Is it wise to use part of your 401k to put a down payment on a retirement house before you sell your current house.

ANSWER

Expert Thomas Graham iii's Answer:

It honestly depends on your current situation.  I would be more concerned about taking money from your retirment nest egg than I would be about putting money down on a home before you sell your current house.  You need to take into account the tax and penalty considerations as well.  If you are not yet 59.5 it will not be a tax free distribution and you will also pay a penalty on your early withdrawal. 

What would it hurt to put off the retirment house until you have enough cash to put down without having to dig into your retirment fund?  In my mind this is the best scenario because you avoid being taxed and penalized.  Plus you are leaving more money in your 401k to grow tax free.

Thomas Graham iii, CPA, CFE

Oklahoma

7 yrs experience

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