Normally, I would regard retirement accounts as sacred. But the amount needed relative to your savings isn’t that much. You would have to calculate the opportunity cost (return you would have gotten if the money remained in the account) vs PMI cost minus deduction (PMI deduction might not apply to you due to income restriction).
Dear Emily,
Looks like if you went ahead with the cash out then you would have been better off leaving the money in. It would have gone up about 30% by now which would have been $15,000. I too am about to gamble to get rid of my PMI, I am refi’ing into a shorter term, slightly more expensive loan to get rid of it. I may have been able to get rid of it in 1 year as long as home prices continue their upward climb. I’ll report back in 1 year to see if my choice was a good one.
You can do a LOT better than merely buying a home, assuming you’re not already self-employed…
Sitting on 300k cash and not using it to start a business of some sort, whether it’s property rental or something else entirely, is stupid in my book. If you’re 30, retirement isn’t for another 35 years. Better to position yourself to have investment/business income NOW, so you’re not beholden to some arseholes at your office all the time.
Looking at it, with 300k in the 401k, won’t that meet minimums to keep the plan even after leaving the job?
If I had that much cash equivalent available, I’d be putting it in properties capping 8-9%(*), borrowing against the properties at 6% principle + interest, 75% LTV, and having at least $40-50k additional pre-tax investment income minus the interest on the loan against the 401(k). 2.75% IRA return is for the birds.
With that kind of investment income, you two can at the very least have a VERY nice vacation one or two times per year. Plus having it pay for most of your housing expense if you choose to live frugally. As far as primary home, I wouldn’t spend more than $175-300k on a 2 bedroom well-managed (but not ritzy) condo in your situation.
(*) – they exist currently. Just bought one a few weeks ago in SD. Less deals of that type locally to you now, but plenty of that sort of thing in halfway decent areas surrounding various East Coast cities right now.
