I have been a tax preparer for over 50 years and a financial consultant for over 30 years. I think this is bad advice.
1. You may withdraw up to $10,000 from your IRA (here, IRA will refer to all retirement funds) to buy your FIRST HOME with out penalty if you are underage for RMDs. You are still subject to income tax on the withdrawal. Of course, Roth IRAs, held for at least 5 years are withdrawn tax-free. First Home, according to the IRS, means not living in a home that you own for the last TWO YEARS.
2. Clients are always warned - Your retirement comes first - it has the highest priority. We caution young families to put money away for their retirement before they consider their children's college AND do not withdraw from your IRA for current college payments. People are living longer. Under recent Mortality Tables, a 65 year old man can expect to live to age 81. However - an 81 year old man can expect to live to age 90. You should accumulate enough cash to be combined with social security, pensions, 401ks and annuities to last for 25 years.
3. Buying a house using IRA money does NOT make the house part of your IRA.
4. Selling your home - the one that is your primary residence - defined by the IRS as the address you pay taxes from - can be tax-free if you have lived in it for two of the last 5 years. If so, a married couple can exclude $500,000 of capital gain before any tax is due.
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