How to Use Retirement Funds to Buy a House

You can use your retirement funds to purchase a home.

While the ultimate goal of building a retirement fund is to create a comfortable retirement, there are times when investors need to withdraw money for other worthy purposes. If you need to tap the money you have saved in your retirement fund to purchase a home, you can do so. Even so, you need to follow the proper procedures to reduce your tax bill and minimize the impact on your eventual retirement.

Things You'll Need

• Retirement fund statement
• Bank account

Instructions

1. Determine how much money you need to finance the purchase of the home. If mortgage rates are near historic lows, it might make sense to use the retirement fund to finance just the down payment, but if rates are higher it might be best to pay off as much of the home as possible to avoid those hefty interest charges.

2. Review your most recent retirement plan statement to determine how much you have available in your retirement fund. Keep in mind that the exact amount in your account today might be more or less, depending on how well or how poorly the market has done in the meantime. For a more up to date balance you can check your account online or over the telephone using the instructions on your monthly or quarterly statement.

3. Inform the custodian of your retirement account that you wish to tap the funds in the plan for the purchase of a home. The custodian should be able to inform you if the withdrawal will result in any additional taxes, but you also may be advised to discuss your plans with a CPA or tax accountant.

4. Complete any necessary paperwork to start the withdrawal process. Be sure to fill out the application completely, including the account number, your Social Security number and your address.

5. Indicate how you wish to receive the money. Depending on the plan, you might be able to have the funds transferred directly to your bank account. Otherwise, you can request a check and deposit the funds in the bank account you plan to use to purchase the home or make the down payment.

References

• Forbes Magazine: Tapping Retirement Funds to Buy a Home