Reply to Using retirement money...ever a good idea?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]We borrowed $30,000 from our retirement fund without penalty. Paid it back to ourselves with interest in 5 years. We're about to do it again to buy a new car.[/quote]

Doing this to buy a house is one thing.  To buy a car?  That's idiotic.  [/quote]

This.[/quote]

+1. we did it, were nervous about it, but ended up being the right decision for us. we bought our house in 2010. great neighborhood (our home was way less than the average home in the area), great public schools all the way to HS, walking distance to transportation. between downpayment and closing costs we were short 24K (the house was 700K). my DH is a federal employee with a very stable job, he borrowed the money from his retirement account. there was no penalty and a very low interest. it was the right time to buy, with prices falling, few buyers, interest rates going down. we were renting before in a 2bd apt (with two kids) paying almost 2000 in rent. now we pay a mortgage, but get the interest deduction, will be able to live in this house forever and send our kids to public school, and our house has appreciated a lot in the past 3 and a half years. with the tight market and higher prices, it would have been difficult for us to buy in this area. if we waited to save 24K, we might have missed the chance. I agree with others that you have to think carefully about doing it, and consider if the need for the loan is caused by the fact that you are stretching yourself too thin. in our case, we knew that our day care costs were going to end in less than two years and that I was going back to work full time instead of part time, and given the situation, we decided to take the risk. but buying a house in a situation where you determine you can afford it is the only instance where you can borrow from the retirement account.   we would never, ever, do this to fund a lifestyle we cannot afford, including buying an expensive car, vacations or stuff like that (we have only one car, 8 yr old, and we will keep using it for other 10 years as far as I am concerned - any extra money we have go to fund our retirements, savings, kids' college savings, and to pay our mortgage down faster). if you need to borrow from a retirement account to buy a car, then you cannot afford the car.  [/quote]

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