YA401KT Yet another 401k thread

[TheSiege]

First off, i bought a house, my first, in january of this year.
I wanted to use my 401k and put a little more down
well i was told that i had to roll it over to an IRA then i could use it as a first time home buyer
the people handling my 401k wouldnt let me roll it over

i ended my employment at that place in may of this year
can i still roll my 401k to an IRA then use it towards my home
or can i only do that right when i buy it?

 

[vi edit]

A 401k is pre tax money. The only way you can get money out of it without a penalty is through a loan if your plan sponsor supports it. Even rolling it into a rollover IRA will not get you around the tax implications.

The Roth IRA is the one that has first time homeowner exemptions in it. A rollover is a traditional. You can recharacterize your traditional to Roth, but you'll pay taxes on it.

 

[TheSiege]

Can I withdraw from my IRA to buy my first home?

Yes. Whether you have a Traditional or Roth IRA, you can withdraw up to $10,000 for a first-time home purchase without penalty, before age 59 ½. And with a Roth IRA, the withdrawal will also be tax-free. Keep in mind that the $10,000 tax exemption on first-time home purchases is a lifetime limit.

http://www.bcu.org/IRAFAQs.aspx#withdraw

it says i can do it from a traditional which is only taxed on the interest.

so i want to roll 401k to traditional, withdraw for my home

i am just wondering if it is too late to use it for my home since i bought it january

 

[vi edit]

Strange. I don't ever remember that exception being allowed on traditionals.

 

[TheSiege]

well either way. do you know what the time limit is ? 6 months? a year?

 

[vi edit]

I'm kinda half right:
http://www.fool.com/money/alla...ras/allaboutiras12.htm

Now the law allows individuals to receive distributions from their traditional IRAs to pay up to $10,000 of first-time homebuyer expenses without incurring the 10% early withdrawal penalty that usually applies to withdrawals from a traditional IRA before age 59 1/2. But, even though the penalty is waived, you will still be required to pay taxes (as applicable) on the traditional IRA withdrawal itself.

No penalty, but you still pay taxes on the withdrawal. It looks like there is a 120 day window of time between when you can take the distribution until you have to use it as the payment.

 

[TheSiege]

Originally posted by: vi_edit
I'm kinda half right:
http://www.fool.com/money/alla...ras/allaboutiras12.htm

Now the law allows individuals to receive distributions from their traditional IRAs to pay up to $10,000 of first-time homebuyer expenses without incurring the 10% early withdrawal penalty that usually applies to withdrawals from a traditional IRA before age 59 1/2. But, even though the penalty is waived, you will still be required to pay taxes (as applicable) on the traditional IRA withdrawal itself.

No penalty, but you still pay taxes on the withdrawal. It looks like there is a 120 day window of time between when you can take the distribution until you have to use it as the payment.

yeah but technically i dont have any earned interest so i wouldnt pay taxes on it. i am wondering if there is a time limit from when you close that you have use the money not on the withdraw itself

 

[vi edit]

Originally posted by: TheSiege

Originally posted by: vi_edit
I'm kinda half right:
http://www.fool.com/money/alla...ras/allaboutiras12.htm

Now the law allows individuals to receive distributions from their traditional IRAs to pay up to $10,000 of first-time homebuyer expenses without incurring the 10% early withdrawal penalty that usually applies to withdrawals from a traditional IRA before age 59 1/2. But, even though the penalty is waived, you will still be required to pay taxes (as applicable) on the traditional IRA withdrawal itself.

No penalty, but you still pay taxes on the withdrawal. It looks like there is a 120 day window of time between when you can take the distribution until you have to use it as the payment.

yeah but technically i dont have any earned interest so i wouldnt pay taxes on it. i am wondering if there is a time limit from when you close that you have use the money not on the withdraw itself

It's still money that went in pre-tax. If you take that distribution you have to pay taxes on it when you take it out. The exemption for the house lifts the 10% penalty.

As far as the details on how you can/can't use it, probably best off asking your loan officer. I'm sure there is probably some paperwork that you have to fill out at the time of closing saying that 10k of the down payment came from an IRA.