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Author: Wradical Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 26  
Subject: Re: Housing equity allowance Date: 7/30/2006 11:29 PM
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I have around $40,000 in my retirement account that is designated housing equity. My wife has around $10,000. Technically, I am supposed to be able to withdraw this money whenever I would like and not be subject to penalties or taxes.

I'm not familiar with the term "designated housing equity."
What I have seen is that some churches and related organizations specifically designate retirement benefits payable from their retirement plans as housing allowance. I'm most familiar with the Methodist and Episcopal church's arrangements.

Is there a limit to how much I can withdraw and when?

That depends on the terms of the plan. It sounds like you have a 401(K) or 403(b) plan. Many churches also have defined benefit plans for clergy and other employees.

The amount that be withdrawn free of income tax, as housing allowance,
in any year, is the least of:

* The amount designated as housing allowance. (No problem here, if the entire amount of benefits from the plan is so designated.)

* The actual amount spent to maintain your home.

* The fair rental value of your home (applies if you live in church-owned property.)

An extra twist can arise when there are multiple plans paying benefits, which can happen if you've been working throughout the country, and your church has different plans for different regions. You have to aggregate the retirement benefits designated as housing allowance, to see if a part of the total is taxable, which can often be the case.

Bill
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