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Kiplinger: How to Retire Rich

How to Retire Rich: Smart Steps at Ages 30-45

Siphon off cash for a down payment. Sacrosanct as retirement accounts may be, some financial planners consider them fair game for a down payment on a first home. To justify this strategy, you need to have enough time before retirement to replenish the accounts. If you're 45 or older, don't even consider the idea. Also be strategic about which account you tap. With a 401(k), for instance, you'll incur taxes and a 10% penalty on early withdrawals. But with an IRA, Uncle Sam waives the 10% penalty on a distribution of up to $10,000 for a first-time home buyer -- although you'll still owe taxes on the withdrawal. If your spouse is also a first-time home buyer, you can each withdraw up to $10,000 penalty-free. You can always withdraw your contributions from a Roth tax- and penalty-free, but if you're buying your first home, you can take up to $10,000 of earnings tax-free, too, as long as you've had the account for at least five years.

You can usually borrow against your 401(k), an option not available with IRAs. You are allowed to borrow as much as half your balance, up to $50,000, for any reason. You generally have to repay a 401(k) loan within five years or it's considered a taxable distribution. But your employer may allow you as long as 15 years if you're borrowing to buy a home. "If it gets you into the home you want and need," says Yrizarry, "it's an effective use of your money."

Already own your home? Consider refinancing your mortgage if you haven't locked in the low rates available now. You can put the money you free up into savings.


More From Kiplinger:
5 Costly Retirement Surprises
10 Things You Must Know About Social Security
10 Most Tax-Friendly States for Retirees

The opinions expressed are solely those of the author and do not necessarily reflect the views of Comcast.

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