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

[Anonymous]

OP, what's done is done. Stop questioning your decision. And the pile on from people is pointless too. Just resume saving for retirement and enjoy your house. You
Have time the build your 401K back up.

[Anonymous]

Anonymous wrote: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.

In 1995, I cashed out my 401k to make a down payment on a townhouse. It was $122,000 and as I recall the mortgage was 8%. The townhouse is now a rental and paid off. The county assesses it for a ridiculous $450,000. As I recall the down payment was $7,000 and at 6% returns that would be $40,000ish today. So, I think that worked out.

That's not usually true for real estate but NoVA doesn't follow the general rules of real estate.

[Anonymous]

Anonymous wrote:

Anonymous wrote: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.

In 1995, I cashed out my 401k to make a down payment on a townhouse. It was $122,000 and as I recall the mortgage was 8%. The townhouse is now a rental and paid off. The county assesses it for a ridiculous $450,000. As I recall the down payment was $7,000 and at 6% returns that would be $40,000ish today. So, I think that worked out.

That's not usually true for real estate but NoVA doesn't follow the general rules of real estate.

Umm…your math isn’t mathing.

[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.

yup, I got laid off at 52, 10 years ago. Ending up in a job that paid only 60% of what I had made as I went from high-level back to mid-level job, and felt lucky to find even that as I had been in a niche science career. I actually just retired and never made as much as I used to.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote: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.

In 1995, I cashed out my 401k to make a down payment on a townhouse. It was $122,000 and as I recall the mortgage was 8%. The townhouse is now a rental and paid off. The county assesses it for a ridiculous $450,000. As I recall the down payment was $7,000 and at 6% returns that would be $40,000ish today. So, I think that worked out.

That's not usually true for real estate but NoVA doesn't follow the general rules of real estate.

Umm…your math isn’t mathing.

Yes, you have to ignore some mortgage interest. That's hard to calculate because I refinanced to a shorter 20-year loan after the rates dropped, and you can deduct it from your taxes (which isn't a 100% rebate, just a lower tax rate.) The real estate market is this area is crazy. Anywhere else, and I don't think it works out as well.

[Anonymous]

You’re fine. People on DCUM are so risk averse it’s a wonder any of these people manage to get out of bed.

[Anonymous]

Anonymous wrote:

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

Really? I don’t see the problem. Not everyone lives their lives the same way. He wanted to own a home he bought a home. He shouldn’t have to live in fear of what might happen in 25 years.

He didn’t have to put 45% down. He is missing out on a lot of future growth. A doubling on average every 7-10 years.

+1

That rarely happens with a house, but routinely does with the market.

Yes you can live however you want. Most Americans do that, and are in financial trouble, with a very low networth, no Emergency fund and in trouble financially. Doesn't make it right

A lot of people double their down payment in 7 years. I put down 20% for a 1.3M house that is worth $1.7 in just five years. And that money is tax free unlike 401K money.

Huh? It’s not tax free.

There is an amount ($250,000 for a single flier/ $500,000 tax free gain for those who file jointly) of gain in one's primary residence that is tax free. Must be one's primary residence for at least 2 of the past 5 years when the sale occurs.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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

Really? I don’t see the problem. Not everyone lives their lives the same way. He wanted to own a home he bought a home. He shouldn’t have to live in fear of what might happen in 25 years.

He didn’t have to put 45% down. He is missing out on a lot of future growth. A doubling on average every 7-10 years.

+1

That rarely happens with a house, but routinely does with the market.

Yes you can live however you want. Most Americans do that, and are in financial trouble, with a very low networth, no Emergency fund and in trouble financially. Doesn't make it right

A lot of people double their down payment in 7 years. I put down 20% for a 1.3M house that is worth $1.7 in just five years. And that money is tax free unlike 401K money.

Huh? It’s not tax free.

There is an amount ($250,000 for a single flier/ $500,000 tax free gain for those who file jointly) of gain in one's primary residence that is tax free. Must be one's primary residence for at least 2 of the past 5 years when the sale occurs.

But you pay property tax …. And of course the point of 401ks is that they grow on pre-tax income unlike the home purchase. homes are extremely expensive investments.

[Anonymous]

Anonymous wrote:I think the bottom line is the OP bought a house she can't really afford. She decimated her retirement savings to purchase it and put too much down on it.

You may want to work forever, but as others have said that may not be an option due to an unexpected decline in health, layoff, etc.

