I am looking at purchasing my first home, as my calculations show it would actually be cheaper to pay a mortgage (and related fees) than it would be to continue renting.
I have some savings, and some investments, some bonds, and fairly low debt (no credit card debt, and less than $3000 in low interest personal debt).
I have two IRA accounts, one normal and one a SIMPLE IRA which my employer contributes to. My IRA is currently "just sitting", after recently being rolled over from a closed 401k account.
I am contemplating "raiding" my normal IRA and just paying the taxes now plus the early-withdraw penalty. This would be for adding to my down payment on a home.
This IRA account currently is valued around $10,000. I have about $3,000 in savings, $2,500 in securities, and another $2,500 in matured us saving bonds.
Raiding this IRA would yield a substantial penalty, since I am currently 26 years old. I'm estimating being able to keep somewhere around $6,000 after taxes and penalties.
Together, this should provide around $14,000 for a down payment and other related expenses. I am seeking a first-time home buyer's program, so this down payment should be more than enough.
I am trying to avoid asking family for any assistance with this purchase, so coming up with any needed funds on my own is preferred. This would also financially wipe myself out, however since my total cost of living would decrease when it was all said-and-done, this may be worth the temporary financial constraint.
Since my IRA is no longer receiving contributions, and a good annual growth rate seems to be around 5%, I figure the home investment will yield a greater return in 5-10 years. So even after initial penalties, it feels like a better investment.
I am seeking advice on this strategy. Perhaps I'm not considering all ramifications of this move.
Is raiding my IRA now in order to bolster my down payment a good option?