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Can you use an IRA to buy a house? Here's when it makes sense.

Can you use an IRA to buy a house? Here's when it makes sense.

Yahoo11-07-2025
If you're in the market for a home, you may have heard that you can withdraw money from your individual retirement account (IRA) for your down payment. You're absolutely correct — the IRS has even carved out specific rules that allow it under certain conditions.
Before you get excited, this rule has two caveats: It's designed for those who qualify as first-time buyers, and it's a move to approach with caution. Using an IRA for a home purchase comes with multiple pros and cons that could impact your finances for decades to come.
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In this article:
Can you use an IRA to buy a house?
Can I use my Roth IRA to buy a home?
Can I use my traditional IRA to buy a home?
So, should you use your IRA to buy property?
Alternatives to using an IRA for a home purchase
FAQs
The short answer: Yes, you can withdraw money from an IRA to buy a house. Whether it's a traditional or Roth IRA, IRS guidelines allow you to withdraw up to $10,000 from either account type without triggering the 10% early withdrawal penalty. If you're married, both you and your spouse can each withdraw $10,000 from your respective IRAs. You'll avoid penalties, provided you meet certain criteria (more on that below). The rules differ slightly for Roth and traditional IRAs.
With Roth IRAs, you can sidestep both the early withdrawal penalty and income tax. With traditional IRAs, you can avoid the early withdrawal penalty, but you will still face income taxes. Let's get into both IRA types in more detail.
If you have the luxury of choosing which type of IRA to tap, using money from a Roth IRA to fund your home purchase is the better option. Because contributions to Roth IRAs are always made with after-tax dollars, you're allowed to withdraw your contributions (not your earnings) at any time, for any reason, tax- and penalty-free.
If you want to withdraw your earnings without any penalties, you'll need to meet a few criteria. First, you'll need to be making a first-time home purchase. The IRS defines a first-time home buyer as someone who hasn't owned a primary residence within the past two years. If you qualify, you can withdraw up to $10,000 in earnings as long as your account has been open for at least five years.
If your account is less than five years old and you still want to withdraw earnings, you should be able to avoid the early withdrawal penalty — but you may still owe income tax on the earnings portion.
Read more: The best mortgage lenders for first-time home buyers
Yes, you can use your traditional IRA to buy a home, but it comes with a few more strings attached than using funds from a Roth IRA. The withdrawal limits are the same ($10,000 max), but the main difference is that you'll be subject to income tax on the entire amount withdrawn.
Unfortunately, there aren't any tax-free loopholes with traditional IRAs since you make contributions with pre-tax dollars.
While the IRS provisions offer home buyers some pretty generous access to IRA funds for home purchase, experts said it's a move most savers should avoid.
'We view leveraging an IRA for home purchase as a last resort,' said Sam Diarbakerly, Boston-based founder and private wealth advisor at Generation Capital Advisors, in an email interview. Why? Because the long-term costs generally outweigh the short-term rewards.
Withdrawing funds from a Roth IRA to fund a home purchase is generally the most palatable option, but Diarbakerly advised approaching it with caution. 'While a Roth withdrawal [of contributions] won't trigger any penalties or income taxes, you're giving up your most valuable asset: tax-free growth.'
Sure, you can supercharge your IRA savings over the years following a withdrawal to make up the difference, but you're still losing the compounded growth on the money you've withdrawn on top of the money you've taken out. Over time, it adds up.
Say you're 29 years old, have a $30,000 Roth IRA balance, and max out your contributions every year at a modest 6% annual rate of return, your balance at 65 would be over $1.18 million.
If you withdraw $10,000 from that same account at 29, your ending balance at 65 would only be about $1.1 million — assuming you're able to max out your contributions every year. The real cost of $10,000 today is roughly $80,000 tomorrow.
Those considering a withdrawal from a traditional IRA could be in for an unforeseen income tax bump without proper planning.
If you already earn on the high end of your current tax bracket, a $10,000 taxable withdrawal could push you into a higher tax bracket. In this case, not only would you lose out on the long-term growth of the money you withdraw, but you'd also be in a higher tax bracket. Then, every penny you earn for the year would be taxed at that higher rate.
Consulting a licensed tax professional before you tap a traditional IRA can help avoid unpleasant surprises.
Are you using your IRA to fund a home purchase because you think it's your only source of funds? It could be time to reconsider.
'When a client considers tapping retirement funds to make [a home purchase] work, it often signals they may be stretching beyond what's sustainable,' said Diarbakerly.
While every buyer will have their reasons for considering an IRA withdrawal to help with buying a home, it could help to speak with a financial professional for alternative ideas. 'Our job isn't to say no — it's to get creative,' Diarbakerly said. 'We look for smarter, more efficient ways to fund a down payment without giving up the compounding power of tax-free growth.'
Dig deeper: How much house can you afford? Use the Yahoo Finance affordability calculator.
You could have more options for affording your home purchase than you think. In the spirit of the aforementioned 'getting creative,' here are three alternatives to tapping your IRA when buying a home.
If you have a 401(k) with your current employer and your plan allows loans, taking out a loan may offer more perks than tapping your IRA.
'Interest rates on 401(k) loans are comparable to what a home equity line might be, and the borrower is effectively paying themselves back the interest into their 401(k) without worry of a penalty or a limit of $10,000,' said Melissa Barkley, an Alabama-based certified financial planner and wealth advisor with Linscomb Wealth in an email interview.
Many 401(k)s have borrowing limits of 50% of your current account balance or $50,000 — whichever is less.
You'll typically have five years to repay the loan when using a 401(k) loan to buy a home. You'll pay interest, but both the interest and the repaid loan balance are credited to your 401(k). You can still contribute to your 401(k) while you have an outstanding loan, so you can keep your retirement savings on track since you eventually recoup everything you borrowed.
