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Estate Planning


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September 15th, 2020

Why Asset Location Helps During a Relocation

Buying your first home is one of the first major financial events of a person's life. For the majority of people, it is also one of the largest single financial transactions they will ever make. Knowing where to pull funds from can provide significant tax savings.

Traditional IRAs and 401(K)s are the most common tax-deferred retirement plans among US citizens and often the main source for a down payment on their first home. Understanding their differences when it comes to funding down payments is key.

In short:

Traditional IRAs = income taxes apply, but there is no additional penalty for withdrawing up to $10,000 towards a first time home buyer's down payment.

401(K)s = Income taxes apply in addition to a 10% penalty for withdrawing funds for a down payment (just like any other non-qualified early withdrawal).

Just like anything else, doing your due diligence pays dividends. Funding your down payment is no different.

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