Using 401k For Down Payment On House

Using 401k For Down Payment – Is It Right For You?

After adding money to your 401k plan over several years, you may have built up a lot of money inside your 401k accounts. These accounts could be a desirable supply of funds for investing in a home. Nevertheless, there tend to be rules as well as restrictions upon withdrawals from the 401k accounts. Fortunately, there may be a way for you to make use of the money within your 401k plan. One great way is using 401k for down payment.

Some 401k programs allow participants to consider a loan from the funds inside the 401k. Usually, the 401k plan will limit the quantity of the loan to some certain percentage from the total balance. This implies that you cannot borrow all the money inside your plan, are just some of it. Nevertheless, this quantity may be significant enough to become useful for the long-term objectives.

Borrowing From 401k Plan

Using 401k For Down Payment Fidelity

Here’s a screenshot showing what loans you have available through your 401k plan if you’re using Fidelity.

When a person borrow money from the 401k plan, you borrow the cash from yourself. In additional words, the money is withdrawn out of your account as well as distributed for you.  That means there isn’t a credit check as well as your credit score doesn’t impact in your loan rate of interest.  This is because, there isn’t any risk in order to any lender.  You are repaying yourself. Actually, the curiosity you pay about the loan goes straight into your personal 401k accounts.  It does not go into any financial institution or loan provider.

Be Aware Of The Rules When Using 401k For Down Payment

However, it doesn’t mean you are able to control how so when you pay back the mortgage. The INTERNAL REVENUE SERVICE has requirements that must definitely be met concerning 401k financial loans. As this kind of, the plan may have a set rate of interest that you need to pay whenever you repay the actual loan. Additionally, you should make well-timed, regular obligations, just like every other loan. Usually, most 401k programs require that you simply make regular monthly obligations to be able to fulfill this particular requirement. Check out our 401k calculator to see the impact loans can have on future earnings.

When using 401k for down payment you need to be aware of possible negative situations that may arise.  It is necessary that a person make your own 401k program loan obligations. While you will find no lenders involved, and therefore there isn’t any damage for your credit score or credit history, there could be substantial taxes repercussions with regard to failing to settle the mortgage as decided. Any mortgage principal that isn’t repaid is recognized as a distribution through the IRS. Which means that the entire amount associated with any delinquent loan stability is taxable because ordinary earnings. Even worse, if you’re under grow older 59 1/2, then your distribution is going to be considered an earlier distribution and could be susceptible to a 10 % tax fee.

“Using 401k For Down Payment Does Have Its Advantages!”

I would advice against using 401k for down payment, if you already have the cash sitting around.  Otherwise, the advantages of using 401k for down payment to purchase a house are extremely advantageous to many people. Nevertheless, it is essential to realize that though it is financing to yourself, it continues to be an actual loan, also it must end up being repaid. If you’re able to do do that, then borrowing using 401k for down payment can be a smart method to finance your house purchase.

 

 

How to Fight Inflation

How To Combat Inflation? – 5 Strategies To Fight Inflation

Inflation – Rising Prices – Can Make It Difficult To Get Ahead

Inflation occurs when prices are steadily and noticeably on the rise.  Out of control inflation can wreak havoc on an economy, and for individuals even moderate inflation can make it challenging to get ahead.  The purpose of this article is to provide some concrete, practical strategies regular people can us

e to combat the effects of inflation.

How Inflation Affects Regular People

One of the positives of inflation is that wages generally rise.  Isn’t that great!  If only the story stopped there it would be.  The problem is that inflation causes costs rise as well.  For example, if you rent then each time your lease is up then your rent will noticeably increase, thus eroding the effects of your higher wages.  It’s not just rent.  Inflation causes the price for gas, groceries, electricity, mobile phone usage, movie tickets, clothing, and all kinds of things regular people need and want to rise as well, making it a struggle for regular people to keep their heads above water.

How To Combat Inflation? – Lock In Your Costs!

What if your income is $100 and your expenses are also $100.  Now, if your wages increase to $110 due to inflation but your expenses also go up to $110 then you would just be treading water financially.  However, if your wages went up to $110 but your expenses stayed at $100 THEN you would be getting somewhere.  One of the keys on how to fight inflation is to lock in your expenses.  But how can regular people do that?  Here are some strategies on how to combat inflation.

How To Combat Inflation Fixed RateStrategy #1 – Buy A Home With A Fixed Rate Mortgage

Housing is most people’s most significant monthly expense, so it follows that if you can lock in your housing costs then you really put a stake in the ground when we answer the question of how to combat inflation.  How does a regular person do that?  By buying a home with a fixed-rate mortgage.  Doing so locks in your housing costs, and as inflation increases then your purchasing power can actually increase as well (because your wages should continue to rise, yet your housing costs should remain the same).

Strategy #2 – Refinance Your Variable-rate Mortgage To A Fixed-rate Mortgage

As I stated above, on how to combat inflation, it’s not enough to just to own a home, you need to either own it outright (congratulations if you do!) or you need to refinance to a fixed-rate mortgage.  Why?  Because interest rates tend to rise with inflation, and if every time you get a raise your mortgage resets to a higher amount due to an increase in interest rates then you’ll always struggle to get ahead of the inflation curve.

Strategy #3 – Buy Your Cars Rather Than Lease

Cars are often regular people’s second most expensive monthly cost.  So if inflation strikes then you may have a decent lease today, but when it comes time to renew then the cost to do so will be significantly higher.  On the other hand, if you buy your car then you lock in the cost, and the more years you drive it the more effectively you’ll battle inflation.

