You Can’t Spend Equity

As a first time home buyer, you can take money from a retirement account without penalty to purchase a home. While this may be a good idea for some, for others the long-term effects could prove otherwise.

If you use up your retirement to buy a home, you cannot use that money to retire with. Ultimately you want to be able to pay off your home by the time you are ready to retire to reduce your cost of living. If the method of taking money out of your retirement account does not accomplish this, you may want to reconsider.

There are many other factors that contribute to whether or not you should use retirement money- like how much time do you have to retire, how quickly can you replenish the money, what other money you have saved, and the more elusive opportunity costs lost due to not having that money invested.

As they say- a bird in the hand is better than two in the bush. You cannot spend equity as cash, so if you have a need for it, you would have to get a loan against the equity you tried so hard to create- and as we all should know by now, equity can very relative and volatile.

If you are looking to buy a home and are considering using retirement money, take your time- get advice- but most importantly, do the math.

Make the Choice. Make the Change. Delta.