Would you this?

[Anonymous]

I was laid off from my job last month and miraculously found a better paying job 2 weeks later.

So, I want to buy a house. I have $100k and need $200k for down payment. I had a small pension from my old job and after doing the math I am better off taking the lump sum. The lump sum is about $200k and If I transfer it to retirement account I'll avoid taxes.

I am thinking of transferring $80k to my IRA and taking $120k in cash. With the $120k, I can use $100k and use it toward the down payment and have $200k.

Would you do it? I am 44 years old.

[Anonymous]

How much do you have in savings/investments outside your retirement accounts? How much have you saved for retirement?

Homes are money pits. There’s always something that needs fixing or maintaining. Also, last week’s employment data were bad. Times like this, you want to have a bigger than normal emergency fund.

Finally, are you buying a $1M house? Is there nothing cheaper that would work?

[Anonymous]

Anonymous wrote:How much do you have in savings/investments outside your retirement accounts? How much have you saved for retirement?

Homes are money pits. There’s always something that needs fixing or maintaining. Also, last week’s employment data were bad. Times like this, you want to have a bigger than normal emergency fund.

Finally, are you buying a $1M house? Is there nothing cheaper that would work?

OP here. I want to buy a house around $700k. I want to put down as much as possible to have lower mortgage payments. I have $50k emergency savings. For retirement I have about $620k saved.

[Anonymous]

I see housing as a shelter and not investment. Buy the cheapest, smallest house in the best neighborhood you can afford.

So I would do it. You are 44 not 54. Assuming you retire at 65, you have 20 years of investment growth.

The fact that you found a job so soon after you were laid off and in your 40s work in your favor.

[Anonymous]

Do the math on this before moving into the qualitative aspect. Two (of possibly many) scenarios:

1) You put the 200k into retirement tax free. This grows at Y rate (typically around 10% for long periods of time). You pay taxes on withdrawals when your retire.

You put 70k (10%) down payment on the house, pay Z interest rate (which may be tax deductible based on your tax situtation), possibly PMI for a certain number of years.

2) You put 80k into retirement (invested at Y rate as above), take the 120k towards downpayment, and pay taxes immediately on the 120k, likely at a high marginal tax rate.

You pay a lower interest rate than Z (~1%? its typically not as large a difference as one might expect) on a lower principal, no PMI.

Now, check the above scenarios at various time horizons: 5, years, 10 years, 15 years, 20 years, 25 years, 30 years. 20 years is likely the most telling as I assume that is around your target retirement, but I would choose your retirement date as the best data point. 30 years could be useful based on a 3o year mortgage, but seems unlikely you would live there until age 74.

I would be beyond shocked if putting it all into your IRA wasn't the financial prudent thing to do. The only reason I would consider not doing it would be if you think you are already completely set for retirement (doesn't seem likely on 620k at 44 years old. You are already IMO at an excellent place to be at your age whatever DCUM tells you, but its not so much that you can ignore the overall implications of this transaction).

Also for completeness, have you considered just keeping the pension? I bet you are actually making the better move by moving it to your IRA as inflation will likely eviscerate its value, but something to consider. There are various NPV value calculators of pensions you can use discounted for the time until you retire that you can compare with the 200k payout.

If you have specific scenarios you want run and need help, I'd be happy to help with the math if you are having trouble.

[Anonymous]

Anonymous wrote:Do the math on this before moving into the qualitative aspect. Two (of possibly many) scenarios:

1) You put the 200k into retirement tax free. This grows at Y rate (typically around 10% for long periods of time). You pay taxes on withdrawals when your retire.

You put 70k (10%) down payment on the house, pay Z interest rate (which may be tax deductible based on your tax situtation), possibly PMI for a certain number of years.

2) You put 80k into retirement (invested at Y rate as above), take the 120k towards downpayment, and pay taxes immediately on the 120k, likely at a high marginal tax rate.

You pay a lower interest rate than Z (~1%? its typically not as large a difference as one might expect) on a lower principal, no PMI.

Now, check the above scenarios at various time horizons: 5, years, 10 years, 15 years, 20 years, 25 years, 30 years. 20 years is likely the most telling as I assume that is around your target retirement, but I would choose your retirement date as the best data point. 30 years could be useful based on a 3o year mortgage, but seems unlikely you would live there until age 74.

I would be beyond shocked if putting it all into your IRA wasn't the financial prudent thing to do. The only reason I would consider not doing it would be if you think you are already completely set for retirement (doesn't seem likely on 620k at 44 years old. You are already IMO at an excellent place to be at your age whatever DCUM tells you, but its not so much that you can ignore the overall implications of this transaction).

