Liquidating 401k to buy home

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Lori Mc Dermott, an insurance broker from West Seneca, N.

Y., took out a ,000 loan against her 401(k) for a downpayment on a home in Sarasota, Fla., last December.

Without mortgage insurance, lenders will advance only 0,000 on a first mortgage, leaving you ,000 short.

One possible source of the needed ,000 is your 401K account.

It always seems to cost a lot of money whenever life goes off the rails into uncharted chaos territory.

After the emergency fund is drained from too many emergencies, where can you turn?

Any thoroughly researched discussion on early withdrawals from a retirement account should begin with a firm reminder on the importance of keeping an ample emergency fund. And the next is retirement accounts," says Bonnie Kirchner, author of "Who Can You Trust With Your Money?

However, if you're considering taking money out of a retirement account early, it's very likely that the emergency-fund horse has already left the barn, so to speak."There are three levels of liquidity. ""Even though (a retirement account) is a source of liquidity in an emergency, they should really try not to touch it," she says.

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"This new scenario involves people losing significant personal funds since they are financing real estate through retirement accounts, savings and life insurance." Galaris should know.“If you have a 401(k), you can borrow up to ,000 or half of your vested balance, whichever is less,” Barzideh says.“You are required to pay back the loan with interest, though, so you’ll have another debt to pay that digs into your cash flow.“A younger person will hopefully have a long time to rebuild retirement savings, so borrowing or withdrawing some of it isn’t necessarily wrong, but they shouldn’t take unnecessary risks, either.” Doug Benner, a senior loan officer with Embrace Home Loans in Rockville, Md., says borrowing from your retirement is much better than withdrawing money because you can repay yourself.The rules about how you can leverage your retirement savings vary according to the type of investment.

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