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Can I use 401(k) or IRA money for a down payment, and should I?

You can, but weigh it carefully. With a traditional IRA, first-time buyers can withdraw up to $10,000 of earnings penalty-free (you'll still owe income tax), and Roth IRA contributions can always come out tax- and penalty-free, with up to $10,000 of earnings also penalty-free for a first home. A 401(k) loan lets you borrow up to $50,000 or half your vested balance and repay yourself with interest, avoiding taxes if repaid on time — but if you leave your job, the balance often becomes due fast or counts as a taxable distribution. A straight 401(k) withdrawal before 59½ usually triggers income tax plus a 10% penalty, which is expensive. The bigger cost is lost retirement growth. Tapping retirement should be a last resort after exhausting savings and assistance programs. Model the trade-off at wealthserene.com/tools/opportunity-cost.

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Educational disclaimer. Everything on WealthSerene.com is educational and is not investment advice. Projections and calculations are illustrative; actual results depend on market conditions, your situation and factors outside this tool’s scope. For a decision specific to your situation, consult a qualified financial professional. View full disclosures