What is the best way to get cash from my retirement accounts for a home down payment?
You can withdraw the contributions you made to Roth IRA tax free. Any withdrawals from Roth IRA count first towards the contributions, then conversions, and only then towards the gains which are taxable. You can also withdraw up to $10000 of the taxable portion penalty free (from either the Traditional IRA or the Roth IRA, or the combination of both) if it is applied towards the purchase of your first primary residence (i.e.: you don't own a place yet, and you're buying your first home, which will become your primary residence). That said, however, I cannot see how you can buy a $250K house. You didn't say anything about your income, but just the cash needed for the down-payment will essentially leave you naked and broke. Consider what happens if you have an emergency, out of a job for a couple of months, or something else of that kind. It is generally advised to have enough cash liquid savings to keep you afloat for at least half a year (including mortgage payments, necessities and whatever expenses you need to spend to get back on track - job searching, medical, moving, etc). It doesn't look like you're anywhere near that. Remember, many bankruptcies are happening because of the cash-flow problem, not the actual ability to repay debts on the long run. Given that utilizing all the funds available to you drains your retirement and leaves you with very little cushion for unforeseen events (as already noted), it may be best to use a smaller amount for closing and just deal with the PMI for a couple years. PMI is likely less than the taxes/penalties incurred from withdrawing a full 20% + closing costs. Let alone the lost earning on the accounts (above your mortgage interest rate); but personally I think the stability of significant home equity is worth more than anticipated stock gains. I would recommend pulling enough to buy the house comfortably without dipping too deeply in any one area, while still paying down your balance to where you can eliminate PMI quickly (say 2-3 years). Your limits for each account are approximately: Roth IRAs:  Traditional IRAs: Brokerage (non-retirement): Checking: Things to consider:   If you are current on your payments, you can request PMI removal once your loan-to-value drops below 80% - it also terminates automatically when it is scheduled to drop below 78% (not if it actually has). Many loans have a 2 year minimum PMI period though, regardless of your Loan To Value (LTV) changes. LTV changes could be from: The best way to get cash from retirement is to not do it.  Leave the retirement savings alone.  Start saving for house down payment.  Look for ways to squirrel away money for that down payment.  Consider payment plus insurance, taxes, and maintenance costs.  If all that comes in less than a rental, you're probably better off buying.  Most likely it will not.  Make sure that when you go to buy, you have 20% down, AND an emergency fund that will cover you for 3 months of expenses at the new, higher, rate.  Hint, that'll probably be in excess of 10k based on a single person with a 1.5-2k a month mortgage, plus utilities and food.  And as a home owner, you will have a lot of things for which that emergency fund will come in handy.  It's a matter of when, not if.  Consider, 5k for a new roof, 6k for a hvac system, 1.5k for exterior paint, 500 for the plumber, 750 for pest control, 250 to have the tree removed that fell in a storm.  1000 for a new fridge.  500 for a new water heater.  1200 for washer and dryer.  ALL of these are periodic costs, and they all able to fail before they're supposed to.
"The optimal down payment is 100%. The only way you would do anything else when you have the cash to buy it outright is to invest the remaining money to get a better return.  When you compare investments, you need to take risk into account as well.  When you make loan payments, you are getting a risk free return.  You can't find a risk-free investment that pays as much as your car loan will be.  If you think you can ""game the system"" by taking a 0% loan, then you will end up paying more for the car, since the financing is baked into the sales [price in those cases (there is no such thing as free money).  If you pay cash, you have much more bargaining power.   Buy the car outright (negotiating as hard as you can), start saving what you would have been making as a car payment as an emergency fund, and you'll be ahead of the game. For the inflation hedge - you need to find investments that act as an inflation hedge - taking a loan does not ""hedge"" against inflation since you'll still be paying interest regardless of the inflation rate.  The fact that you'll be paying slightly less interest (in ""real"" terms) does not make it a hedge. To answer the actual question, if your ""reinvestment rate"" (the return you can get from investing the ""borrowed"" cash) is less than the interest rate, then the more you put down, the greater your present value (PV). If your reinvestment rate is less than the interest rate, then the less you put down the better (not including risk).  When you incorporate risk, though, the additional return is probably not worth the risk. So there is no ""optimal"" down payment in between those mathematically - it will depend on how much liquid cash you need (knowing that every dollar that you borrow is costing you interest)." The rent versus buy question is a deeply personal one in which your personal desires for a living space need to be carefully combined with what makes economic sense.  