[Pianosounds]

My wife and I hope to purchase our first home this coming fall but are not sure if we can use the 17K that we have in my 403 (b).
My understanding is that we are allowed to use money saved in our Roth IRA (since we are first time home buyer; we each have $3500 in the Roth IRA).
My wife also has a traditional IRA approximately $4700.

Please help me understand what we can use for down payment on a new home. Is there a limit on how much we can use from our Roth IRA, traditional IRA, and 403 (b).

Thank you.

[ebaines]

You can not use the 403(b) money for a first-time home purchase without paying a 10% early-withdrawal penalty as well as income tax on the distribution. The rules for this are similar to the early withdrawal rules for 401(k) participants - unlike IRAs, the penalty is not waived for first time home buyers.

You can withdraw up to $10K from your IRAs for a first-time home purchase without penalty. You can use the Roth IRA money without having to pay income taxes or penalties as long as the money has been in the account at least 5 years. The timing of this can be tricky - even if you deposited money in the account more than 5 years ago, if you withdraw more than what you put in (i.e. take some of the earnings), those earnings may be less than 5 years old, and hence you could owe income tax on that portion of the withdrawal. If you use money from your traditional IRA there is no 5-year waiting period, but you will be taxed on all except any after-tax contribution money you may have deposited. In either case there is no 10% early withdrawal penalty as long as the money is used for a first-time home purchase and is not more than $10K. One last thing - if you make these withdrawals from your IRAs you have 120 days to use the money towards the house purchase, so be sure to wait until you need the down payment before making the withdrawal.

Bottom line - if you really need to use your retirement savings for this home purchase, I would recommend taking it first from the Roth IRAs (if they meet the 5-year rule), then from your traditional IRA. I would not recommend taking anything from your 403(b) - you'd be better off making a smaller down payment, and/or doing your best between now and the fall to save a little extra for the house.

[Pianosounds]

Thank you for the information. I will do as you recommended and not take anything from the 403 (b).

[robert777]

Hello I have a 401 403 from previous work where I do not contribute. I would to buy a home and use this as a payment or buy a house to fix up
Can you tell me if I can use this money about 75000 for a fixer upper with out the 10 and 20% penalities

[ebaines]

Hello I have a 401 403 from previous work where I do not contribute. I would to buy a home and use this as a payment or buy a house to fix up
can you tell me if I can use this money about 75000 for a fixer upper with out the 10 and 20% penalities

As noted in the earlier post, this is one of those areas where the rules differ between IRA plans and 401(k)/403(b) plans. Unfortunately there is no exception to the 10% early withdrawal penalty for taking money from a 401(k) or 403(b) and using it for this purpose. However, if the money was in an IRA then you could withdraw up to $10K for the purpose of buying, building, or repairing a first home without having to pay the 10% penalty. So you may want to consider rolling your old 401(k)/403(b) account to an IRA, and then taking up to a $10K withdrawal from there.