If you’re short on cash for a down payment, and you happen to have a retirement plan at work, you might be wondering if you can use a 401(k) to buy a house. The short answer is yes, you are allowed to use funds from your 401(k) plan to buy a home. It is not the best move, however, because there is an opportunity cost in doing so; the funds you take from your retirement account cannot be made up easily.
Here’s a look at the details of tapping your 401(k) for the joys of homeownership, along with some better alternatives. Throughout, we’ll assume that you are under 59½ years old and still employed.
- You can use 401(k) funds to buy a home, either by taking a loan from the account or by withdrawing money from the account.
- A 401(k) loan is limited in size and must be