"Time to Retire"
Hey Help Me Retire,
So, I’m 63 and gearing up to retire next year. Got a sweet paid-off home but looking to move to a new spot once I kick off the retirement party. Need an extra $100k on top of what I already have in the bank for that dream house in our dream area.
Here’s the plan – can snag $50k for the new crib, and another $50k for all the other stuff from my 401k. Interest at 10% ain’t no biggie since that cash goes right back to me. Some fees involved, but nothing crazy. Plus, IRS won’t come knocking since this ain’t a taxable distribution.
Gonna hustle and pay off both loans once the old house sells. Sounds like a solid plan, right?
UPDATE: Just found out I can only have one loan at a time. Gotta pay it off by the end of the next quarter after the last payment once the job’s done. Otherwise, hello taxable distribution! IRS rules, can’t beat ’em.
What do you think, Help Me Retire? Is this the way to go?
Catch you later,
Time to Retire
Response from HELP ME RETIRE:
Hello There,
Congratulations on your upcoming retirement! It’s great to hear that you have a paid-off home and are considering your options for a new place in your target area. It sounds like you have a clear plan in mind by borrowing $50k for a home and another $50k for additional expenses from your 401k.
Given your situation, it seems like utilizing your 401k loan could be a practical solution to bridge the gap for your new home purchase. The fact that the loan is not considered a distribution by the IRS is definitely a positive aspect to consider. However, it’s important to be mindful of the repayment terms and the implications of these loans.
Since you mentioned that you can only have one loan at a time from your 401k and you’ll have to pay it off within a specific timeframe once your employment ends, it’s crucial to have a clear timeline for when you plan to sell your current home to repay these loans. Additionally, you mentioned the 10% interest rate on the 401k loan, so you’ll want to factor in this cost when considering your overall financial strategy.
Overall, as long as you have a solid plan in place to pay off these loans once your old house sells and you’re aware of the terms and conditions involved, borrowing from your 401k could be a reasonable option to help fulfill your retirement goals. It’s important to continue evaluating your financial situation and ensure that this decision aligns with your overall retirement strategy.
Best of luck with your retirement plans and your upcoming move!
Warm regards,
HELP ME RETIRE
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