If was OP, I would be working to aggressively save and bring in more money NOW. Since you bought a $700K house, I'm assuming it's more than one bedroom. I would take on a roommate to make extra money, see about getting a second job in retail or something on the weekends, and max out 401K, do an IRA, and also contribute to an after-tax investment account. You have a lot a catching up to do with your retirement account.

And, most importantly do NOT start spending even more money on the house (furniture, upgrades, renos), except for required maintenance.

Lol OP is 42. OP is fine folks.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I think the bottom line is the OP bought a house she can't really afford. She decimated her retirement savings to purchase it and put too much down on it.

You may want to work forever, but as others have said that may not be an option due to an unexpected decline in health, layoff, etc.

If was OP, I would be working to aggressively save and bring in more money NOW. Since you bought a $700K house, I'm assuming it's more than one bedroom. I would take on a roommate to make extra money, see about getting a second job in retail or something on the weekends, and max out 401K, do an IRA, and also contribute to an after-tax investment account. You have a lot a catching up to do with your retirement account.

And, most importantly do NOT start spending even more money on the house (furniture, upgrades, renos), except for required maintenance.

Lol OP is 42. OP is fine folks.

Op has zero savings and like others have pointed out, job security isn’t guaranteed through your 60s. for better or for worse OP is now heavily invested in an asset that is very expensive (a house paid for with an expensive source of capital - withdrawing the 401k and paying taxes/penalties) instead of an asset that is cheap (stock indices). It was a very very stupid financial move. So yes, OP needs to carefully budget to ensure money is going back into the 401k and also take care to make sure their career is on track and that they are in a good position to work through their mid/late 60s. Possibly look for a job transition that increases earning potential. If all goes well, yes, OP has 25 more years to work and save and should be ok. But if OP continues to be a financial idiot then no. Check in here in 20 years to hear all about how OP has a giant second mortgage on the home because they felt entitled to use the equity on a kitchen reno and dream vacations …

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I think the bottom line is the OP bought a house she can't really afford. She decimated her retirement savings to purchase it and put too much down on it.

You may want to work forever, but as others have said that may not be an option due to an unexpected decline in health, layoff, etc.

If was OP, I would be working to aggressively save and bring in more money NOW. Since you bought a $700K house, I'm assuming it's more than one bedroom. I would take on a roommate to make extra money, see about getting a second job in retail or something on the weekends, and max out 401K, do an IRA, and also contribute to an after-tax investment account. You have a lot a catching up to do with your retirement account.

And, most importantly do NOT start spending even more money on the house (furniture, upgrades, renos), except for required maintenance.

Lol OP is 42. OP is fine folks.

Op has zero savings and like others have pointed out, job security isn’t guaranteed through your 60s. for better or for worse OP is now heavily invested in an asset that is very expensive (a house paid for with an expensive source of capital - withdrawing the 401k and paying taxes/penalties) instead of an asset that is cheap (stock indices). It was a very very stupid financial move. So yes, OP needs to carefully budget to ensure money is going back into the 401k and also take care to make sure their career is on track and that they are in a good position to work through their mid/late 60s. Possibly look for a job transition that increases earning potential. If all goes well, yes, OP has 25 more years to work and save and should be ok. But if OP continues to be a financial idiot then no. Check in here in 20 years to hear all about how OP has a giant second mortgage on the home because they felt entitled to use the equity on a kitchen reno and dream vacations …

I am not an economist but I hope we have one who can shed light on this.

What's the future of the American economy if people start losing hope of a secure job as soon as they reach 40? When read some of the comments it's as if once you get to 40 and lose your job you are done. Is the average American really able to save enough to retire in their early 50s if they work between the ages of 22 and 49?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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

Really? I don’t see the problem. Not everyone lives their lives the same way. He wanted to own a home he bought a home. He shouldn’t have to live in fear of what might happen in 25 years.

He didn’t have to put 45% down. He is missing out on a lot of future growth. A doubling on average every 7-10 years.

+1

That rarely happens with a house, but routinely does with the market.

Yes you can live however you want. Most Americans do that, and are in financial trouble, with a very low networth, no Emergency fund and in trouble financially. Doesn't make it right

A lot of people double their down payment in 7 years. I put down 20% for a 1.3M house that is worth $1.7 in just five years. And that money is tax free unlike 401K money.

Huh? It’s not tax free.

