using "defered compensation" for home purchase..?

[jjdeneen918]

Houses are now in the cheap range and interests rates are super low.

I was thinking about pulling $$$ from my 457B retirement account to use it to help with a down payment on a house purchase.

I have heard you can pull up to 50% of what is in the account as a loan.

Has anyone personally withdrawn from their account? If so, what was the process, was it worth it..?

[TrailerparkTrash]

Houses are now in the cheap range and interests rates are super low.

I was thinking about pulling $$$ from my 457B retirement account to use it to help with a down payment on a house purchase.

I have heard you can pull up to 50% of what is in the account as a loan.

Has anyone personally withdrawn from their account? If so, what was the process, was it worth it..?

I'm guessing that you are relatively young and probably new to LEO???/ I'm guessing you have less that 5 years on the job???

Take it from me. DO NOT TOUCH YOUR DEFERRED COMP ACCOUNT!!! I know you'd be investing in a home, but find another way for your down payment. Trust me. When it comes to retirement after 30+ years, you'll thank yourself for have never touched your DEF COMP account.

Don't ever use any portion of your retirement account(s) as a credit card or as a "gift" to yourself to purchase something. It's for your security when you retire, period.

Just my own .02cents of opinion.

[jjdeneen918]

6 1/2-ish years on.

My thinking is I'm taking my investment and putting it into another investment- a house.

Obviously it would lessen the amount of compounding interest for say the 5 years it would take to payback the loan amount. But I would 'save' more in the long run by paying about $1200 to $1500 into a home purchase as opposed to waiting 2 years to save for the down-payment and throwing that $$$ away towards rent.

Dunno... just trying to figure out what would work best.

[jtmkinsd]

6 1/2-ish years on.

My thinking is I'm taking my investment and putting it into another investment- a house.

Obviously it would lessen the amount of compounding interest for say the 5 years it would take to payback the loan amount. But I would 'save' more in the long run by paying about $1200 to $1500 into a home purchase as opposed to waiting 2 years to save for the down-payment and throwing that $$$ away towards rent.

Dunno... just trying to figure out what would work best.

I think if you consulted a financial expert, they would tell you to beg, borrow and steal before you even consider tapping a retirement account for a home. There's a LOT of folks in a bad way out there right now who've seen their values go up in smoke, and are facing losing their home, and the money they decided to take out of their retirement fund to purchase. Just remember, with any "investment" there is risk...and I always shy away from applying risk to retirement money.

[yzErnie]

There are pros and cons of every type of investment. In this particular example, what I would be looking at is will the housing market of the future will become a benefit or burdon. My advise is to weigh all of your options and go with what works best for you.

[TrailerparkTrash]

Also, my opinion is that those that can get into a house with as little "money outa pocket" for a down payment as possible.....WINS.

That way, if the house tanks in the economy and you're upside down with what it's really worth,,,, you've lost nothing (or very little). Versus if you put a large amount of cash down as a down payment and the economy tanks, you've lost big time.

On the flip side, if the market booms and you sell the house, you've just made a killing in profit.

Just don't touch your retirement. If the economy tanks deeper either now or later, that's 6 1/2 years of retirement savings you have lost. That's an additional 6 1/2 years of working beyond your original retirement age before you took out that money.

I hope that makes sense.

[Jonathan Doe]

My deferred comp allows us to get 2 loans up to $50,000. Then we pay back to my own account in 5 years with low interest, about 4.5% at this time. I took some out for my kids' tuition.

[SVT-40]

My advice is don't touch your 457 account. With interest rates as low as they are the tax implications just don't warrant the tax exposure.

I recently refinanced my house and got a rate of 3.287 for a 30 year fixed zero points and low fees . (Charles Schwab bank)

So money is cheap if you have good credit.


I contributed to my 457 plan at the max amount and actively managed my account before I retired. Needless to say it has appreciated greatly over the 20 plus years I contributed. Even since I retired I still actively manage my account. I'm up over 18% since July alone.

[ronin16]

Look into FHA loans as well. Rates are very competitive for First Time buyers

[swat]

Please do not touch your deferred compensation account. Deferred comp is one of the best things government did for regular working joes. I was lucky enough to get into the program early in my career and have stayed with it over the years. In a nutshell deferred comp is a great supplement to your pension. Even with the 3%@50 PERS retirement deferred comp allows you to boost your retirement income far in excess of what you earned when you worked. Deferred comp is also a good mechanism to head off the impact inflation has on your pension over the years.

You are much better off saving your money for a home down payment and leave your deferred comp alone.

[johnnykane0147]

Deffered Comp

I did it this year, my deferred comp works in a way that I borrowed x amount have to pay it back with 4.5% interest in five years but that interest that I am paying is to myself , so it worked out for me.

[erikdjs]

Hi OP - I've been a mortgage lender about the same amount of time you've been a LEO.

My suggestion would be NOT to touch your retirement account.

I'll tell you a secret that I rarely share. Buying a primary residence is NOT an investment. Investments have a rate of return. Primary residences do not. They have a rate of return of 0%. Yes, they can increase in value - but that has nothing to do with the amount of money you put in.

You buy a home for really only a few reasons:

1. Tax Deductions
2. Pride of Ownership
3. Freedom of Ownership (no landlord)
4. During retirement you should have paid off your mortgage so that you have minimal housing expenses (property taxes, homeowners insurance)

My suggestion: take the difference of what you pay in rent now and what your mortgage, insurance, and taxes would be and use that as savings for a down-payment. FHA only requires 3.5% down which on a $300,000 home is $10,500. By the time you've saved the money for a downpayment you will be accustomed to the cashflow difference of buying vs. renting.

Just my .02. Good luck

[CapnHawk]

^ Listen to him!

[neomentat]

Houses are now in the cheap range and interests rates are super low.

I was thinking about pulling $$$ from my 457B retirement account to use it to help with a down payment on a house purchase.

I have heard you can pull up to 50% of what is in the account as a loan.

Has anyone personally withdrawn from their account? If so, what was the process, was it worth it..?

When I was still doing tax work 2 years ago, the rule was you can take out $10,000 out of your deferred account penalty free for the purchase of a residence if you're a first time home buyer. And the federal tax code's definition of a first time home buyer is someone who has not bought a home in 2 years.

But if you borrow, you have to pay back with interest, which is a bad idea. However, if you're currently renting and your rent payment is higher than your would be mortgage payment then it makes sense to borrow and you can use the left over money to pay back into your account. If you're not married you can also rent out rooms for a profit.

Might I ask you where you're looking to buy?

[SWATCop]

You can borrow 50% of your account and pay it back over a max of 5 years. The house will probably grow equity faster than the stock market will. The interest goes back into your account and there is a $50 transaction fee. It's your money, you can't go wrong borrowing from yourself.