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Personal Finances / Buying or Selling a Home
|Subject: Re: When can I qualify for a loan?||Date: 4/27/2013 12:49 PM|
|Author: EvanED||Number: 125186 of 127222|
If you take money from an IRA and redeposit it in an IRA within 60 days, that's a rollover.
That's what I meant by "essentially borrow". I brought that up in the context of the "fairly big ticket" repair item, like a furnace. I would have to withdraw the money for the repair, but during that 60-day span I would likely earn enough (especially if I especially tried to be frugal) to be able to redeposit it in full. (My estimate of how much I could afford to do this and still make it back in time to recontribute is either $8K or $13K depending on when it happens.)
Yes, I know the IRS would call that a rollover. Yes, I know it's limited to 60 days. Maybe you disagree with me saying "borrow" before. But to me, it walks and quacks like borrowing -- I take money out, use it, and a little bit later put it back. (Perhaps in a separate account.)
IRAs are retirement accounts, not piggy banks to be raided when you can't live without a Twinkie and have to run down the alley to Paul's Grocery to get a package.
Yes, I definitely get that's the idea. However, what I would say is that in my case the situation is a little bit complicated. It's complicated because as a grad student I haven't really had the opportunity to build both an actual emergency fund and a retirement account. I really wanted to contribute to some retirement account (esp. because I guessed that the time I opened it was a good time to get into the stock market, and it was), but I couldn't have done so for a couple additional years if I built up an explicit emergency fund. I chose the Roth specifically because you can withdraw your contributions without penalty -- that was my backup in case something went horribly awry. (And to be clear, I've never had to tap it.)
Because of that, the Roth to me currently serves a dual role -- it is both a retirement account and emergency fund. It's not really a matter of "don't treat your Roth as an e fund" because that ignores the above reality. The question really is: At some point in the future this will change, and it will become a "pure" retirement account -- when will this happen? My argument is it's not totally unreasonable to say "a few months after I buy a house".
You seem to be arguing that building an efund and switching the Roth over to "pure retirement account" should come before the house. That's fine, and I'll definitely consider it. But does my explanation make things a bit more clear as to how I'm thinking about the situation, even if you disagree? (Perhaps it was already clear and I didn't write anything you hadn't already picked up.)
However, if you see opportunities in the home to re-purpose a den to a third bedroom by adding a closet, or put up a non bearing wall in a large room to section off a third bedroom, then you will add significant value to your two bedroom bargain
That's an interesting idea I hadn't thought of too much before. I'll keep it in mind. (I had mostly thought about the "add a bathroom to a 1-bathroom" home remodel, and that of course sounds like it can be horrendously expensive. Your suggestion to figure out if it's possible to piggyback is good.)
Particularly in cold wintered WI, you want a garage. Two car would be best. It doesn't matter that you expect to use the bus. Future buyers will not.
Just because I plan on using the bus to commute doesn't mean that I don't have a car. :-) Yes, I totally will be looking for a garage. (Or at least some really cheap place without a garage where I could productively put one up.)
True, but it being in computer science sure doesn't hurt. I'm stunned at the internship our 18 year old got for this summer, even after just one year of school. He was told at school that internships typically go to go to Juniors and above, yet he still got an extremely well paying full time summer gig with only 30 credits under his belt. The market is hungry for comp sci degrees.
Also true, but at the same time I think there's not a lot around here that I would be interested in taking. So that would mean it wouldn't be just a matter of going and getting another job, but I'd have to sell.
Further, Evan could look at establishing a line of credit when he gets his mortgage, assuming he qualifies for the added debt, or see if his family is secure enough to provide him with a short term emergency loan if something came up. I would rather our kids touch base with us to discuss the potential for an emergency loan than tap their Roth.
Also possibilities; in some sense, I'm trying to argue what I can do from a completely self-sufficient point of view. Though if I was a $5K repair or something like that where I'd just have to withdraw the money short term then roll it over, I might just do that as the consequences seem quite small.
What do you lose by delaying your house purchase for a year? A small amount of appreciation. (Lord willing and the creek don't rise. House appreciation in the last several years has been low or negative -- so you wouldn't actually miss out on anything.)
That's the return you'd be giving up.
A small amount of appreciation plus any rent that you pay during that year that costs more than interest+insurance+prop tax., plus the tax deductions of the remainder. And that's just the financial side. On the non-financial side I'd either have to rent a house for that year (which would add even more to that) or put up with living in an apartment for longer, neither of which I really want to do. The financial situation isn't as important as those.
First off is the idea that a 4 year holding period is long enough. It isn't.
Even if I believed you, and I'm still not sure that I do, this still falls under the last statement above. If it wound up that I'm, say, 10% of the house cost in the hole after those four years relative to rental costs, it'll still have been worth it to me on balance.
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