Last, but not unimportant, is your feelings. Would being a homeowner bring you a lot of satisfaction? It does many folks. That satisfaction is worth some unknown amount of money.
posted by tmdonahue at 7:22 AM on May 28, 2020 [3 favorites]
But if the outgo of owning is more than rent, you can save/invest more money by staying where you are.
Now, there is the issue of inflation. Your rent will go up over time. Your mortgage will not (you are planning on a fixed rate loan, aren't you?) but the other costs of home ownership will go up over time. Historically the value of homes have gone up but that's not guaranteed and we've seen in the last two recessions long periods when house values have gone down.
This is a complex decision. Add to that complexity the current state of the economy which means home prices and loans rates may be at a lifetime low in absolute dollars. On the other hand, is your income assured?
Last, but not unimportant, is your feelings. Would being a homeowner bring you a lot of satisfaction? It does many folks. That satisfaction is worth some unknown amount of money.
posted by tmdonahue at 7:22 AM on May 28, 2020 [3 favorites]
I did this as part of a government stimulus system back in the 90s in Toronto, with the tax penalty spread over the next 15 years. I think it was limited to $20k per person.
I was freelancing and the primary breadwinner (so not the most stable of incomes) but it worked out well because the market was at it's bottom. House prices had been dropping since the crash of ‘89, so it felt like a “safe” buy. Even so, I was mentally set to ride out any continued loss in resale value because I knew I wanted to live in it long term, if possible.
If I were you, I'd wait a bit longer and I wouldn’t make a plan to put all the burden onto one partner's savings - because things can happen in relationships.
posted by bonobothegreat at 7:33 AM on May 28, 2020 [1 favorite]
I was freelancing and the primary breadwinner (so not the most stable of incomes) but it worked out well because the market was at it's bottom. House prices had been dropping since the crash of ‘89, so it felt like a “safe” buy. Even so, I was mentally set to ride out any continued loss in resale value because I knew I wanted to live in it long term, if possible.
If I were you, I'd wait a bit longer and I wouldn’t make a plan to put all the burden onto one partner's savings - because things can happen in relationships.
posted by bonobothegreat at 7:33 AM on May 28, 2020 [1 favorite]
Not having to pay the 10% penalty is huge. Make sure you are well prepared to pay those taxes. Make sure you are buying a house that is well within your budget, not a stretch. I personally believe the economy will recover after Covid is dealt with by vaccine, herd immunity, time, but I'm just some person on Ask.Me. Do plan or expenses of home ownership - repairs, tools, and other stuff.
posted by theora55 at 7:44 AM on May 28, 2020
posted by theora55 at 7:44 AM on May 28, 2020
Keep in mind that it seems like a great idea to withdraw retirement when you are not retired.
Retirement is super expensive, more than you think. An average nursing home is 6k a month, which nets to a million for ten years with living expenses baked in. And we’re living longer. We’re going to have a very big problem. I would never touch it despite it “looking healthy.”
I will say that if you plan to hold the house for 20 years, when you sell it would be a nice cushion for your retirement - but the amount you make there would be hard to match the same amount as retirement once you factor in cap gains tax, etc.
posted by pando11 at 8:01 AM on May 28, 2020 [3 favorites]
Retirement is super expensive, more than you think. An average nursing home is 6k a month, which nets to a million for ten years with living expenses baked in. And we’re living longer. We’re going to have a very big problem. I would never touch it despite it “looking healthy.”
I will say that if you plan to hold the house for 20 years, when you sell it would be a nice cushion for your retirement - but the amount you make there would be hard to match the same amount as retirement once you factor in cap gains tax, etc.
posted by pando11 at 8:01 AM on May 28, 2020 [3 favorites]
Your alternatives aren't "take money out of retirement fund" and "don't buy a house." Your alternatives also include buying a house with an 80/20 mortgage or buying a house with a small down payment and paying PMI until you have 20% equity mostly through appreciation.
