Buying a house with a 401(k)

[Smeghead]

I have heard that one of the few ways you can withdraw money from a 401(k) before retirement without having it be very heavily taxed is to use it to buy your first house. Is that true? If it matters, my wife and I actually have both 401(k) accounts and 403(b) (the equivalent for government workers) accounts, because a few years ago we were reclassified as government workers.

[UltraVires]

@Smeghead

I have heard that one of the few ways you can withdraw money from a 401(k) before retirement without having it be very heavily taxed is to use it to buy your first house. Is that true? If it matters, my wife and I actually have both 401(k) accounts and 403(b) (the equivalent for government workers) accounts, because a few years ago we were reclassified as government workers.

Yes, but the limit you can use is $10k without the PENALTY. You still get taxed on the income, and homes with the prices they have today require much more than $10k.

Above that you get hit with the taxes AND the penalties for early withdraw.

The feds at their finest. Fashion a rule that is inflexible and punishes home ownership…

[Neptunian_Slug]

@Smeghead

I have heard that one of the few ways you can withdraw money from a 401(k) before retirement without having it be very heavily taxed is to use it to buy your first house. Is that true? If it matters, my wife and I actually have both 401(k) accounts and 403(b) (the equivalent for government workers) accounts, because a few years ago we were reclassified as government workers.

I actually took a loan form the 401K to buy my house. There are risks to that strategy. But I was reasonably confident that my bonus would cover it come January. So you can do it that way as well as long as you have a strategy to pay it back.