Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
So,
we are looking at our future and have decided we will retire in Arizona or Nevada. We currently live in upstate NY, so we will need to purchase a home for retirement. We have a figure of $200,000 -$250,000 that we plan on spending on a home. We are looking for opinions...... do we draw $100,000/$150,000 plus($100,000 cash from sale of our current house) out of our Roth 401k to purchase or do we take out a 15 year mortgage (putting down 50%). It would be great not to have a mortgage, but would love to not have to take a large sum out of our 401k.
Quote:
Originally Posted by jghorton
Have you considered that in order to net $100K to $150K toward a house out of your 401K, you will need to withdraw $130K to $200K before taxes,....
There's no reason to consider it because there are no taxes to be paid.
So,
we are looking at our future and have decided we will retire in Arizona or Nevada. We currently live in upstate NY, so we will need to purchase a home for retirement. We have a figure of $200,000 -$250,000 that we plan on spending on a home. We are looking for opinions...... do we draw $100,000/$150,000 plus($100,000 cash from sale of our current house) out of our Roth 401k to purchase or do we take out a 15 year mortgage (putting down 50%). It would be great not to have a mortgage, but would love to not have to take a large sum out of our 401k.
To begin with, we will have income of $4,800 per month plus our 401k. We will then have a small IRA four years later.(59 1/2) At age 60, we will add an additional $1,000 per month. (this would be five years into the mortgage). Two years later we will add an additional $2,800. per month (SS).....so, do we keep our 401k and get a mortgage or tap the 401k and pay cash?
As you have seen in the threads a lot of people say it is not wise to pull from your 401k. jghorton explains it best because that is the biggest reason not to. It will hurt much more than it even appears on first glance as well. I just saw that it is a Roth that you will draw from. It makes a difference but I still advise against it. Even though there are no taxes on the money you would be loosing potential long term gains that should be providing income to you in the future. Your home could do that but it's real value (home) is living in. If you have other sources of income ie a pension or two that have COLA provisions that might sway me into thinking that your choice would be okay. If your only retirement income will come from SS and your 401k than that would be a red flag.
So that being said many people are in similar situations. The easiest way to deal with it is to rent for the first few months or even a year in your new location. While that might seem like throwing good money away think on this. First it will give you time to find just the right house. Your first choice might not be your best. That is why when people move in retirement they could end up in a place where the grass isn't as green as they like (metaphor). Two it allows for the general sale to go on your previous house with fewer restrictions for yourself. It is much easier to find a place to live in if you are renting because even if the housing market is tight you could even rent a hotel room or an extended stay suite. You can rent a pod to put household goods and store them. The pod then can be delivered to your new home at your convenience.
My wife and I are in similar situation and thoughts. I am retired and my wife will soon be (2 years max I think). In 5 years from now we are planning on selling this overly large house (2400+ sf) for something a bit smaller. Our plan so far and it is subject to change is to sell the house and travel abroad to Korea (wife's original home) and spend time there with family and travel the Asian theater and countries north and south of the equator in that area. During that time we might come back to see if there is a place we want to move to. We have many thoughts but mostly we just don't really know if we want a house or to rent or lease a condo or a townhouse. Having made the sale of our home and banking the proceeds we will be in position to do anything quickly.
Long winded explanation but I hope you got some good pointers in there.
Last edited by oldsoldier1976; 08-31-2016 at 05:38 AM..
Reason: Missed that it is Roth
We won't be tapping our retirement, downsizing means the cash for the new house will come from the sale of our current home.. But I don't really have a desire for another mortgage. I'm not sure the interest would be enough to get past the standard deduction figure and any money saved and invested will obviously have a tax event on those investment returns. Sure my returns after taxes could be higher than the mortgage interest rate. But what happens when the market returns are similar to those starting in the year 2000?
Nope free and clear, after 6 months of renting in the new area, is our plan and I doubt that will change.
DH and I are just retired and will be buying our retirement home with cash, no mortgage. We like to be free and clear too! We won't be taking anything from our retirement accounts to do it. We'll take the money from the sale of our home and add some from our liquid savings to buy. We should be more than fine and will certainly sleep well at night.
Everyone's situation is different. We've found that this is the best thing for us to do. We will have 401K, pension with health care, rental income from other properties we own, enough in liquid savings for emergencies and SS in a few years.
A lot of great thoughts. ...thank you all for you opinions and ideas. We are leaning towards Arizona...we have vacationed there for the last 14 years and absolutely love it there. The only fly in the ointment there is that pension would be taxed state wise....as opposed to Nevada not doing so. (Chose these two places because they carry similar landscape /weather)
To begin with, we will have income of $4,800 per month plus our 401k.
We will then have a small IRA four years later.(59 1/2)
At age 60, we will add an additional $1,000 per month. (this would be five years into the mortgage).
Two years later we will add an additional $2,800. per month (SS).....so, do we keep our 401k and get a mortgage or tap the 401k and pay cash?
You're going to retire at 55 and start drawing from all these various funds ??
You're going to take SocSec at 62 ??
In My Opinion, I would re-think the timing of this whole thing. You're leaving a lot of money on the table by taking SocSec early. And you're tapping the funds early, too. Where is the base income of $4800 per month coming from ?? Pension ?? How much is in the retirement accounts ?? Enough to last 35 years ??
A Mortgage only helps you to the extent that you can deduct the Interest. On a 15 year note, you're going to get beyond that point rather quickly, and end up paying it off early anyway.
How much is the state tax on pension in Arizona ?? Don't let a few hundred dollars tax make your decision for you.
Last edited by FiveLoaves; 08-31-2016 at 07:35 AM..
We plan on selling our house next spring when I take early retirement. The next house we buy, probably in Nevada, will be for cash. We will have enough proceeds from the sale to cover the cost of the new house, the move, some new furniture, and whatever minor improvements we want to make.
We could afford a small mortgage but if it's not necessary, I'd rather not have one.
In today’s interest rate environment this is a no-brainer. You can use OP (other people’s money) at a cost of well below 4%. Then reduce the rate by 25% for the tax advantage and you get closer to the ‘real’ cost of borrowing. I would offer a mortgage* with 20% down and take a loan for the rest, take my own cash and put it in a conservative investment which should easily beat the cost of the home loan.
*for the record, homeowners do not ‘get’ a mortgage, they ‘give’ a mortgage to the bank in exchange for receiving money. Most discussions confuse the mortgage with the loan. They are 2 separate items.
Going to buy my house with cash, but from the sale of my house i have now. (downsizing)
You can Google the benefits of buying with cash - getting a better deal (seller knows they dont have to wait for you to be approved, wait for loan, etc.), and saving on many of the closing costs.
I dont want a mortgage in my retirement. You have to weigh the options, and everyone's opinions.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