There is an amount ($250,000 for a single flier/ $500,000 tax free gain for those who file jointly) of gain in one's primary residence that is tax free. Must be one's primary residence for at least 2 of the past 5 years when the sale occurs.

But you pay property tax …. And of course the point of 401ks is that they grow on pre-tax income unlike the home purchase. homes are extremely expensive investments.

When you take money out of a 401K you pay income tax - tax rates could easily be higher by then so 401Ks are not necessarily such a great deal, aside from the employer match and the fact that they are a good way to automate and protect retirement savings. That first $250K/$500K of home appreciation is more tax protected than your 401K money. And the property tax can be deducted (and that $10K SALT max is likely to increase in tax bill currently making its way through congress).

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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

Really? I don’t see the problem. Not everyone lives their lives the same way. He wanted to own a home he bought a home. He shouldn’t have to live in fear of what might happen in 25 years.

He didn’t have to put 45% down. He is missing out on a lot of future growth. A doubling on average every 7-10 years.

+1

That rarely happens with a house, but routinely does with the market.

Yes you can live however you want. Most Americans do that, and are in financial trouble, with a very low networth, no Emergency fund and in trouble financially. Doesn't make it right

A lot of people double their down payment in 7 years. I put down 20% for a 1.3M house that is worth $1.7 in just five years. And that money is tax free unlike 401K money.

Huh? It’s not tax free.

There is an amount ($250,000 for a single flier/ $500,000 tax free gain for those who file jointly) of gain in one's primary residence that is tax free. Must be one's primary residence for at least 2 of the past 5 years when the sale occurs.

But you pay property tax …. And of course the point of 401ks is that they grow on pre-tax income unlike the home purchase. homes are extremely expensive investments.

When you take money out of a 401K you pay income tax - tax rates could easily be higher by then so 401Ks are not necessarily such a great deal, aside from the employer match and the fact that they are a good way to automate and protect retirement savings. That first $250K/$500K of home appreciation is more tax protected than your 401K money. And the property tax can be deducted (and that $10K SALT max is likely to increase in tax bill currently making its way through congress).

Look, there’s an argument for not maxing out your 401k to save up for a down payment. There’s zero argument for emptying out your 401k, incurring penalties and taxes, to put 50% down on a house.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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

Really? I don’t see the problem. Not everyone lives their lives the same way. He wanted to own a home he bought a home. He shouldn’t have to live in fear of what might happen in 25 years.

He didn’t have to put 45% down. He is missing out on a lot of future growth. A doubling on average every 7-10 years.

+1

That rarely happens with a house, but routinely does with the market.

Yes you can live however you want. Most Americans do that, and are in financial trouble, with a very low networth, no Emergency fund and in trouble financially. Doesn't make it right

A lot of people double their down payment in 7 years. I put down 20% for a 1.3M house that is worth $1.7 in just five years. And that money is tax free unlike 401K money.

Huh? It’s not tax free.

There is an amount ($250,000 for a single flier/ $500,000 tax free gain for those who file jointly) of gain in one's primary residence that is tax free. Must be one's primary residence for at least 2 of the past 5 years when the sale occurs.

But you pay property tax …. And of course the point of 401ks is that they grow on pre-tax income unlike the home purchase. homes are extremely expensive investments.

When you take money out of a 401K you pay income tax - tax rates could easily be higher by then so 401Ks are not necessarily such a great deal, aside from the employer match and the fact that they are a good way to automate and protect retirement savings. That first $250K/$500K of home appreciation is more tax protected than your 401K money. And the property tax can be deducted (and that $10K SALT max is likely to increase in tax bill currently making its way through congress).

Look, there’s an argument for not maxing out your 401k to save up for a down payment. There’s zero argument for emptying out your 401k, incurring penalties and taxes, to put 50% down on a house.

(also any income tax advantage of real estate v 401k is likely outweighed by the fact that a home is much, much more expensive than a 401k. an index fund in a 401k is extremely cheap. But a house is so expensive - repairs, property taxes, closing costs …)

[Anonymous]

I'm tired. I don't own a home. I rent. I am in good health and do my best to exercise and eat healthy. I have a very modest 401k. Social security alone covers my rent, food and transportation. I understand that many of you expect a much higher standard of living and that's okay.

OP will be a in much better position than me when he retires.

Of course we can't predict the future of the economy. But if OP's investments fail over the next 20 years he won't be the only one in trouble.