If you're using IRA funds for a down payment because you're struggling to come up with 20% down for a conventional mortgage, Barkley also suggested exploring government-backed mortgages to ease the down payment burden.
FHA loans only have a modest 3.5% down payment requirement. If you're an active-duty military member or a veteran, VA loans offer the option of no down payment.
And remember, you don't need 20% down for a conventional loan. A 20% down payment will let you avoid paying for private mortgage insurance (PMI), but many mortgage lenders accept down payments as low as 3% on conventional mortgages.
If you have a modest income and want help funding your home purchase, you could qualify for a wide array of down payment assistance programs.
These programs come in various shapes and sizes, including grants and low-cost, forgivable loans. You'll usually need to meet income and geography requirements. That is, you'll need to buy a home in a certain area to qualify.
Speak with your mortgage lender and real estate agent to explore potential programs in your area. You can also do a quick web search for programs available where you live.
Read more: Best mortgage lenders for low or no down payments
Avoid loans and selling other assets. If you're struggling to cobble together a down payment or cover closing costs, your IRA might seem like a lifeline. For some first-time buyers, especially those who are younger and lack savings elsewhere, using funds from an IRA can be the quickest path to homeownership.
Skip the early withdrawal penalties. The IRS's exceptions for first-time homebuyers mean you can pull from your IRA without paying the typical 10% penalty, up to $10,000. This makes IRA funds more accessible than many other retirement accounts.
Flexible rules for Roth holders. With a Roth IRA, you can access your contributions at any time, and the five-year rule gives you a path to tap earnings with fewer tax consequences.
Sacrificing future growth. The money you withdraw now won't earn compound interest for retirement later. A small withdrawal today could mean thousands less when you retire.
Taxes on traditional IRA withdrawals. Traditional IRA withdrawals are taxed as ordinary income. This could cause you to be bumped into a higher tax bracket or significantly reduce your expected refund.
Not an ideal solution if you're near retirement. For those close to retirement, dipping into your IRA today could leave you short on funds later when you're on a fixed income.
Yes, in some cases, you can use your IRA to buy a house without penalties. If you qualify as a first-time home buyer, the IRS allows you to withdraw up to $10,000 from a traditional IRA penalty-free, though you'll still owe income tax. With a Roth IRA, you can withdraw contributions at any time without penalty, and earnings may also be penalty-free if the account is at least five years old.
Using your IRA to buy a house can be helpful if you're short on cash, but it's not always the smartest move. You'll lose out on future retirement growth and may face tax consequences. It's best considered a last resort after exploring other options, such as down payment assistance or government-backed mortgages with low down payment requirements.
The IRS allows first-time home buyers to withdraw up to $10,000 from an IRA for a home purchase without the early withdrawal penalty. This is a lifetime limit per person. If both you and your spouse qualify, you can each take out $10,000 from your respective IRAs. Roth IRA contributions can be withdrawn at any time, and up to $10,000 in earnings can also be used if your account is at least five years old.
Laura Grace Tarpley edited this article.
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Like that seems like that would be sort of life-changing across generations, right? And you can often do that um for the cost of one date night per month, right? Or sort of one pair of shoes. Welcome to Financial Freestyle here on Yahoo Finance, and I'm your host, Ross Mack. Now look guys, no matter where you are on your journey of building wealth, you can never stop learning, and that's why each and every week I'm giving you guys gems on gems and today's no different because we're talking to one of my really, really good friends, Mr. Ryan Smith, vice president of Atlanta Life Insurance. My guy Ryan, how are you living, baby? I'm good, but it's good to see you. How are you? Man, it's, it's remarkable to have you on here, to the people, to the, listen, let me let y'all in on the secret. I was a young intern at Morgan Stanley. It was very rough around the edges. I was probably like 19 years old, and Ryan was like, Yo, who's this kid and how they let him even get an internship? 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And so when we talk about sort of the life insurance protection gap.A key way to sort of ensure that we start getting people life insurance policies and the appropriate amount will often include term. And so again, I don't take issue with Dave Ramsey's perspective. Um, I do take issue when he attacks, uh, other forms of life insurance cause they all have their value, they all have their sort of method and approach, uh, and so two things can be true at once. You know, the one thing that is not often talked about, right? So say I, you know, I get married at 30.I get a 30 year term policy, right? So, I got, you know, million dollar term policy, $2 million.03 million dollars, whatever it is, but that's only for 30 years till I get to 60. At the end of the day, right? Actuaries, the people that are, you know, coming up with how much I should pay and you know, the people that are crunching the numbers for the goal is one for them to make money, right? And my understanding is less than 2% of term policies actually pay out. And so when I do,Get married at 30, have kids, and I turned 60, I then have no life insurance. And so if I want to get life insurance, now at the age of 60, that premium is considerably different than when I was at 30 because well now I'm closer to, you know, when I do pass away. And so another thing that, you know, I, I didn't take into account when I got my first term policy was, oh, it's cheaper, let me just do this, but the idea is thatWhen I turn 60, I now gotta take a brand new, you know, uh, gotta, gotta do a new physical and got to screen all my health, etc. And so now, as you can get older, right, and so like obviously I'm understanding now I'm doing more research, there's a lot of creative ways where you canYou know, maybe bump up the premium as you start to make more money or something, but like the idea of having a permanent policy does seem more