On Apr 18, 11:55 am, johntalmadge.wri...@[EMAIL PROTECTED]
wrote:
> My wife and I are looking to buy a house; we are hoping to drawdown on
> my retirement savings, as first-time buyers, for the down payment.
> Here’s the catch: I know we can draw down an IRA penalty-free for a
> home purchase, but my investments are in a 403b. Is it legally
> possible for me to rollover my funds into a Traditional IRA, expressly
> for the purpose of drawing those funds down penalty-free? Also, I
> assume the disbursement is taxed at filing time, not front-loaded
> (netting down the disbursement) and adjusted at tax time. Am I right?
> Finally, how quickly can this process take place?
I found this FAQ and answer on the irs.gov web site:
---
If I can't withdraw funds penalty free from my 401(k) plan to purchase
my first home, can I roll it over into an IRA and then withdraw that
money to use as my down payment?
Yes, if you are receiving a distribution from a 401(k) that is
eligible to roll over into a IRA and you meet all of the
qualifications for an IRA distribution for a first-time homebuyer.
Your plan administrator is required to notify you before making a
distribution from your 401(k) plan whether that distribution is
eligible to be rolled over into an IRA. To see if you qualify for a
distribution to be used as a first-time homebuyer, refer to Chapter 1
of Publication 590, Individual Retirement Arrangements (IRAs).
---
It seems that the key question is whether your employer will allow you
to do an IRA rollover while still employed. I think the only way to
find that out is to ask your 403(b) administrator.
IRS Publication 590 says:
---
First home. Even if you are under age 59½, you do not have to pay
the 10% additional tax on up to $10,000 of distributions you receive
to buy, build, or rebuild a first home.
---
It goes on to list a number of requirements that you must meet. I
think this allows you to avoid the penalty, but not the taxes on an
IRA distribution of $10,000. Thus, after you pay income tax at your
marginal federal + state rate, you still might have a few thousand
dollars left for your house.
If you are allowed to do the rollover, no tax should be withheld at
that time, and if you then take the distribution, the IRA custodian
will ask you whether or not you want taxes to be withheld, and you can
tell them "No."
Dave
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