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I live in Dallas, making $130k. No state income.

That makes it a little worse. Even though you've been able to itemize in the past, your property taxes (around $5k) and mortgage interest (maybe $6k - depending on your interest rate) probably don't exceed the threshold of $12k for the standard deduction.

Taxes on $118k in regular income: $25,490

Taxes on the withdrawal:
$27,500 @ 24%: $6,600
$42,500 @ 32%: $13,600
$140,000 @ 35%: $49,000

Penalties @ 10% on $210,000: $21,000

Total taxes and penalties on the withdrawal: $90,200

Just to be sure you understand what you will be paying in total taxes on your income for the year that you do this...

Adding in the income taxes on your regular income: $115,690 for income taxes

SS & Medicare tax on $130k:
$128,700 (SS earnings limit) @ 6.2% = $7,979
$130,000 @ 1.45% (Medicare) = $1,885

Total income based taxes: $125,554

That's almost your entire earnings from your job for the year going to taxes on your income. Do you really want to do that?

I'm single. My 401k is my only investment. I do have a home worth about $250k, but I still have $170k to pay. For retirement, I'll have social security, no pension. I plan to live on the boat for retirement.

If you really want to get a boat that can be lived on (i.e. has a galley, a head and berths), you should look at getting a mortgage from a lender on it, rather than cashing out a retirement plan. As a 'live on' boat, it can be considered either a second home, or a vacation home, and the interest on the loan, as well as any property taxes, would be deductible. There are caveats for deductibility as a vacation home - you can't use it for your own use, or let friends/family use it at less than the rental market rate for more than 14 days in a calendar year. However, as a vacation home, if you rent it out, that would give you some income to help pay for the mortgage and maintenance. You may have to have a different type of insurance if you are renting out the boat, so be sure to let your insurance agent know what you are planning on doing.

If you go this route, you should have ALL OTHER DEBT except your first mortgage paid off completely. That would include, but not be limited to: NO car loans, credit cards, personal loans, HELOCs, student loans, 401(k) loans, etc. In addition, you should have an emergency fund of at least 6 months of expenses (mortgages, property taxes, insurance, food, utilities, etc.), plus the down payment for the boat, saved in a liquid account before you try to get financing. I would strongly suggest that you finance the boat for no more than 10 years, so you can be sure to have it paid off before you want to retire.

At your income level, you should still be able to max out your 401(k), as well as fund a Roth IRA, in addition to paying for your house, your boat and other living expenses, without going into debt. If you can't do all that, you need to take a serious look at your spending.

If you can't get into a financial position to have all your debt paid off, plus the liquid savings and maxing out retirement accounts while still borrowing to purchase a boat, then you really can't afford to buy a boat now. You would be better off to work on paying off all debt, including your mortgage, and when you sell your retire and sell your house, buy the boat with some of the cash from your house.

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