attractive, especially as you can kind of customize it. So, talk about some of those customizable things that the average person doesn't even know about. Yeah, so again, right, like this isn't a mutually exclusive thing. You can have more than one life insurance policy. You can have more than one type of life insurance policy. Um, but as a general matter to the point you just younger you are when you get life insurance, the better, right? And the presumption is that sort of you are healthier at call it 20 or 30, then you will be at 60. And so when you think about sort of pricing a life insurance policy at 60, like that is when some elements of age uh sort of start to reflect themselves and and people find themselves having some health issues or just frankly you probably have more life behind you than you do in front of you, right? And so those are all considerations when it comes to pricing. Um, but one way people think about term is sort of matching it to a liability, right? And so to your point about 30 year term, getting it at 30.A lot of times it's because you have a 30 year mortgage, right? Or you have a child that was just born and you're trying to ensure um that you can support them until they are able to sort of financially support themselves on their own, um, but then there are a number of ways to sort ofAnd shortest you have coverage, the one of the easiest and and sort of why I advocate for permanent life policies because they're permanent, right? And so we don't have this issue. And so you go through your underwriting when you buy the policy, the policy, uh, assuming all goes well is issued, and now you don't have to worry about that so long as you sort of pay your but if we want to sort of think about this from a term perspective too, there's a weird, there's a way to sort of layer different term policies to cover different sort of amounts, different stages of life, different liabilities, different cash flows, uh, and some sometimes people do that. And so like there are myriad ways that you can can utilize life insurance and have it sort of address your needs, your life and then something that we take pride in here is, is sort of building a product that grows with you, right? And so if you think about sort of the normal expectation in someone's life, it's that sort of over the course of time, you earn more and more money, right?And so what that could mean for 21 year old Ross is that I can only afford sort of X amount of premium per month. But then 25 things start going better for me and sort of that same percentage say that was 1% of sort of my earnings, that equals a different number andSo that allows me to sort of have more premium, have sort of more cash value accumulation, etc. and so on and forth. And so at 30, at 35, at 40, so you have this permanent policy, you're paying your premiums, you can raise your premiums and thus accelerate sort of the growth of your cash what you now have is a product that literally grows with you, uh, and adjusts to the stage of life you're in, um, and becomes this asset for you, uh, that you can always have. I love it,man. Look, for the interest of time, I got one more question, but we could go all day, um, not even gonna lie, cause this is uh super for me, butWhere can people find out more information about just general, you know, life insurance questions? Yeah, so we understand that uh there are tons of sort of misconceptions, tons of unknowns, and so for that reason, we launched a financial literacy and insurance literacy called wealth and equity, and it can be found at wealth and And so on there you can learn about financial literacy, you can learn about life insurance, you can literally see video testimonies of the impact and the ways um that life insurance has impacted different people's lives, um, and so and and also to the point of people being unsure how much they need. You can literally go there, sort of put in the details of your unique circ like or situation, uh, and actually get an estimate of sort of how much life insurance you should have based on your unique circumstances. And we think that's sort of a huge equalizer and sort of bridge builder um for those who have concerns about it and furthermore we, you can get a quote and so you can understand sort of one, how much you need and how much that can cost, and then it's your choice on whether or not you and then one other thing I want to talk about, right, isI alluded to this earlier. So Limra, which is sort of the research body for life insurance, um, does a study every year. It's called the Barome study. Their most recent study said that 102 million American adults life insurance or need more life insurance. So relative to sort of what they have, like, for example, they may have a group benefits policy that covers one or two extra salary, that's drastically different when we talked about the figures of sort of needing 10X or 20X. Um, but if we think about sort of what that means from a dollar perspective, they say the gap is call it like.$25 trillion. Um, and if we think about what that means from a premium opportunity, that's $70 billion. If you think about, and that's on an annual basis, so $70 billion of premium on an annual basis. If you think about how life insurance is often sold, it's sold through so every sort of life insurance policy that you sell, um, you're able to generate commission and sort of you just heard the size of the opportunity, $70 billion a year in that's a significant sort of economic opportunity, and I'm all supportive but people sort of getting their real estate licenses and having side hustles, like there needs to be more consideration to this life insurance opportunity cause you're doing good, so you're getting people a product they need. You're protecting them, you're protecting their family, you're giving them something depending on the product that can be an asset. uh, and it can be a significant sort of income generation opportunity for and so, uh, I, I try and sort of tell more, more and more folks about this opportunity because it is vast, it can be lucrative, and you're literally, um, doing a good service by people by ensuring they have these things, and so, uh, go, go tell a friend. Well, that's a million dollars worth of game. People, let's give a roll welcome and thank you to my dog, Ryan Smith of Atlanta Life. And that's it for this episode. People make sure you tune in each and every week. Tell your mama, your auntie, and your cousins to tune in, subscribe, leave a comment, and share with somebody they love. Appreciate you, content was not intended to be financial advice and should not be used as a substitute for professional financial services. 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Palantir Stock Offers ‘One of a Kind Growth.' Should You Buy PLTR Here?

