Short term use of retirement funds

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BlueRidgePro
Posts: 30
Joined: Fri Mar 09, 2012 1:49 pm

Short term use of retirement funds

Post by BlueRidgePro » Thu Dec 06, 2018 7:03 pm

70 years old & retired. Planning on buying a retirement home for cash, taking my time in moving, and then selling my current home. Proceeds from current home sale will more than cover the retirement home cost. I don’t want to deal with the hassle of timing a home sale and a home buy, or making a contingent offer on a new place. I’m looking at options for obtaining the cash to buy the retirement home before I sell the current place. I’ve got retirements accounts with plenty of value to cover a home cost.

The first option that comes to mind is taking the cash out of my retirement investments to buy the new place and then reinvesting the proceeds when I sell my current home. I understand that this will cost me a tax hit on the retirement account withdrawals.

Any other options that make sense? Bridge loan? Mortgage on the new place that I’ll pay off in less than a year? Loan against the old place that gets paid off when I sell? Can I borrow against the retirement investments?

mhalley
Posts: 6302
Joined: Tue Nov 20, 2007 6:02 am

Re: Short term use of retirement funds

Post by mhalley » Thu Dec 06, 2018 7:08 pm

If you plan on selling the old home, you could take out a home equity loan or line of credit on it and pay it off when it sells. Getting a asset based mortgage is another option.

https://www.thestreet.com/story/1222723 ... ncome.html

JGoneRiding
Posts: 1241
Joined: Tue Jul 15, 2014 3:26 pm

Re: Short term use of retirement funds

Post by JGoneRiding » Thu Dec 06, 2018 8:32 pm

Do you have any significant non retiremnt funds? You could take a margin loan and pay back with no tax consequences.

How much are we talking relatively?

Is the current house all paid for or close to it? I think a heloc or bridge loan is a good idea.

If you knew for sure you could be done in 60 days you could borrow and return the money with no tax consequences but that is back to timing.

BlueRidgePro
Posts: 30
Joined: Fri Mar 09, 2012 1:49 pm

Re: Short term use of retirement funds

Post by BlueRidgePro » Fri Dec 07, 2018 9:13 am

Thanks. Good suggestions. I'm looking for ideas like these as I think about options. I don't want to miss a potential strategy.

I'll weigh the cost of short term equity loans against the tax hit of retirement account withdrawal or cap gains on selling non-retirement positions.

I've read cautions on bridge loans that make me pause.

New home under $1M. Old home over & close to paid off.

MJS
Posts: 213
Joined: Sat Aug 05, 2017 10:55 pm

Re: Short term use of retirement funds

Post by MJS » Fri Dec 07, 2018 9:31 am

Are your retirement investments in tax deferred accounts? The income tax and IRMAA hits might be several thousand dollars, unless you meet the 60(?) day window. And, of course, then the funds would no longer be tax deferred after replenishment.

If the payment would come from a Roth account, I wouldn't do it. However, your situation may be different.

If most of the house payment will come from taxable accounts, this will be very sensible.

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