Hubby's retirement fund has presumably taken a bit of a beating this year. Right now those are just on paper, but taking that money out is going to make those losses real. Likewise, if the future is one where your hubby can promptly get another job, that same future is also likely to be one where retirement funds in general do quite well. So you'll be eating a loss and going without a bunch of future gains. The younger you are, the more true this is -- the money you remove now might be missing out on 35 or 40 years of compounding mostly-gains instead of 10.
It's hard for me to see how that makes more sense than just eating PMI for a few years or taking out an 80/20, in both cases on a house that's maybe smaller or not as desirable as one you might otherwise have gotten.
Your rent will go up over time. Your mortgage will not
Your PITI payments -- principal, interest, taxes, and insurance -- go up over time in fits and starts as tax rates, assessed value, and insurance costs change. Not as fast as rent, but it's a thing.
posted by GCU Sweet and Full of Grace at 8:21 AM on May 28, 2020 [5 favorites]
Hubby's retirement fund has presumably taken a bit of a beating this year. Right now those are just on paper, but taking that money out is going to make those losses real. Likewise, if the future is one where your hubby can promptly get another job, that same future is also likely to be one where retirement funds in general do quite well. So you'll be eating a loss and going without a bunch of future gains. The younger you are, the more true this is -- the money you remove now might be missing out on 35 or 40 years of compounding mostly-gains instead of 10.
It's hard for me to see how that makes more sense than just eating PMI for a few years or taking out an 80/20, in both cases on a house that's maybe smaller or not as desirable as one you might otherwise have gotten.
Your rent will go up over time. Your mortgage will not
Your PITI payments -- principal, interest, taxes, and insurance -- go up over time in fits and starts as tax rates, assessed value, and insurance costs change. Not as fast as rent, but it's a thing.
posted by GCU Sweet and Full of Grace at 8:21 AM on May 28, 2020 [5 favorites]
Your PITI payments -- principal, interest, taxes, and insurance -- go up over time in fits and starts as tax rates, assessed value, and insurance costs change. Not as fast as rent, but it's a thing.
This is a good point. In some places rising property taxes can end up being a major issue for some people.
Also, a lot of house costs are intermittent. You don't need a new roof every year, but if you own your house long enough you will need a new roof at some point. The same is true for furnaces, appliances, carpet, etc. Quite often, people buy houses that have had recent work/upgrades, so while the maintenance costs the first years might be low, with time those bills come due and they can be large.
posted by Dip Flash at 9:01 AM on May 28, 2020 [1 favorite]
This is a good point. In some places rising property taxes can end up being a major issue for some people.
Also, a lot of house costs are intermittent. You don't need a new roof every year, but if you own your house long enough you will need a new roof at some point. The same is true for furnaces, appliances, carpet, etc. Quite often, people buy houses that have had recent work/upgrades, so while the maintenance costs the first years might be low, with time those bills come due and they can be large.
posted by Dip Flash at 9:01 AM on May 28, 2020 [1 favorite]
Have you considered an FHA mortgage? The down payment is significantly lower for those.
posted by mareli at 9:36 AM on May 28, 2020 [1 favorite]
posted by mareli at 9:36 AM on May 28, 2020 [1 favorite]
I did this. In my early 40s to finance an international move with my family. Recklessly, as it turns out, because neither one of us had jobs but I had been assured that my partner or I would surely get a job right away. That was not true, and we ended up using all of that money for a basic living expenses over three or more years.
