Many people have money set aside that can help them buy a home or save their home – in a spot they don’t think they can access easily.
When times get tough, many people will drain their savings accounts and checking accounts of their savings – but I don’t hear very many people asking me about the right way to utilize their individual retirement account to combat a financial crisis.
As a general rule, I am not a big proponent of taking money out of a retirement plan – especially if you do this before it’s time; time being you are 59 1/2 years of age.
That said, I think there are some instances when it might make sense to tap into your individual retirement account to correct your financial situation.
The first such instance in pulling money out of a retirement account would be in the event that you are a first time buyer. In certain instances, the IRS allows for IRA account withdrawals of up to $10,000 for buying a first home without penalty. In the case that you don’t want to drain your checking and savings, or you haven’t saved enough in those accounts, using money from your individual retirement account may make a lot of sense if you can get access to this money without penalty.
The second instance where tapping into your retirement account may make sense has to do with being a homeowner. If you have gotten behind on your mortgage payments because of financial hardship due to a medical condition you may be able to pull money out without penalty if you meet certain requirements. In some cases if your physician has declared that you are not able to do any gainful or substantially gainful activity because of your physical and/or mental conditions you may be able to withdraw money without penalty from your individual retirement account(s).
Does it make sense to withdraw money from your IRA to buy a home or to save your home from foreclosure?
Be sure to consult with your financial advisor for a professional opinion.
Disclaimer: I am not a licensed financial advisor, attorney, accountant or anything else that should make you consider this to be official financial advise. Be sure to check with a licensed professional for your situation.