Do you want your own place with all the joys of having it be yours and all the pains of having to handle all the maintenance and be the one ultimately responsible?  Have you tried living for a few months putting aside the amount required for not only a mortgage payment but the taxes and insurance on a house/condo in your price range to see if you can really afford it?  You can use a real estate website such as trulia to see the assessments of some for sale homes and figure out tax values.  The average home insurance in the US is around $900/year if I remember right - more for homes that are more expensive and less for less expensive ones, with flooding and other hazards as a factor.  Make sure you can afford to pay for all these items. From a financial perspective realize that you'll always be spending money on your living space.  Even if you pay for a house with cash you will be paying property tax and maintenance and would be wise to continue paying for insurance.  The value of the house at that point is, as contributor fennec often says, the rent you aren't paying. I personally don't recommend trying to time the market.  You can't predict the future - will real estate in your area be a double dip or has it bottomed and is it going up?  What you can do is buy a home only when you are sure that you can deal with its relative lack of liquidity by staying there for a long time.  Five years is usually a reasonable minimum.   There is a way that I recommend figuring out if it is likely bad financial decision to buy, and that's by looking at a financial comparison of renting versus buying.  In some cases even with the bursting of the bubble it is still a bad deal to buy.  DC went from renting being more cost effective to buying, but San Francisco is one area where buying is still not necessarily the best choice.  To figure out what the case is for your area, look at the New York Times rent versus buy calculator.  Find a home for rent on craigslist similar to what you'd look to buy.  Find a home for sale on one of the MLS aggregator sites that represents something you think you'd like.  Plug in the numbers.  Figure out how many years you'd have to stay in your purchase for it to be a good deal. In the likely event that the calculator says buy, start saving if that's what you really want.  You're never going to be able to absolutely guarantee that you won't be upside down.  What you can control is getting as much principal in that house as you can.  The more you have, the less likely you will be upside down.  Build a down payment now, reap the rewards later. "Concise answers to your questions: Depends on the loan and the bank; when you ""accelerate"" repayment of a loan by applying a pre-payment balance to the principal, your monthly payment may be reduced. However, standard practice for most loan types is that the repayment schedule will be accelerated; you'll pay no less each month, but you'll pay it off sooner. I can neither confirm nor deny that an internship counts as job experience in the field for the purpose of mortgage lending. It sounds logical, especially if it were a paid internship (in which case you'd just call it a ""job""), but I can't be sure as I don't know of anyone who got a mortgage without accruing the necessary job experience post-graduation. A loan officer will be happy to talk to you and answer specific questions, but if you go in today, with no credit history (the student loan probably hasn't even entered repayment) and a lot of unknowns (an offer can be rescinded, for instance), you are virtually certain to be denied a mortgage. The bank is going to want evidence that you will make good on the debt you have over time. One $10,000 payment on the loan, though significant, is just one payment as far as your credit history (and credit score) is concerned. Now, a few more reality checks: $70k/yr is not what you'll be bringing home. As a single person without dependents, you'll be taxed at the highest possible withholdings rate. Your effective tax rate on $70k, depending on the state in which you live, can be as high as 30% (including all payroll/SS taxes, for a 1099 earner and/or an employee in a state with an income tax), so you're actually only bringing home 42k/yr, or about $1,600/paycheck if you're paid biweekly. To that, add a decent chunk for your group healthcare plan (which, as of 2014, you will be required to buy, or else pay another $2500 - effectively another 3% of gross earnings - in taxes). And even now with your first job, you should be at least trying to save up a decent chunk o' change in a 401k or IRA as a retirement nest egg. That student loan, beginning about 6 months after you leave school, will cost you about $555/mo in monthly payments for the next 10 years (if it's all Stafford loans with a 50/50 split between sub/unsub; that could be as much as $600/mo for all-unsub Stafford, or $700 or more for private loans). If you were going to pay all that back in two years, you're looking at paying a ballpark of $2500/mo leaving just $700 to pay all your bills and expenses each month. With a 3-year payoff plan, you're turning around one of your two paychecks every month to the student loan