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dotru

I have two retirement accounts a 401k and Roth IRA. What kind of paperwork/work would be involved in using that money to purchase a primary residence? When I sell, can I put the proceeds back into the retirement account?<br />

ermak

First, check with your plan provider or administrator for both your 401k and IRA.
Most 401(k)s have several options for withdrawing for purchase of a primary residence. The most common is a loan (either general purpose or residential). In order to borrow from your account, you'll (usually) have to have more that 2k vested, and you're only allowed to borrow up to 50% of your account balance, not exceeding 50K (under the IRC). While you pay the loan and interest back to yourself, you generally pay back in after tax dollars (most contributions into your 401k are pre-tax), so when you withdraw at retirement, you'll probably be taxed on your repaid loan moneies (which, again, you repaid after tax). Loan money doesnt count as income, unless you default on your loan.
Paperwork will vary depending on the company, type of loan, employer rules, etc. Generally, simple to complete, and will probably require documentation for the purchase.
When you sell your home, you will more than likely not be able to contribute the proceeds into your 401k. Most plans require contributions to be directly from your paycheck. You may be able to deposit to your ROTH, but will have to abide by the IRS contribution limits for the year.
Hope this helps and Good Luck!

alien

You may be able to borrow money from your 401(k), depending on your plan's rules. If you do so, you may have up to 10 years to pay the money back, since you are borrowing it to purchase a home.

One caution with borrowing from your 401(k) - if you change jobs, either voluntarily or involuntarily, you may be required to pay the loan back within 30 - 90 days or risk having the loan become a premature distribution. If this occurs, and you are under 59.5, you will pay federal income tax plus a 10% penalty. Some states also charge income tax and penalties. So check with your plan to determine if this is true.

The same tax and penalty situation applies to withdrawing (rather than borrowing from) a 401(k) plan, so that's not a good option. You will probably end up with, at most, 65% of the money that you withdrew, after taxes and penalties. So it's usually better to borrow more money against the house instead of withdrawing from your 401(k) plan.

For the Roth IRA, you can withdraw contributions to the plan at any time. So if you put $20k in over the past 5 years and the account is worth $30k now, you could withdraw up to $20k with no taxes or penalties.

If your Roth IRA has some money that was converted from another IRA or a 401(k), and the Roth IRA account is at least 5 years old, you can withdraw the converted amounts without taxes or penalties.

If you are a first time homebuyer, you can also withdraw up to $10k in gains without penalties, but you will have to pay taxes on the money.

Any withdrawals from retirement accounts are permanent. You cannot put the money back into your account after you sell the house. If you take a loan from a 401(k) plan, you will need to pay back the money, or it will become a distribution.