Hi friends I'm Laura Adams and you're listening to the Money Girl Podcast.

If you want to buy a home but don't have enough save for a down payment you might

wonder if it's possible to tap your retirement fund for this special occasion

there are certain situations where

using a retirement account to buy a home is allowed, will cover the rules, and

whether using retirement savings for a down payment is a good idea.

Retirement plans that you can only get through an employer, such as a 401k or 403b, are the most popular types of retirement accounts.

If you have one, there are two ways to tap it, taking a loan or making a withdrawal.

Taking a loan from a workplace retirement account is always the best option,

because you're obligated to repay yourself with interest over a set period of time.

When you take a withdrawal on the other hand, you're actually not allowed to repay it

except by bumping up the amount you contribute from each paycheck.

But not all workplace retirement accounts are set up to allow loans.

If they are allowed, there's a limit to the amount you can get.

You can only borrow half of your vested balance up to $50,000.

Vested funds are those that you own and you're always 100% vested in the contributions you make.

However, in some cases, money from your employer, such as matching or profit sharing funds, may be tied to a vesting schedule that gives you

ownership over time.

Retirement account loans come with a set interest rate and term spelled out in the plan document.

The repayment period is typically five years,

but it may be longer for a home purchase.

If you repay a loan on time, you don't have to pay any income tax or a penalty on the borrowed funds. However, one of the biggest problems with taking a loan from your 401k or 403b is that if you don't

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