servicer, which for a bachelor is doable but still rather tight. Your mortgage payment isn't the only payment you will make on your house. If you get an FHA loan with 3.5% down, the lender will demand PMI. The city/county will likely levy a property tax on the assessed value of land and building. The lender may require that you purchase home insurance with minimum acceptable coverage limits and deductibles. All of these will be paid into escrow accounts, managed by your lending bank, from a single check you send them monthly. I pay all of these, in a state (Texas) that gets its primary income from sales and property tax instead of income, and my monthly payment isn't quite double the simple P&I. Once you have the house, you'll want to fill the house. Nice bed: probably $1500 between mattress and frame for a nice big queen you can stretch out on (and have lady friends over). Nice couch: $1000. TV: call it $500. That's probably the bare minimum you'll want to buy to replace what you lived through college with (you'll have somewhere to eat and sleep other than the floor of your new home), and we're already talking almost a month's salary, or payments of up to 10% of your monthly take-home pay over a year on a couple of store credit cards. Plates, cookware, etc just keeps bumping this up. Yes, they're (theoretically) all one-time costs, but they're things you need, and things you may not have if you've been living in dorms and eating in dining halls all through college. The house you buy now is likely to be a ""starter"", maybe 3bed/2bath and 1600 sqft at the upper end (they sell em as small as 2bd/1bt 1100sqft). It will support a spouse and 2 kids, but by that point you'll be bursting at the seams. What happens if your future spouse had the same idea of buying a house early while rates were low? The cost of buying a house may be as little as 3.5% down and a few hundred more in advance escrow and a couple other fees the seller can't pay for you. The cost of selling the same house is likely to include all the costs you made the seller pay when you bought it, because you'll be selling to someone in the same position you're in now. I didn't know it at the time I bought my house, but I paid about $5,000 to get into it (3.5% down and 6 months' escrow up front), while the sellers paid over $10,000 to get out (the owner got married to another homeowner, and they ended up selling both houses to move out of town; I don't even know what kind of bath they took on the house we weren't involved with). I graduated in 2005. I didn't buy my first house until I was married and pretty much well-settled, in 2011 (and yes, we were looking because mortgage rates were at rock bottom). We really lucked out in terms of a home that, if we want to or have to, we can live in for the rest of our lives (only 1700sqft, but it's officially a 4/2 with a spare room, and a downstairs master suite and nursery/office, so when we're old and decrepit we can pretty much live downstairs). I would seriously recommend that you do the same, even if by doing so you miss out on the absolute best interest rates. Last example: let's say, hypothetically, that you bite at current interest rates, and lock in a rate just above prime at 4%, 3.5% down, seller pays closing, but then in two years you get married, change jobs and have to move. Let's further suppose an alternate reality in which, after two years of living in an apartment, all the same life changes happen and you are now shopping for your first house having been pre-approved at 5%. That one percentage point savings by buying now, on a house in the $200k range, is worth about $120/mo or about $1440/yr off of your P&I payment ($921.42 on a $200,000 home with a 30-year term). Not chump change (over 30 years if you had been that lucky, it's $43000), but it's less than 5% of your take-home pay (month-to-month or annually). However, when you move in two years, the buyer's probably going to want the same deal you got - seller pays closing - because that's the market level you bought in to (low-priced starters for first-time homebuyers). That's a 3% commission for both agents, 1% origination, 0.5%-1% guarantor, and various fixed fees (title etc). Assuming the value of the house hasn't changed, let's call total selling costs 8% of the house value of $200k (which is probably low); that's $16,000 in seller's costs. Again, assuming home value didn't change and that you got an FHA loan requiring only 3.5% down, your down payment ($7k) plus principal paid (about another $7k; 6936.27 to be exact) only covers $14k of those costs. You're now in the hole $2,000, and you still have to come up with your next home's down payment.  With all other things being equal, in order to get back to where you were in net worth terms before you bought the house (meaning $7,000 cash in the bank after selling it), you would need to stay in the house for 4 and a half years to accumulate the $16,000 in equity through principal payments. That leaves you with your original $7,000 down payment returned to you in cash, and you're even in accounting terms (which means in finance terms you're behind; that $7,000 invested at 3% historical average rate of inflation would have earned you about $800 in those four years, meaning you need to stick around about 5.5 years before you ""break even"" in TVM terms). For this reason, I would say that you should be very cautious when buying your first home; it may very well be the last one you'll ever buy. Whether that's because you made good choices or bad is up to you." "The entire idea of accountability in America has been in serious decline over the years.  