Also for completeness, have you considered just keeping the pension? I bet you are actually making the better move by moving it to your IRA as inflation will likely eviscerate its value, but something to consider. There are various NPV value calculators of pensions you can use discounted for the time until you retire that you can compare with the 200k payout.

If you have specific scenarios you want run and need help, I'd be happy to help with the math if you are having trouble.

I wonder if a 44 years with $600k retirement isn't in the top 20% of retirement savers

[Anonymous]

Paying off your house is not the wisest investment it is often touted as.

[Anonymous]

I don't know who was the idiot who came up with the 30 years mortgage but he did this country a big disservice because a lot of Americans actually think that it's okay to keep paying someone interest for 20 to 30 years

So put as much as you can as down payment to minimize your mortgage cost. I have been through periods of unemployment and the fact that I have a very low mortgage made living for short periods of time without a paycheck far less stressful.

[Anonymous]

Anonymous wrote:

Anonymous wrote:How much do you have in savings/investments outside your retirement accounts? How much have you saved for retirement?

Homes are money pits. There’s always something that needs fixing or maintaining. Also, last week’s employment data were bad. Times like this, you want to have a bigger than normal emergency fund.

Finally, are you buying a $1M house? Is there nothing cheaper that would work?

OP here. I want to buy a house around $700k. I want to put down as much as possible to have lower mortgage payments. I have $50k emergency savings. For retirement I have about $620k saved.

PP here. What is your HHI and what would your mortgage be? I actually think it’s not an unreasonable move but would consider rolling over less into the IRA in order to have more non-retirement savings. Economic uncertainty is rising, and especially with higher house related costs, you’re going to want a bigger emergency fund outside of the IRA. With some companies, it’s last in, first out. So, good to be prudent.

[Anonymous]

Anonymous wrote:I don't know who was the idiot who came up with the 30 years mortgage but he did this country a big disservice because a lot of Americans actually think that it's okay to keep paying someone interest for 20 to 30 years

So put as much as you can as down payment to minimize your mortgage cost. I have been through periods of unemployment and the fact that I have a very low mortgage made living for short periods of time without a paycheck far less stressful.

Hard disagree. My original 30 year 4% mortgage and refinanced 30 year 2.875% mortgage (both of which are tax advantaged) have been far outpaced wage growth and, more importantly stock market growth. Also the 30 year lower cost per month makes it easier for me to weather the hard times when my costs are high (i.e. kids) versus scaling back to pay off my mortgage for no great discernable benefit.

That being said with current mortgage rates its not quite as easy a calculus, but I personally would take a 30 year, tax advantaged ~7% over paying extra on the downpayment and doing a 15 year ~6.25%. Also, I can certainly appreciate the overall point of the "easy" money allows people to overspend on houses and be stuck.

[Anonymous]

Anonymous wrote:I was laid off from my job last month and miraculously found a better paying job 2 weeks later.

So, I want to buy a house. I have $100k and need $200k for down payment. I had a small pension from my old job and after doing the math I am better off taking the lump sum. The lump sum is about $200k and If I transfer it to retirement account I'll avoid taxes.

I am thinking of transferring $80k to my IRA and taking $120k in cash. With the $120k, I can use $100k and use it toward the down payment and have $200k.

Would you do it? I am 44 years old.

Ask a mortgage lender or broker for advice as you may encounter a problem regarding employment for only a few weeks with your new employer.

If you qualify for a mortgage, then it is really more of a personal preference based on one's overall living & financial situation as well as one's psychological comfort level with debt.

[Anonymous]

I would not pay tax penalties to get a lower down payment

[Anonymous]

Anonymous wrote:I see housing as a shelter and not investment. Buy the cheapest, smallest house in the best neighborhood you can afford.

So I would do it. You are 44 not 54. Assuming you retire at 65, you have 20 years of investment growth.

The fact that you found a job so soon after you were laid off and in your 40s work in your favor.

I like this outlook too. A home is a big deal and feels great. You have other savings. Do it and refinance if rates drop, 15 yr would be awesome.

[Anonymous]

Hard no. You are thinking with your heart, not head and your math is way off.
You have already done something wrong for 24 years. You should have a lot more money. Why continue with bad money decisions.
You have no idea what you are giving up if you buy this house. Well, that's why it seems a good deal to you.

[Anonymous]

mmmm NO.