How Home Buyers Can Tap an IRA Penalty Free

You can withdraw money from your retirement savings to pay for a house, but the rules are different for Roth and traditional IRAs.

(Image credit: Courtney Keating)

Question: My husband and I would like to help our son make a down payment on his first home, and we're thinking of tapping our IRAs, but we're not 59½ yet, so we’re worried about incurring a penalty. What are the rules for withdrawing money from an IRA to buy a house?

Answer: The rules are different for traditional IRAs and Roth IRAs. With a Roth, you can withdraw contributions for any reason at any time without taxes or penalties. And you and your husband can each take up to $10,000 in earnings from your Roth IRAs for a first-time home purchase without a 10% early-withdrawal penalty. If you’ve had your Roths for at least a five-year period (five calendar years, counting the year you made the first contributions), the earnings are tax-free, too.

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Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.