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You are here: Experts > Business > Corporate Law > Tax Law (Questions About Taxes) > Roll 401K $ to IRA for first time home buyer
Expert: John L. Tidwell
Date: 8/25/2008
Subject: Roll 401K $ to IRA for first time home buyer
Question
My husband and I would like to buy our first house. I am 25 and he is 28. I have a 401K with just over $7K in it. My husband has an additional $10K+ in teacher retirement. I am planning on a career change to teaching in the next few months so I will also have teacher retirement. If I roll my 401K into an IRA (which I don't have at the moment) will I be able to avoid the penalty if I take money out for the house? We are planning to buy in January- does the money have to sit for a certain time period or could we pull it out after the first of the year? We do have some additional $ in savings but we'd like to keep it there as an emergency fund b/c our son has some medical issues.
Thanks!
Answer
J
It is my recommendation to leave the retirement money in place. Never use it to purchase a house or for anything. That said, you can borrow some of your money out of a 401k to purchase a home only if the plan will allow you to do so. Your plan may not allow you to do so. IRA's and 401K's are not a piggy bank that you can use when ever you choose to use it. It is in fact a pre-tax retirement account that allow you to take money from your pay check an save before your income tax is calculated. One should ignore it as a debt financing tool.
John
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