Twenty years on, it is impossible to regret it because it is a done thing. But I have virtually no retirement savings now; before I had a significant amount. This is one of those cases, as everyone is pointing out, in which your mileage will vary. It might end up being fabulous. It might end up being disastrous. It might end up anywhere along that spectrum. A lot depends upon your tolerance for risk and your age. I will never have an opportunity to make up for that loss. I’m not bitter. I made that decision. I wish I had been more thoughtful and more clear about the actual risks instead of assuming that myself or my partner would be able to get new employment as easily as friends in the new country claimed.
posted by Bella Donna at 9:52 AM on May 28, 2020
Twenty years on, it is impossible to regret it because it is a done thing. But I have virtually no retirement savings now; before I had a significant amount. This is one of those cases, as everyone is pointing out, in which your mileage will vary. It might end up being fabulous. It might end up being disastrous. It might end up anywhere along that spectrum. A lot depends upon your tolerance for risk and your age. I will never have an opportunity to make up for that loss. I’m not bitter. I made that decision. I wish I had been more thoughtful and more clear about the actual risks instead of assuming that myself or my partner would be able to get new employment as easily as friends in the new country claimed.
posted by Bella Donna at 9:52 AM on May 28, 2020
Ordinarily, this is a task that requires both careful calculations and necessarily inaccurate guesses about the future, not to mention trying to price idiosyncratic preferences. It's so subjective that one hesitates to make pronouncements. In this case, though, I'd say that in such an uncertain environment, it would almost certainly be unwise, unless your savings are truly hefty. We don't know what's happening next month, much less next year. Evidently your husband's industry is affected by the pandemic, since he lost one job. Now is not the time for ordinary people without backstops to be rolling the dice.
Note that while I haven't researched it in detail, it seems that this withdrawal will be available for some time yet, in which case I don't know why'd you rush to do it. (On the other hand, it appears that the money can be rolled back in if not used, so your only loss if you don't buy is the loss realized on sale and any failure to participate in market gains in the period your money is out--you don't have to lose the tax advantage. That's from my quick read, though, and I wouldn't base life decisions on it!)
Also, just generally, people telling you that homes are retirement investments are only partially correct. Homes are illiquid investments. You can't sell part of the kitchen to pay for medical expenses. You can only realize any gains on the home by leaving it and, necessarily, finding somewhere else to live. (Or by taking out a very pricey reverse mortgage, but don't do that.) People's brains get so paralyzed by the specter of a historically brief period of huge price run-ups in certain areas that they somehow fail to realize this is not the result for most people, and you can easily find yourself in retirement owning a home but cash-strapped, and, even when you decide to move, not necessarily seeing enough gains to pay for the next stage. This isn't an absolute argument against purchasing a home, but it's best to be realistic about likely outcomes, and "sell twenty years later for a $5m gain on a $150K outlay" is not the normal outcome.
posted by praemunire at 11:34 AM on May 28, 2020 [3 favorites]
Note that while I haven't researched it in detail, it seems that this withdrawal will be available for some time yet, in which case I don't know why'd you rush to do it. (On the other hand, it appears that the money can be rolled back in if not used, so your only loss if you don't buy is the loss realized on sale and any failure to participate in market gains in the period your money is out--you don't have to lose the tax advantage. That's from my quick read, though, and I wouldn't base life decisions on it!)
Also, just generally, people telling you that homes are retirement investments are only partially correct. Homes are illiquid investments. You can't sell part of the kitchen to pay for medical expenses. You can only realize any gains on the home by leaving it and, necessarily, finding somewhere else to live. (Or by taking out a very pricey reverse mortgage, but don't do that.) People's brains get so paralyzed by the specter of a historically brief period of huge price run-ups in certain areas that they somehow fail to realize this is not the result for most people, and you can easily find yourself in retirement owning a home but cash-strapped, and, even when you decide to move, not necessarily seeing enough gains to pay for the next stage. This isn't an absolute argument against purchasing a home, but it's best to be realistic about likely outcomes, and "sell twenty years later for a $5m gain on a $150K outlay" is not the normal outcome.
posted by praemunire at 11:34 AM on May 28, 2020 [3 favorites]
Response by poster: I appreciate all the thoughtful replies!
posted by turtlefu at 1:04 PM on May 28, 2020
posted by turtlefu at 1:04 PM on May 28, 2020
While my wife and I did this, and I would generally recommend it as not the worst idea (punchtothehead's criteria were much the same as ours), there's two big things to consider:
1. As punchtothehead's list referred to, age matters. If you're 30 or below, and can replenish your retirement savings aggressively for a few years post-home purchase, it's a much easier path to yes on that question than if you're 45 or so.
