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Do you think using your IRA money towards a downpayment is smart?(homebuying)

We have the money saved for our down payment already and continue to save as much as possible. My husband recently read if your a first time home buyer you can take up to 10k from your IRA. Penalty free. It sounds good to be true to me. He doesnt have much in there really about 6k. Having that extra money would mean the money saved can go towards fixing up the property. New carpet, a fridge, etc.

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Asked by goodfriendeva at 8:00 PM on Jan. 24, 2011 in Money & Work

Level 7 (189 Credits)
Answers (10)
  • I would keep it in the IRA, but that's just me.

    Answer by 2BlondeBabies at 8:02 PM on Jan. 24, 2011

  • I think its a smart idea, but I think it's something you'd have to pay back over time. I'm not sure, but me, I think I'd be making it a home in the process so the extra money would help.

    Answer by Imortlmommy at 8:05 PM on Jan. 24, 2011

  • We used part of DH's Simple IRA towards the downpayment of our house. However, there are payback requirements and a time frame that we had to obide by. It depends on the IRA, the company it goes through, and what you're using it for. You should really check with the company he has his IRA through before believing in what you've read elsewhere. If it really is penlty free it might be worth it, but I think it should stay for retirement.

    Answer by JazzlikeMraz at 8:14 PM on Jan. 24, 2011

  • I think it's a bad idea.
    First of all, if you pull out when the market is down it's not 'penalty free.'
    2nd there are usually clauses in it- like if you sell the home you have to pay it back. Well what happens if you sell the home when the market is down and you don't get that money back?
    And finally- you're essentially pulling from your retirement so that you can re-carpet your home. Bad ida.

    Answer by Erica_Smerica at 12:49 AM on Jan. 25, 2011

  • Actually I did that because I did not have quite enough for the down payment at the time (25 years ago) and I did have to pay a penalty then. I guess for me I don't regret it since it was the only way to get the house at the time. Taking a couple of thousand from my IRA and paying it back probably did impact my retirement a little but now that I am almost at that point I don't think it would have made that much difference in what I have now. I don't think it is a good idea though if you only need the money for extras like new carpet but if it means the difference between being able to buy or not like it did for me then it may be more worth it.

    Answer by confused969 at 1:26 AM on Jan. 25, 2011

  • It's a terrible idea. You should NOT tap into your IRA for a house. For a true emergency, yes, but for a house, absolutely not.

    Answer by Anonymous at 6:51 AM on Jan. 25, 2011

  • Bad idea! There are still rules and payback requirements. Plus you are losing time in the IRA and time = $$.
    I wouldn't do that, I would start saving money now for a down payment that is completely separate from your retirement savings. Also if you close out your retirement account to use that money, you will likely put off saving again for many years because now you are going to have house stuff that you will need the money for....repairs, new furniture, etc. Bad idea!

    Answer by slw123 at 1:04 PM on Jan. 25, 2011

  • Don't do it. That IRA is there to save for your retirement. Any money you take out of there you're taking from your retirement.

    Answer by HotMama330 at 2:02 PM on Jan. 25, 2011

  • I wouldn't do it.

    Answer by Snewo at 2:14 PM on Jan. 25, 2011

  • I agree that it's a bad idea.

    Answer by Christina807 at 2:36 PM on Jan. 25, 2011

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