Not to get on my high horse and preach, but this issue begins early on with child care and has branched it's way into our economics as well.  Kids get 9th place ribbons for races with 9 racers. Young post-college adults are struggling to survive on their own in the real world. CEO's are told to retire early as opposed to stepping down.  At the end of the day, everyone wants to credit themselves with a job well done and shift blame to others or outside forces.   However, this doesn't mean that there's no position left in the US with 'accountability.' For instance, the Fed Chairman has to be correct on their position or the entire economy can be destroyed in the process.   So what do we do instead? Those positions are the ones we blame for what's happening around us. So naturally, their response is to leave as delicately and unnoticed as possible.  If you ask me, those people at Equifax should be in jail. Not because of the hack, but because they waited so long to let everyone know. Stepping down and retiring shouldn't  mean they get away from it, the same way declaring bankruptcy doesn't mean I get away from my student loans.  If people started taking accountability for their own actions, America would be much more healthy in my opinion.  But then again, at the end of the day it is just my opinion, so you're free to believe whatever else you like. Cause you know what they say, 'opinions are like a**holes, everyone has one.""" I'm normally not a fan of partitioning investment money into buckets but your case may be the clearest case for it I've seen in awhile.  Your income and saving is good and you have two clearly defined goals of retirement saving and saving for a house each with very different time frames ~30 years and 3-5 years respectively. For medium term money, like saving for a house, just building up cash is not actually a bad idea. This minimizes the chance that a market crash will happen at the same time you need to withdraw the money.  However, given you have the means to take more risk a generally smarter scheme would be to invest much of the money in a broad liquid bond funds with a somewhat lower percentage in stocks and then reduce the amount of stock each year as you get closer even moving some into cash.  This gives reasonable positive expected return while lowering the risk of having to sell during a crisis as the time to purchase gets shorter and shorter. The retirement money should be invested for the long term as usual.  A majority in low-fee index stock funds/etfs is the standard advice for good reason. Which strategy makes more sense: Check your new Fidelity 401k plan. Make sure it has a good group of funds available at very low fees. If it does, roll over your Principal 401k to your new 401k. Call Principal and have them transfer the funds directly to Fidelity. Do not have them send you a check. If the new plan doesn't have a good fund lineup, or has high fees, create a rollover IRA and roll your old 401k plan into it. Again, have Principal transfer the funds directly. Consider using Vanguard or other very-low-cost funds in your IRA. Taking the money out of your old 401k to pay toward your mortgage has several disadvantages. You will pay taxes and a penalty. Your mortgage rate is very good, and since you are probably in a high tax bracket and perhaps itemize deductions, the effective rate is even less. And you lose liquidity that might come in handy down the road. You can always change your mind later, but for now don't pay down your mortgage using your 401k money. As a result of being under 20%, I am paying mortgage insurance of   about $300/mo. This is wasted money. Save aggressively and get your mortgage down to 80% so that you can get rid of that PMI. If you are earning a high salary, you should be able to get there in reasonably short order. If you are maxing out your 401k ($18,000 per year), you might be better off putting it on pause and instead using that money to get rid of the PMI. I have no 'retirement' plans because I enjoy working and have plans to   start a company, and essentially will be happy working until I die You are young. Your life will change over time. Everyone young seems to choose one of two extremes:  In the end, very few choose either of these paths. For now, just plan on retiring somewhere close to normal retirement age. You can always change your plans later. I'll preface this with saying that I'm not a finance or real estate professional, this is just how I understand the situation and what I'm doing:  We just got a 30year/FHA mortgage, there's no prepayment penalty, and no fees associated with paying it biweekly. In fact (Wells Fargo), while the payments get withdrawn biweekly, they don't actually post to the mortgage until there's enough for a full payment.  So essentially here are the benefits I'm realizing: I agree. I have physical cash hidden in my house, a trick I learned from an elderly neighbor whose husband demanded they do it and it paid off for them twice. I have that and then will rely on credit if needed. My only question is if the statistic they mention is ALL savings or just what is in liquid assets.