Young home buyers raiding retirement accounts for down payment
Saving enough money for a down payment on a house is often a deal breaker for younger buyers.
A disturbing new report shows that many millennials are coming up with that money by raiding their retirement accounts.
About one in three millennials surveyed by Bank of the West said they had withdrawn savings from their 401(k) or IRA for this purpose.
Owning real estate is a good addition to an investment portfolio, trading off a financially secure retirement for an early home purchase is a terrible idea, personal finance experts say.
"It’s a clear sign that you are not ready to buy yet if you've got your eyes on your 401(k),” said Bruce McClary, vice president of communications at the National Foundation for Credit Counseling. "It's always better to get your financial house in order, clear debt out of the way and then buy a home when it's affordable for you, without cutting into your retirement savings."
After weighing all the pros and cons, should you decide to dip into your retirement account to cover a down payment, go with a loan rather than a withdrawal. You'll need to pay back that loan with interest, but it won't be taxed.
More Info: The 2018 Millennial Study: What we found out