Stupid me emptied my 401k to buy a house at 42

[Anonymous]

Last year, Stupid me emptied my 401k to buy a house at 42. I just got tired of waiting and home prices just kept going up while rates still remained high.

I bought a $700k house and put 45% down $315,000 and with fees I put $350k. After paying taxes and penalties etc my $401 balance is down to $50k. I don't have an IRA account either.

1 year later, mortgage is reasonable, living expenses and maintenance costs are reasonable as well and built my savings to 20k in 1 year.

Now I am starting retirement planning over. I just contributed the max to Roth.

Anyone else raided their 401k? Do you regret it? Or did it turn out to be a good decision?

I don't plan to retire at 50 like most people here..as long as someone wants my services I am going to work until at least 65.

[Anonymous]

You may not planning on retiring at 50 something, but you may be forced to. Lots of 50s something getting laid off then can't find another job that pays even close to what they were making.

I suppose you could always sell your house if you need the $$ later.

[Anonymous]

Yikes.

[Anonymous]

Why did you do that? Sounds impulsive. just don’t add to it by deciding you need to sell the house because you don’t like the neighborhood or whatever. what is done is done and now you need to get the most out of that investment by staying put for the long term and doing just the bare minimum in home maintenance to ensure nothing falls apart - ie no kitchen renovation; no expensive landscaping.

[Anonymous]

Anonymous wrote:You may not planning on retiring at 50 something, but you may be forced to. Lots of 50s something getting laid off then can't find another job that pays even close to what they were making.

I suppose you could always sell your house if you need the $$ later.

The United States cannot afford a bunch of 50 years old forced into a retirement. The impact on growth will be massive.

[Anonymous]

Yeah dumb move. Like really dumb. Why did you feel the need to take all the money and put that much down?!

[Anonymous]

Anonymous wrote:

Anonymous wrote:You may not planning on retiring at 50 something, but you may be forced to. Lots of 50s something getting laid off then can't find another job that pays even close to what they were making.

I suppose you could always sell your house if you need the $$ later.

The United States cannot afford a bunch of 50 years old forced into a retirement. The impact on growth will be massive.

Tell that to DOGE.

[Anonymous]

You should have put down only 20% to avoid paying taxes on the retirement liquidation. You could always liquidate more later if necessary.

Plus a larger mortgage gives you a larger tax deduction. The after-tax mortgage rate is around 4%. Surely you can beat that with your retirement investments.

[Anonymous]

Anonymous wrote:Why did you do that? Sounds impulsive. just don’t add to it by deciding you need to sell the house because you don’t like the neighborhood or whatever. what is done is done and now you need to get the most out of that investment by staying put for the long term and doing just the bare minimum in home maintenance to ensure nothing falls apart - ie no kitchen renovation; no expensive landscaping.

OP here. It wasn't impulsive. I like the house and the neighborhood. I will only sell and move if I am laid off and cannot find a job within a 1h30 mins commute under heavy traffic

[Anonymous]

Dumb

[Anonymous]

You will be fine. Not the end of the world. You put 40% down.

It's okay. Just save and avoid unnecessary expenses.

You will social security and perhaps a small inheritance.

Nowadays everyone is all doom and gloom.

We bought in 2020 and have a 2.6% interest rate. I think it's very easy for people who bought houses when rates were cheap and/or houses were cheap. These people sit in their chairs with popcorns and scorn people like you. We have friends who have been priced out and are renting crappy places for insane money. Frankly many of us don't understand the situation that a lot of folks like you are under.

[Anonymous]

I get it, OP. At 42, you want to live your freaking life. And your house may appreciate more than the 401k anyway, even with the tax penalities factored in. Max out retirement moving forward, you'll be okay.

[Anonymous]

I think most people take a loan against their 401k rather than liquidating it.

[Anonymous]

It's not that dumb. You will always need somewhere to live, and you've prioritized home ownership which is fine. We have a friend who did this to buy a house (similar age) in the outer banks which we thought was questionable, but he really loves it there. Turns out he gained enough in value even if it's not quite as much as if he had left the money. Now he has some health issues and is happy he's already had years to enjoy it.

[Anonymous]

As long as you know you made a poor mathematical decision, it is all good.