How to Withdraw From a Retirement Account to Buy a House

Withdrawing from a retirement account can help with a home purchase.

Withdrawing from a retirement account can help with a home purchase.

Typically, withdrawing funds from your retirement account before age 59 ½ is too costly due to income taxes and early withdrawal penalties. If you are buying a home, however, you may be allowed to withdraw money for that sole purpose without the associated penalty. Among the most popular retirement plans are traditional IRAs, Roth IRAs and 401(k)s. Under certain circumstances, you may be able to withdraw money from any of those plans to use toward the purchase of a home.

Decide the amount you wish to withdraw from your traditional IRA and fill out the necessary paperwork with your financial institution. You may withdraw up to $10,000 from your traditional IRA for the first-time purchase of a home. "Generally," the IRS explains in Publication 590, "you are a first-time homebuyer if you had no present interest in a main home during the 2-year period ending on the date of acquisition of the home which the distribution is being used to buy, build, or rebuild. If you are married, your spouse must also meet this no-ownership requirement." If a home is purchased within 120 days of the withdrawal, the 10 percent withdrawal penalty is waived. The amount is still subject to income taxes. Withdrawals do not need to be repaid. Claim your withdrawal on your income taxes as gross income the following year.

Determine the amount you need to withdraw -- up to $10,000 -- from your Roth IRA. In addition to being a first-time home buyer, you must have owned the Roth account for at least five years. Obtain and fill out the appropriate paperwork from your financial institution. You may withdraw any amount of your original contributions tax-free if you meet the five-year requirement. Early distributions of earnings are subject to income tax. Roth IRA withdrawals do not need to be repaid. File your taxes and note the withdrawal. Specifying that the withdrawal was taken from a Roth IRA will ensure only earnings are taxed.

Identify the amount you need to borrow from your 401(k). You are allowed to borrow half your vested balance or $50,000, whichever is less, without incurring a penalty or taxes. Your employer will provide the paperwork for your loan. Taking a loan from your 401(k) instead of a straight withdrawal will protect you from paying taxes and penalties. Make payments on your 401(k) loan. Principal and interest on such loans typically must be paid back within five years, but an employer may agree to a 15-year plan for a mortgage. Note the amount you borrowed on your income taxes as part of your gross income.


  • IRS Publication 590 explains that if both you and your spouse meet the definition of first-time home buyer and both of you have an IRA, you may each withdraw up to $10,000 to use toward the purchase of a home without incurring the 10 percent penalty.


  • If you are unable to purchase a house with 120 days of your IRA withdrawal, be sure to roll the money back into an IRA to avoid taxes and penalties.
  • A loan from a 401(k) must be repaid in full before leaving your employer.

About the Author

Lynn Starner has been writing professionally since 2004, specializing in business-related topics. She holds a both a bachelor's and a master's degree in business. She loves reading, writing, and talking about business with a particular fondness for small businesses.

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