conversation: User (TheMagicalGobo): "I have a 401K from a previous job that is sitting doing its thing and has been for the past three or so years; I have a new job now with a different type of retirement plan, and I was lazy and never rolled it over.  It’s doing pretty well as far as I can tell; the average rate of return for the past 5 years is 10.12%, and it’s over $50K.  I am 31 years old, single, no kids, and I rent an apartment, but I have always wanted to own a home.  An opportunity has arisen for me to purchase a home from a family member, and I can give more details if they’re relevant, but the bottom line is, it would be a really great deal, but only if I can use the money from my 401K as a down payment.  When I say really great deal, I mean, mortgage, taxes, and insurance would be ~$200 less than I am paying in just rent right now.  Standard financial wisdom, as I understand it, says to not touch that money under any circumstances because of the loss of the eventual return, but without using it, I would have a very hard time coming up with any type of reasonable down payment in the near-ish future, and if I retire when I’m 62, I’d like to have a place to hang my hat and no mortgage payment if possible.  \n\nI realize that with the purchase of a home, the financial piece is a large part of the conversation, but not the only one.  That being said, I’m leery about removing the money because it’s doing pretty well, and should I cash out, I would lose ~$13K in fees and taxes right off the bat not including the additional income tax I’d have to pay on it.  On the other hand, I have other retirement investments that, according to my projections, will keep me fed, clothed, and comfortable when I retire, and the payout would allow me to put about 33% down and avoid PMI.  I am well and truly on the fence, and would appreciate any input.\n"
  Self: "I'm not going to say no outright, but that's one heck of an opportunity cost IMHO.  At 8% from 31 to 65, that's just shy of $165k in growth.\n\nIs there really no other way you could get the down payment?  Can you work a second job or negotiate a raise at your current job?"
  AngryEEng (AngryEEng): "&gt; At 8% from 31 to 65, that's just shy of $165k in growth.\n\nI think your math is off. A $50k principal, with 8% growth, over 30 years is ~$450k in earnings, for a total balance of ~$500k."
  Self: "I was referring to the $13k that he loses immediately in fees for cashing out, not the whole balance.  The whole thing is obviously more."
  AngryEEng (AngryEEng): "Ah, gotcha."
  