Retirement Savings vs. Down Payment: A Tough Choice

0:00On this March 7th in Durham, here's what is making headlines. Many first-time home buyers face a tough choice, dip into retirement savings like a 401K or IRA for a down payment. These plans let you borrow or withdraw limited amounts. Penalty-free in some cases, but taxes and loss growth can hurt long-term security. High home prices, inflation, and steep mortgage rates have stretched saving timelines with typical households now needing about seven years for a down payment down from 12 recently. Meanwhile, retirement accounts have boomed, with average 401K balances hitting $146,400 and IRAs. At $137,095 by year's end, most buyers stick to personal savings, family gifts, or stock sales with 46% using their own cash. Only 6% of all buyers and 11% of first-timers tapped 401Ks or pensions, while 3% used IRAs.

1:03Loans from 401Ks are often better than withdraws, since you repay yourself up to 50% of your balance or $50,000. Max, with job loss turns unpaid loans into taxable income plus a 10% penalty if under 59 and a half. Work withdrawal skipper payment, but trigger taxes and penalties too, except IR as allow $10,000 penalty-free for first-time buyers. Experts urge running the numbers first and talking to a planner or plan administrator. Pulling funds early often means delaying retirement, so way home ownership dreams against future nest egg needs. The Daily News Now is Powered By Our Sponsor. When you want calm, do not reach for your phone. Lay back and listen at soliplow.com.