Quality of Life in 04105>Question Details

Ellen, Home Buyer in Granbury, TX

My husband and I, 66 and 69 respectively, are considering buying a home with his retirement fund. Advantages/disadvantages, please?

Asked by Ellen, Granbury, TX Wed Dec 12, 2012

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9
Bruce Davis’ answer
Using an IRA to purchase a home is a great alternative to conventional investments, however you cannot personally use the property or make improvements to it if it remains in your retirement account. There are numerous self directed IRA holding companies who specialize in distributing funds and paying bills associated with your real estate, as you cannot directly do so. I've e found the best source for information is through these different holding firms as it is not an oft used strategy and most accountants are not well versed in this technique. That said make sure you accountant is part of the conversation before you pull the trigger.
0 votes Thank Flag Link Wed Dec 12, 2012
Feel free to give me a call @ 207 632 2110 so we can go over all your needs and wants. And the type of property that will best fit you.
1 vote Thank Flag Link Sat Sep 7, 2013
There are a lot of options here and your personal situation will dictate which way to go. You should be speaking to a financial planner/advisor.
things to consider:
* is this a home for your personal use or for investment purposes?
* does the fund allow for a complete disbursement at age 70 to purchase the home or would you use a disbursement to fund a downpayment and keep it outside of the retirement account?
* if you are going to keep the home in the retirement account,
* when does the account start requiring mandatory disbursements?
* how will you cover any expenses for maintenance, repair, taxes etc?

Lastly, be aware of the difference in tax treatments for money being disbursed from a retirement account (ordinary income) vs. sale of a property (capital gains).

there are quite a lot of things to consider - but given your ages and the fact that most accounts start requiring mandatory distributions at age 70, it could be difficult to have real estate inside a retirement account.

I do know of some good financial planners - if I can be of assistance, let me know.
1 vote Thank Flag Link Thu Dec 13, 2012
The advantages are no mortgage payments and as cash buyers you put yourselves in the strongest possible negotiating position possible. In essence you're paying yourselves a rate of interest equal to whatever the mortgage interest rate would be.

The disadvantages are you pulling retirement money out that you may need at some point in the future and you're losing whatever rate of return it's generating.

Whether this is a good strategy is hard for any one of us who responds to say. We don't know enough about your financial status in specific; nor are the majority of us certified as financial planners, advisers etc. This is something you should be discussing with your financial adviser.
0 votes Thank Flag Link Mon Mar 17, 2014
This is really an accountant of financial consultant question. I do know there are vehicles one may use to tap into your retirement account. The advantages of each may have disadvantages as well. These must be weighed carefully.
0 votes Thank Flag Link Mon Mar 17, 2014
Ellen,
You have provided only one option and that is use retirement fund.
Advantages / disadvantages can only be assessed along side other options.
Clearly using 'cheap' money is better than expensive money, but opportunity costs must be considered.

Eventually, your purchase objective must be known? Are you going to move right in? Is this a second, third, vacation home? An income earning investment? If you could OWN the home, modify, buy/sell as you see fit and only pay 60% of the list price, how would that influence your decision?

You truly have a world of options, the one best for you is entirely dependent on your situation, goals and objectives.

Best of success,
Annette Lawrence, Broker/Associate
Remax Realtec Group
Palm Harbor, FL
727.420.4041
http://FirstLookHomes.us Palm Harbor University High School district http://annettelawrence.mfr.mlxchange.com/?Page=-1
0 votes Thank Flag Link Mon Jan 27, 2014
I believe there is no withdrawal penalty to using your retirement fund if you are purchasing a primary residence AND you are both over 59. This said, an accountant would be the expert to call. There is a vehicle whereby you can have your fund purchase a property, but there are many restrictions on use and maintenance that would prohibit this direction.

You may simply weigh the differences in ROI based on keeping the funds there and making a purchase where you make mortgage payments on the property. Again, a question best posed to your accountant.
0 votes Thank Flag Link Mon Jan 27, 2014
Hello Ellen,

When buying a house there are 2 ways to look at it. One is the investment and the other is quality of life.

Buying a house right now is a great investment but you definitely want to talk with your financial advisor. Because the cost of money is so cheap it may be worth it to take a loan. If your retirement fund is getting better than 4% per year growth a loan might make sense. Again, please consult a financial advisor and an accountant.

If a loan isn't an option for you the decision will have to be based on where you and your husband will be most happy. Maine certainly offers a lot to be happy about. Have you ever lived here? If you want community information or any other information about Maine let me know, I am happy to help.

Good Luck,
Doug
0 votes Thank Flag Link Thu Dec 13, 2012
Ellen, it might be a good idea for you and your husband to sit down with a trusted financial planner, investment advisor or CPA and discuss your total financial picture, life situation and your retirement plans, to get professional advice. The advantages and disadvantages are going to very much depend on your individual circumstances and plans.
0 votes Thank Flag Link Thu Dec 13, 2012
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