Can I use funds in my 403(b) retirement plan for a first-time home purchase?

You may be able to withdraw from your 403(b) without penalty for a first-time home purchase, but it depends on your particular 403(b) plan.

The law recognizes, and allows for, hardship withdrawals from tax-deferred retirement plans like 401(k) and 403(b) plans, but does not require that a particular plan adhere to any kind of hardship withdrawal allowance. So you'll have to check whether you can do it penalty-free or not.

As for your second question, again, that depends on your plan. With my plan, for example, I need to terminate employment before I can transfer funds out of my tax-deferred plan. But yours may be different.

IRAs specifically allow for certain situations for which early withdrawals are exempt from the additional tax. One of those is first-time purchase of a house.

I think MBH answered your question-just depends on the plan. You would have to read the plan or ask your benefits administrator whether your plan will allow this.

Another question is, why would you do this? Is it a good financial plan?

You will be taxed on the withdrawal at your current income tax rate-and the plan will probably withhold 20% of the withdrawal to send to the IRA.

So maybe no penalty, but your money will not be working for you in your plan, and it will not be as much as you think, if you weren't aware of the tax.

Another consideration is the hit your 401-k will take. Tax free accounts like this give your retirement savings a huge boost.

Home values traditionally rise about 3% per year, (except of course the last couple of years!!!) Whereas most retirement accounts, even those conservatively managed will return 6-8%.

So make sure the pluses out weigh the minuses.