Married Couples Can Borrow From Retirement Funds to Buy a New Home
Money isn’t everything. There should be more to life than the acquisition of money. But when it comes to paying bills, money is everything.
I got married too young in life.
We stayed together for about 7 years and we always struggled financially.
And we never owned a home. That was one thing that was always wanted to do, but never accomplished.
It’s too easy to complain that we didn’t have enough money back then when we were young and struggling.
I was financially illiterate. Also, I never took the time to learn how finances and consumer tax breaks work.
Especially in the world of real estate and government finance relief.
If I only knew then what I know now. Home prices are more affordable now than they have been in a decade.
If you are employed, or have ample savings, and a retirement account, there are opportunities available that can help enable home ownership.
Retirement Funds as Home Ownership Tool
Do you or your spouse have a retirement account like an IRA or 401(k)?
If you do, you can borrow up to $10,000 against it build, rebuild, or buy a new home.
Ideally, you can borrow $10,000 against your retirement account to pay for a down payment on a new home.
As long as you’re withdrawing against the account to pay for a home, early withdrawal penalties will be waived.
For example, if you withdraw from a retirement fund before age 59 ½, then you can suffer a 10% penalty. That penalty would be waived.
If you withdraw from a Roth IRA, you won’t have to pay taxes on any withdrawals.
Because of the loan and payment forbearance relief initiatives recently enacted by the CARES Act, repayment terms can be extended.
To qualify, you and your spouse cannot have owned a home within the past 24 months. Additionally, you should be employed.
If you lose your job, you’ll have to pay back the loan, tax penalties, and early withdrawal penalties by your next tax return deadline.
If you own a 401(k), and you or your spouse contracted COVID-19, you may be able to withdraw up to $100,000. You’ll also be granted extensions to pay it back.
Talk to your retirement plan administrator for more information.
If you want to own a home, even these hard times, you have options.
I wish I knew this when I was young and married.
Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.