401K/403b retirement account question

[Marsharen DuPont]

Hello All!

My name is Marsharen and I have a question in relation to retirement accounts. If possible, how would I go about using funds from my 403b as a down payment toward my first property (which will be owner occupied)? And if so, would it be possible without fees and penalties?

Thanks!

[Will Fraser]

Hi Marsharen!  I'll start by saying that I am not a financial advisor and have limited knowledge on taxes and tax planning, so I'm simply a fellow journey-er sharing my experience:

Using funds from a tax-favored account for a personal residence (even one that you eventually tend to use as an investment) is quite difficult, if not impossible/illegal to do while the funds are still in the fax-favored account.  You can withdraw some portion (or with pre-tax dollars of a 403(b) all) of the funds but you WOULD likely incur a penalty and/or a tax.

The "hack" of using your retirement account funds in investment real estate comes primarily from the idea that you can funnel funds into a Self-Directed IRA from a number of different sources (like rolling over a 403(b) when you separate from the service that sponsored it). In that case the SDIRA could be used to participate in real estate investing, but there are very strict guidelines for the ways that you can benefit from those investments. I don't know of a way that it is viable to use tax-favored account dollars for a property that you would be living in unless you could roll it into a state-supported First TIme HomeBuyer account (assuming you meet all of the state's requirements for using that type of account).

Best of luck!

WIll