Strategy #4 – Have Some Of Your Financial Reserves In A Money Market Account

The stock market struggles to do well during periods of inflation because borrowing costs are high for businesses (due to high interest rates).  Bonds do even worse because as interest rates  increase they take a hit in value.  So what can you use for a financial reserve?  A money market account is a good option because the interest it earns will rise with inflation, and money market accounts also have the advantages of being liquid and relatively safe.  If you want even more safety (at the cost of a lower interest rate) then put your money in an FDIC-backed savings account instead.

Strategy #5 – Avoid Variable-rate (Or Floating) Consumer Debt To The Extent Possible

Again, when inflation rises it takes interest rates along with it.  So if you have a substantial amount of consumer debt then it increases your exposure to the negative effects of inflation.  Credit card debt is one obvious example.  However, a less obvious example is a home equity line of credit with a variable interest rate.  If you’re caught with a high balance (through financing major home improvements or college tuition, for example) then try and lock in your rate if at all possible (check out borrowing against your 401k plan as an alternative).

An Inflationary Economy Unmasks Poor Financial Choices

The strategies above generally work well during most economic cycles, so what’s the big deal?  It’s important to keep in mind that a good (or even a stable) economy can mask less than ideal choices.  For example, if you got a variable-rate mortgage while interest rates are flat or declining you would notice little or no difference between your situation and someone who had a fixed rate.  On the other hand if inflation took off then it would take your monthly mortgage payment with it, and that could cause you to feel a strain on your finances in a very real way.

In summary, inflation has serious and far-ranging effects on both individuals and the broader economy.  While the strategies above may at first blush seem general and applicable to most any economy, they are particular well suited to deal with an inflationary environment.  Thus by taking steps on how to fight inflation you can not only weather it well, but you make it work for you.

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Should I invest in my Company Sponsored 401K Retirement Plan?

Should I invest in my Company Sponsored 401K Retirement Plan?

Should I invest in my company’s 401k plan? The answer is YES!!! Take advantage of your company sponsored 401k retirement plan.

Government programs for retirement income, like social security, are becoming very unpromising. And retirement healthcare has been so up in the air lately in the political world. So many changes…who can keep track?! And Company paid Pension Plans are almost extinct now, too!

Well one thing that I do know is that no one is guaranteed to pay for your future…except for you!

 

Reasons why to invest in your company sponsored 401k retirement plan

  • Most plans have a match % (which means they give you the matched amount for FREE! If you don’t invest at least the matched amount, you are missing out on free money!
  • The money is invested pre-tax, out of your paycheck before the taxes are taken out.
  • Yes, the plan is often based on funds that are based on the stock market (so there is some risk involved), but that means the potential for growth is big! Remember, the bigger the risk, the bigger the potential returns.
  • You do usually have the power to choose your risk and diversify! Many companies offer “safer” choices for employees nearing retirement (usually funds recommend to have more aggressive investment strategies when you are younger, and safer ones as you get older.
  • The fund always has an investment manager or help person that you can ask questions to! They can help you pick what is best for you, your family and your future!
  • You can use our free 401k calculator to find out how much money you should be saving, based on your age and expenses.

Have you been putting any money into your 401k, yet? Do you wish you would have started sooner?

Want To Learn About The Basics of Investing?

Basics of InvestingGetting Started With The Basics of Investing

The financial industries are dynamic, fast-paced and complex. Keeping up to date with the latest trends, trades, booms and busts is a daunting task, even for the seasoned investors among us. But with a bit of help from online resources, even we little Davids can conquer the basics of investing and currency trading. All it takes to learn (and keep up with) the basics of investing is to follow a few golden rules: arm yourself with the best available resources, get educated and keep up.

In the list below, you’ll find some of the best freely available resources for learning the basics of investing and currency trading. This list has not been commissioned, and the author has no affiliations with any of the mentioned resources. They have been selected based the merit of their content.

Basics of Investing: Get educated with these free learning resources

Arm yourself with free online resources to learn the basics of investing. The beauty of online learning is that you can gain multiple perspectives from national and international experts in the finance industry. As they say, variety is the spice of life (and knowledge is the main ingredient) – so don’t be afraid to gather information from many sources. Click the links to visit these websites and get started on your journey to becoming an investing whiz:

      1. Investopedia (USA/International)

        Find articles covering the basics of Financial Concepts to in-depth Market analysis at Investopedia.com. Get share market advice and learn about how to trade currencies from one of the world’s leading stockbroking information sources.

      2. Harvard Business Review (USA/International)

        Learn about Finance Essentials and everything business by visiting HBR Learning.

      3. Khan Academy (USA/International)

        Offers free online learning about micro and macroeconomics, including comprehensive Finance and capital markets courses. Learn about stockbroking and investing at Khanacademy.org.

      4. New York Institute of Finance and Technology (USA/International)

        Nyift.com offers some finance courses for free. Popular free courses include the Wall Street Training Course and What is Fixed Income (Introduction to Fixed Income Securities). This is another great resource for share market advice, learning about stockbroking and how to trade currencies.

      5. MoneySmart (Australian)

        MoneySmart.gov.au is an Australian Government initiative supported by the Australian Securities & Investment Commission. Learn about investing basics, investments paying interest, complex investments and get investing warnings in one place. MoneySmart offers accessible and reliable information, adhering to their promise of “simple guidance you can trust”.

      6. The Financial Basics Foundation (Australian)

        The FBF is a non-profit organisation that provides free financial literacy resources for educators and the public. Financialbasics.org.au is especially targeted towards teachers of school-aged children, but has handy resources for anyone beginning studies in finance or looking for share market advice.

Use the above resources to learn about investing, stockbroking, how to trade currencies and get up-to-date share market advice. Visit the above sites as well as financial news sources, blogs, radio sources and speak to your real estate agent, financial adviser and Australian stockbroker to stay ahead of the game with the latest in the financial industries.