Which cash account to buy second home??

[cobra911]

We plan on purchasing (for cash) a second home in Florida next month. I have several "cash" or cash equivalent accounts (MM, Fed Treasury fund etc.) held in both taxable and tax deferred accounts... all within Vanguard:
- Trad. IRA (Me)
- Roth IRA (Me)
- Trad IRA (Wife)
- After Tax brokerage acct ( a Trust in both wife and my name)
- After Tax brokerage account (in my name only)

All have a cash balance I could withdraw the full mount needed to pay for the second home ... but I'm sure there is one account that makes the best financial sense. I assume it would be one of the After Tax accounts...?? Am I thinking correctly here?
Thanks for any help!

[123]

I would take funds from a regular taxable account. Distributions from a Traditional IRA will have a tax consequence and taking a distribution from a Roth account can have a tax consequence (depending on your age etc) as well as the loss of future tax-free growth.

Depending on the interest rate available and your income/assets profile it can be more advantageous to finance some of the purchase to the extent possible. However, if I were to purchase a second home and I had the cash to buy without impacting my ability to fund my future needs I would pay cash and be done with it.

[cobra911]

Pay cash and be done with it..My thinking too! I don't want another house payment. I am over 59.5 years old... so no penalties for taking from my Roth or Trad IRA... but don't want to pay the gov/tax now when I can wait 10 more years. Don't want to touch my Roth either. That leaves one of my two taxable accounts. Yes?

[Meg77]

Traditional IRA distributions will be taxable, so lump sum distributions for large purchases is generally not advisable from there. Roth accounts are most advantageous and so want to be left to grow as long as possible (again in general). Not sure what the purpose of the trust is or what kind it is, but if it's just a rev trust you operate your household out of then you could take from that without a big deal. But the taxable brokerage is the most obvious source of funds for this kind of transaction and likely to have fewest tax or estate planning implications.

As an aside, if you have enough cash in five different accounts to buy a second home, might you have too much cash? Not sure what your AA target is of course or how much in addition you might have in stocks, bonds and RE investments, but just food for thought!

[Gill]

That leaves one of my two taxable accounts. Yes?

Correct. Don't touch either IRA account at this point.
Gill

[cobra911]

Thanks ... guess I knew the correct answer all along but it's nice to be able to bounce it off the BH's out there.
Concerning the excessive cash balances... Yes, my stupid attempt at "market timing" waiting for stocks to crash and then jump in.
That was 3 years ago!!! Missed a lot of upside with that "dead money". Lesson learned.

[beernutz]

Thanks ... guess I knew the correct answer all along but it's nice to be able to bounce it off the BH's out there.
Concerning the excessive cash balances... Yes, my stupid attempt at "market timing" waiting for stocks to crash and then jump in.
That was 3 years ago!!! Missed a lot of upside with that "dead money". Lesson learned.

You were 6 months away from your big opportunity.