<#-- Rebranding: Header Logo--> <#-- Rebranding: Footer Logo-->

Is using money from my Roth IRA as a down payment for a house the same as swapping my investment for real estate investment?

I am 63 years old, currently married, and have about $150,000 in my Roth IRA. I want to buy my own house, so I propose using at most $100,000 from my Roth IRA for a down payment. Wouldn't that be like swapping stock investment for real estate investment?

Estate Planning, Investing, IRAs, Real Estate, Stocks
Sort By:
Most Helpful
last month

The short answer is no, the two are not the same.  First, investing in a home is not always a good investment, it may or may not go up in value.  There are also costs of ownership and sale that need to be taken into account as part of the cost. In addition, you are personally consuming this investment which makes it different than an investment held for the sole purpose of investing.

There are also major tax differences in a Roth IRA and an investment in your home.  You are probably aware that the Roth IRA earnings are tax-free both state and federal when you remove them.  The Roth is not subject to RMD rules making it more attractive. The sale of a home is exempt as to federal tax for the first $250,000 in gain, $500,000 if you own it jointly.  State tax laws vary, many do not exclude the same amount as the IRS does for federal taxes.

Buying a home may be more important to you than the tax consequences, is your area experiencing increases in home prices?  Will this provide you stability in your living situation?  Do you need protection from rising rents in your area?

You do not say if you have other alternatives to providing the down payment for your home, or what other sources for retirement income that you have.

If you do have personal investments or cash, utilizing them for your downpayment might be a better way to come up with the money.  Then keep your Roth IRA intact for your retirement income use. A mortgage is a good idea since rates are historically low which makes a mortgage more desirable.





last month