Retired seniors in Nebraska recently presented Rachel Cruze and George Kamel, hosts of The Ramsey Show, with a financial dilemma: should they withdraw money from their IRA to buy a home outright or should they use monthly distributions to manage a mortgage? ?
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The couple, with an annual income of $125,000 from Social Security and pensions, has $200,000 in savings and more than $500,000 in IRAs. Their goal is to purchase a $450,000 home and they seek advice from The Ramsey Show to help them determine the best option for their financial stability.
Kamel started by listing the couple’s options.
He noted that the $200,000 cash would be a “serious down payment,” which would be helpful; however, using their IRA to fully cover the balance would deplete a large portion of their retirement savings. “So they would have to live on social security and pensions for the rest of their lives.”
Cruze added that the couple’s income of $125,000 is above average, providing a solid foundation if they decide to purchase the house directly from IRA funds. Ultimately, the hosts suggested that taking out a mortgage might be the best option.
Kamel noted that the couple is already paying rent, implying that they can now handle a mortgage just fine. “When times get tough, they have the money,” he added. “And they were able to leave the money invested so it could continue to grow.”
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Another perspective the hosts offered is that the couple might consider downsizing and buying something smaller than a $450,000 home if they didn’t need a home with more than 1-2 bedrooms. That would allow them to pay off the house faster and possibly immediately without drawing too much from their retirement accounts.
The median home price in Nebraska is $289,200 – substantially less than the $450,000 home this Nebraska couple is considering.
This couple’s situation reflects broader trends in home buying among retirees. According to the National Association of Realtors, baby boomers, who often buy to downsize or move closer to family, represent a significant share of homebuyers. Additionally, retirees often prioritize maintaining liquidity and minimizing debt, in line with Cruze and Kamel’s advice to avoid completely depleting retirement accounts.
While there is no one-size-fits-all answer, the couple has several options. Whether they choose to purchase their $450,000 dream home with a combination of cash and a mortgage or move to a smaller property, Cruze and Kamel advise that their focus should remain on maintaining financial security and minimizing future debts.
If you are in a similar situation and are considering purchasing a retirement home, try speaking to a trusted financial advisor. They can help you understand your current financial situation and create a home buying plan that meets your long-term financial goals.
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This article Retired Nebraska Couple Asks Ramsey Show Hosts: ‘Should We Use IRA for a House or Use Monthly Benefits for the Mortgage?’ originally appeared on Benzinga.com
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