I’m 59. Is it late in the day to raid my $2.5 million IRA to buy a $400K home?

By Quentin Fottrell

‘I regret not buying a home 10 years ago, but we were both going through divorces’

“We love to travel. We have seven children between us, all over the age of 23.” (Photo subjects are models.)

Dear Quentin,

I am 591/2 and my spouse is 62; we are both fully retired. We have been together for 10 years and married (second time for each of us) for five years. We love to travel. We have seven children between us, all over the age of 23.

I regret not buying a home 10 years ago, but we were both going through divorces and it was easier to rent. We have become unhappy with apartment living and will probably be moving next summer, regardless of our rent-versus-own dilemma.

We pay $2,300 a month for a three-bedroom apartment. If we purchase, we are considering spending $400,000, and that would be our last home. Our retirement includes $2.5 million in a traditional IRA and $250,000 in a Roth. Social Security plus a pension bring in $1,400 a month.

Here are my primary questions:

1. Given our ages, do the figures support making a purchase?

2. Given our retirement status, would obtaining a mortgage be an issue?

3. Would paying cash be the better way to go?

Moving in Minnesota

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.

Don’t miss: ‘Today is my 61st birthday’: I have my ex-spouse’s Social Security benefits. Should I retire at 65 and travel?

You could, as a compromise, use a combination of financing and cash.

Dear Moving,

1. Perhaps.

2. Possibly.

3. Maybe.

Your pension and Social Security play a part, but you are also relying on your IRA withdrawals.

I understand your motivation for buying. You clearly want to own your own home, and there’s something special about knowing it’s yours and that you don’t have to move again if you don’t want to. You also don’t have to worry about the rent going up year after year. You can take pride and joy in creating a home together, now that your remaining children have left or are about to leave the home.

Banks use asset-depletion underwriting for retirees: They total your liquid assets, subtract your down-payment and closing costs, divide by 360 months, and add that to your monthly income. With $2.75 million in retirement assets, you will – barring any unexpected developments – comfortably qualify.

At ages 591/2 and 62, you can both withdraw money from your respective retirement accounts without incurring a penalty. However, you will pay income tax on the money you withdraw from your traditional IRA and you will lose future returns if you take money from your IRA or your Roth. It’s a trade-off between letting that money grow, or investing that $2,300-a-month rent in real estate instead.

To break down the different scenarios financially: Your current $2,300 a month in rent adds up to $27,600 per year. If your rent increased by even 3% a year, in 10 years you’d be paying about $37,000 a year. Over 20 years, the total amount you spend on rent could easily exceed $650,000 – and after all that, you still wouldn’t own your home.

Owning property comes with its own costs, of course: HOA fees if you moved to a managed development, property insurance and taxes, maintenance (you can normally estimate 1% of home value per year on a well-maintained home), the cost of the down payment and your time horizon (financial advisers recommend that you intend to own a home for at least five years).

Affording a mortgage

If you purchased a $400,000 house with a 6.3% mortgage rate and put 20% down – or more to reduce your monthly payments and interest paid over the life of the mortgage – you would have a $320,000 mortgage that would cost you around $1,900 a month, just shy of your current rent. But annual insurance, property tax and a 1% maintenance cost could add thousands of dollars extra to your costs.

By not paying cash for the home, you could perhaps expect long-term average returns of around 5% a year on your investments, though results can vary widely, which is especially important to take into account during retirement. A sudden economic downturn could significantly impact the value of your portfolio

As for paying cash, the decision to take $400,000 (or $200,000 each) out of your respective retirement accounts is not a small one, particularly as you will lose the returns on both the principal and the interest you would earn over time. What’s more, given the tax implications (25% or thereabouts), you’d actually have to pull $500,000 out of your retirement funds to clear $400,000 for a new home.

By taking a large taxable distribution from your IRA, you might also push yourselves into a higher tax bracket. In addition to losing long-term growth on invested funds, you reduce liquidity, which is important in retirement. You have $2.5 million in a tax-deferred IRA; if you withdrew $500,000, that money would no longer compound. Roth funds should generally be left untouched for as long as possible.

For that reason, you’re correct to at least consider a mortgage. Keep in mind, however, that the $500,000 to buy a home could be worth $1.9 million in 20 years. But whatever you choose to do, there will be a long-term penalty. You want to choose the lesser of all evils. When you reach your 70s, required minimum distributions will create taxes regardless. A paid-off home can reduce fixed expenses during RMD years.

You have to weigh the rewards of owning your own home. The rent you would pay over the next 20-plus years – depending on your health, mobility and any future downsizing plans – would ensure a roof over your head, but otherwise it is effectively lost money. Minnesota has high property taxes and insurance in many counties, and challenging maintenance issues with heating and repairs due to the frigid winters and hot summers.

Ultimately, the decision to buy a home should be taken after careful consideration, especially as you will have to live in it for five years, which is a widely accepted rule of thumb, if you want to claw back those selling costs.

Related: ‘How do I shield my retirement savings?’ I’m worried about Trump’s trade war and Fed’s willingness to cut interest rates

The Moneyist regrets he cannot reply to questions individually.

More columns from Quentin Fottrell:

My husband and I are in our 50s – and 85% invested in stocks. Is our strategy too aggressive for the next 10 years?

Can my husband contest his late brother’s $600K will? He experienced oxygen deprivation due to COPD before he died.

I have early Alzheimer’s and my husband has stage 4 kidney disease. We just inherited $50K. How can this help us?

Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Post your questions or weigh in on the latest Moneyist columns.

By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms.

-Quentin Fottrell

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

11-29-25 1157ET

Copyright (c) 2025 Dow Jones & Company, Inc.