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My husband and I are in a situation where we need to sell our home in one state so that we may purchase our new home in the state he has relocated to. Our home has been on the market for almost 2 months and isn't selling, possibly because we are on a shared driveway. He is at his new job, in a new state, paying rent for an apartment until we sell our home and move there for good. Our children would be starting school in our new home in about 1 month. We are very anxious to move to our new home, get settled and move in time for the start of the school year. Anyway, we are considering taking money from his 401K (to cover our loss) so that we may lower the price on our current home even more, in hopes of a sale. Does this make any sense? We were told the tax on the money from the 401K would be about 36%. It has been very stressful on our family both emotionally and economically. We live in an area where new homes are going up quickly and builders are undercutting the resales. They are even offering incentives such as free upgrades worth thousands and free plasma big screens. If there is anyone who can explain the implications of taking the money from the 401K, we would really like to hear from you.
Withdrawals from tax deferred retirement will be taxed as ordinary income and are also subject to a 10% penalty if you are under 59.5. I would not recommend raiding the retirement funds except as a last resort.
The current market can be difficult to sell into so I would look at all options to allow time on the market (it took me six months to sell at a fair price in a decent market).
ditto ditto ditto cdelena...if money is that tight, maybe you need to consider buying a less expensive house. Don't raid your retirement funds...the penalty is stiff and the money is for your retirement.
no no no ... NEVER take the 401K moola out! You will be taxed and penalized as the first poster responded already! If you were a first time homebuyer, you could use the money for a down payment but still, I would only do that as a last resort!
Since you are pulling equity out in the sale, isn't the more reasonable approach a more modest living arrangement in your new area until you become better financially established?
Since you are pulling equity out in the sale, isn't the more reasonable approach a more modest living arrangement in your new area until you become better financially established?
I definitely agree with your statement but when there are kids in the pictures, it's a different story. Children need stability and moving around will only cause the family added stress, IMO.
If you were a first time homebuyer, you could use the money for a down payment but still, I would only do that as a last resort!
No, being a 1st time home buyer does not mean you can take money out from the 401K to avoid penalties. You CANNOT do it. If it is an IRA, then yes, but not a 401K.
Many banks will allow you to take a bridge loan until your old house sells. I would talk with your banker and explore those options first. You might also be able to take a home equity loan out until your old house sells.
No, being a 1st time home buyer does not mean you can take money out from the 401K to avoid penalties. You CANNOT do it. If it is an IRA, then yes, but not a 401K.
I stand corrected!
I thought you could use your 401K or IRA. The things we learn on CD!
Some 401k plans allow for loans, check into that maybe.
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