Quote:
Originally Posted by wcc
Bad info. I don't know about that completely. But you can do a ONE time withdrawl for a house/business/school without penelty. Bad info? I don't know exactly, so I'd have to check it out to make sure. But I heard so.
I do know this though. If you HAVE to borrow against your 401k plan for something DO NOT BUY IT! That is the worst advice I've heard of. Save your money and pay for it in full, that's the best. If not, save your money and pay a large amount down then get a loan for the remainder and pay if off early if you have to.
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I guarantee when the time comes to buy a home I will be looking at doing exactly this. I see nothing wrong with it. The money in my 401k is MY money, not the government's money. Why shouldn't I tap it for something that will benefit me? It gets paid back over time (still tax-free) anyway.
You guys say "oh, just save up for a down payment" like it's nothing. Have you looked at the price of housing relative to income lately? I don't know if you guys are all multi-millionaires or what, but I'm not and as such, I need to consider (and use, where applicable) all tools at my disposal to get ahead in this world. I guess it'd be nice if I'd been born with a trust fund or whatever like some of you evidently were, but barring that I think it's only smart to at least explore the possibilities of tapping resources and making your money work for you, instead of sitting in some account working for a fund manager who's getting rich off it until I'm old, gray and miserable.
The amount necessary for a "decent" down payment is $50k-$100k these days. If you live like a pauper, max out your 401k, put the recommended amounts into savings and investments, etc. it typically leaves very little, if anything afterwards. And if you have kids, forget about it unless you're in the top 2% of wage earners in America. I'm talking about reality here for the majority of the population.
How much do you think an average 2-earner household that makes decent (but not exceptional) money, lives fairly modestly and makes all the recommended contributions to 401k/IRA, savings, investments, etc. can realistically save for a down payment - after taxes? No credit cards, no car payments, etc. Maybe somewhere on the order of $500 a month? $750 a month if they're lucky? Let's assume they can save $750 a month. That's $9,000 a year. That means a MINIMUM of five or six years to save up just for a down payment. Minimum. Any "less-than-ideal" factors will lengthen this time period.
Tell me why it's a good idea to automatically exclude low-or-no-interest borrowing against one's 401k again?