Should I use funds from my IRA to cover a land down payment?

Should I use funds from my IRA to cover a land down payment?

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Aug 01, 2000

By Sarah A. Chadwick, associate editor

Q. I lease space for my hospital but want to purchase some land and build a facility when my lease expires in three years. My Individual Retirement Account (IRA) contains enough money to cover the down payment on the land. Is this a wise use of my IRA funds?

A. No, the drawbacks of withdrawing IRA funds far outweigh the benefits, says Cynthia R. Wutchiett, CPA, owner of Wutchiett & Associates Inc. in Columbus, Ohio. "Withdrawing retirement funds early makes you subject to costly taxes and penalties, and this decision diverts money that you've set aside for your future financial security," she says.

"As a practice owner, you should be earning a return on investment (the practice's market value) of 16 percent to 20 percent," says Wutchiett. "Set aside a portion of this money to invest in a future facility." She also recommends waiting until you're two years from your lease's expiration date before committing to a new location because the demographics or traffic patterns of a potential location could change over time.

August 2000 Veterinary Economics