Palantir (PLTR) shares are extending gains today after a Piper Sandler analyst initiated coverage of the big data analytics firm with an 'Overweight' rating. In his research note, Brent Bracelin announced a $170 price target on PLTR, indicating potential upside of another 8% from here. More News from Barchart This Self-Driving Car Stock Is Surging on a Major Nvidia Boost UnitedHealth Stock Spirals Lower Again. Don't Buy the Dip. UNH Stock Falls as UnitedHealth Confirms DOJ Probe. How Should You Play Shares Here? Stop Missing Market Moves: Get the FREE Barchart Brief – your midday dose of stock movers, trending sectors, and actionable trade ideas, delivered right to your inbox. Sign Up Now! Bracelin's bullish call is significant given Palantir stock is already up some 150% versus its year-to-date low set in mid-January. Piper Sandler Downplays Valuation Concerns in Palantir Stock Brent Bracelin agreed that a forward price-earnings (P/E) multiple of more than 400x on PLTR shares makes them a 'high-risk' investment. But investors should own them, nonetheless, since they offer a 'one-of-a-kind growth plus margin model that if proven durable could grow into a $24 billion run-rate by 2032,' his reported added. The Piper Sandler analyst dubbed Palantir stock's explosive rally over the past three months a 'rise of the phoenix moment,' emphasizing that valuation alone shouldn't define this AI 'all-star.' PLTR Shares Could Extend Gains After Q2 Earnings on August 4 On Friday, the investment firm also dubbed Palantir shares a 'secular winner' within the artificial intelligence space. According to Brent Bracelin, the Nasdaq-listed firm will push further to the upside as it continues to gain share 'across two $1-plus trillion total addressable markets.' Piper Sandler's bullish note arrives only a week before PLTR is scheduled to report its earnings for the second quarter. Consensus is for the company to earn $0.08 on a per-share basis, more than 150% higher than the $0.03 a share it earned in the same quarter last year. If the Denver-headquartered firm beats these estimates, it could validate Piper Sandler's positive view and trigger another leg up in PLTR stock. Wall Street Recommendation: Pull Out of Palantir Now Investors should note, however, that other Wall Street firms recommend pulling out of PLTR shares following their meteoric rally since early April. The consensus rating on Palantir stock currently sits at 'Hold' only with the mean target of about $107 indicating potential downside of more than 30% from current levels. On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Sign in to access your portfolio