2. The country is headed towards/in a pretty serious economic downturn right now, which, if you have stable employment with a reasonably solid chance of it staying that way, is actually a really good time to invest MORE in your retirement, not less. A hypothetical $500 gets you a lot more hypothetical shares of a hypothetical fund in a hypothetical retirement plan today than it did a year or two ago.
So if there's any other way to fund a down payment, explore that first, but if withdrawing from your retirement is the way forward for you, I wouldn't say that "withdraw it now and stash it in a savings account until you're ready" is the best plan today, because that money could be doing a lot of work for you where it is right now. I don't know if there's a deadline for the CARES Act penalty-free withdrawal, but if there is, I'd wait as long as I could, until the last possible minute, before pulling money out of a retirement account.
posted by pdb at 2:00 PM on May 28, 2020 [1 favorite]
1. As punchtothehead's list referred to, age matters. If you're 30 or below, and can replenish your retirement savings aggressively for a few years post-home purchase, it's a much easier path to yes on that question than if you're 45 or so.
2. The country is headed towards/in a pretty serious economic downturn right now, which, if you have stable employment with a reasonably solid chance of it staying that way, is actually a really good time to invest MORE in your retirement, not less. A hypothetical $500 gets you a lot more hypothetical shares of a hypothetical fund in a hypothetical retirement plan today than it did a year or two ago.
So if there's any other way to fund a down payment, explore that first, but if withdrawing from your retirement is the way forward for you, I wouldn't say that "withdraw it now and stash it in a savings account until you're ready" is the best plan today, because that money could be doing a lot of work for you where it is right now. I don't know if there's a deadline for the CARES Act penalty-free withdrawal, but if there is, I'd wait as long as I could, until the last possible minute, before pulling money out of a retirement account.
posted by pdb at 2:00 PM on May 28, 2020 [1 favorite]
I think this is an insane time to be taking on any extra financial liability. Has there ever been a more uncertain period in history? And one of you already out of work? What if things go the other way, what will you do then?
posted by HotToddy at 2:00 PM on May 28, 2020
posted by HotToddy at 2:00 PM on May 28, 2020
What are your retirement plans, and how will doing this impact on them? I do not want to be 80 and in need of a job because I can't make ends meet and I prioritise retirement investment accordingly. There are scenarios in which this is not a terrible idea, but mainly those scenarios involve having previously aggressively oversaved/invested towards retirement. It's easier to recover your retirement plans when you are younger but the impact of removing money is much bigger since the longer the money is invested the bigger it will grow (all else being equal).
posted by plonkee at 2:33 PM on May 28, 2020 [1 favorite]
posted by plonkee at 2:33 PM on May 28, 2020 [1 favorite]
If you're 30 or below, and can replenish your retirement savings aggressively for a few years post-home purchase, it's a much easier path to yes on that question than if you're 45 or so.
This isn't necessarily a wrong, but it's also a judgment call and the opposite of my take. The opportunity cost of withdrawing funds is higher when you're younger because you're giving up more years of growth.
posted by Tehhund at 9:38 AM on May 29, 2020 [1 favorite]
This isn't necessarily a wrong, but it's also a judgment call and the opposite of my take. The opportunity cost of withdrawing funds is higher when you're younger because you're giving up more years of growth.
posted by Tehhund at 9:38 AM on May 29, 2020 [1 favorite]
This thread is closed to new comments.
Where do you live and what is the cost of
housing there?
How much do you have in retirement funds and how much of that would you withdraw?
How old are you and when do you expect to retire?
What percentage of your income do you currently save for retirement? How would you change this to build your retirement savings back up later?
What is your plan if your husband doesn't find a new job? Say for 5 years? Would you spend the money you withdraw on living expenses and have no down payment and no retirement savings?
posted by medusa at 5:27 AM on May 28, 2020 [6 favorites]