‘Am I out of my mind?’
Jamie Bosse contributes to this MarketWatch article seeking to answer a reader’s question regarding the use of 401(k) savings to purchase a home. Naturally, she needs to know much more about the individual’s circumstances to offer any kind of detailed analysis.
A man of 65 is near retirement and looking to move to Georgia to be close to family. He writes: “I’ve been looking forward to this day for years and it’s finally coming near, but now that I’m here I’m also not sure how to optimize the little funds I have to make sure I don’t run out.”
“Don’t forget about taxes,” she says. If you take $120,000 out of a 401(k), and those are pretax dollars, “you don’t get to spend $120K,” she says. If you’re paying, for example, a 22% federal tax rate and a 5% state tax rate, she says, you might “withdraw” $120,000 but only end up with $87,600.