Everlight Solar Named Milwaukee's Top Choice Winner
Everlight Solar Named Milwaukee's Top Choice Winner

Yahoo

time16 minutes ago

  • Yahoo

Everlight Solar Named Milwaukee's Top Choice Winner

MILWAUKEE, July 24, 2025 /PRNewswire/ -- Everlight Solar is honored to announce its recognition as a Milwaukee Top Choice winner for 2025. This community-powered award celebrates businesses that go above and beyond for the people they serve in Milwaukee, Wisconsin. Selected through public nominations and votes, this award highlights Everlight's commitment to its customers, clean energy, and community impact. "We want to thank the people who believe in our mission as we expand across the Midwest," said William Creech, President and CEO of Everlight Solar. "Our mission is to make going solar simple and affordable for homeowners, and Milwaukee is a great city we're happy to serve." Everlight Solar continues to grow its footprint in the region, providing professionalism and clarity with unmatched support throughout every step of the solar journey. Beyond energy, the company invests in the communities it serves through regular volunteer events and partnerships with local nonprofits like the Guest House of Milwaukee and Adopt-A-Highway. Everlight Solar would like to thank its customers, staff, and partners who voted and helped make this award possible. They remain dedicated to helping more Milwaukee residents harness the sun's power and are proud to be recognized as a trusted leader in the solar industry. For more information about Everlight Solar and to see if going solar is right for you, visit About Everlight Solar Everlight Solar is the fastest-growing solar company in the Midwest, with operations in Wisconsin, Minnesota, Idaho, Nebraska, Oregon, Utah, and Wyoming. Everlight Solar earned a spot on both the 2023 Inc. 5000 and 2024 Inc. 5000 lists in their first two years of eligibility. To learn more about open jobs or going solar for your home, visit View original content to download multimedia: SOURCE Everlight Solar Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data

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