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My husband plans on retiring next year at age 60. Is it wise to use half of his 401k as down payment for a home and 25% - 30% of monthly pension for the mortgage? His projected income is estimated at $4400 per month.

Apr 23, 2013 by Rebecca C from Alhambra, CA in  |  Flag
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3 votes
Rich Winer Level 20

Rebecca, To answer this question, I would need to know more about your financial situation including the amount of assets in your husband's 401K, amount and nature of assets elsewhere, value of the home, size of mortgage, what percentage you are putting down, loan interest rate, current living expenses, estimated future living expenses, etc. You are really best off working face to face with a financial advisor. You want to make the right decision because once you liquidate any of the 401K, that money will no longer grow tax deferred. Generally speaking, I prefer to let retirement assets continue to grow tax-deferred as long as possible, So the question comes to mind as to what affect using half the 401K might have on your overall retirement nest egg and financially security now and later on in retirement.

Comment   |  Flag   |  Apr 23, 2013 from Woodland Hills, CA

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Hi Rebecca! My initial concern would be carrying a new mortgage into retirement. If you had a 20 year loan, it would not be paid off until your husband is age 80. A 30 year loan would last until he is 90. This may put a cramp in potential spending for health care and other necessary spending as you age. I lean toward Rich's answer, but definitely check with a financial planner before making a move.

Comment   |  Flag   |  Apr 24, 2013 from River Hills, SC

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If I am reading the question correctly, you are saying that he has a 401(k) where you can take half of it, use as a down payment, and pay the taxes, and then still have a separate pension plan with a guaranteed pension of $4400/month. If that is your only income, and I’m not an accountant, but at 15%, you will be paying about $600 in tax; minus about $1200 in mortgage payments, leaving $2600 to pay all utilities, maybe insurance and property tax, and then still live off of what is left, with maybe a little help from the other half of the 401(k). If you think you can live off of that today, factor in inflation, historically around 4%, and consider how you might be doing in 15 or 20 years. I don’t want to paint a horrible scenario; fill in the blanks, because once you make a decision, there is no reset button.

Comment   |  Flag   |  May 06, 2013 from Delray Beach, FL

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