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Ask The Experts: Use My 401(k) to Save My House?

Wednesday, 11 Feb 2009 | 3:16 PM ET

I am one month behind on my mortgage and can not pay my real estate taxes that will be due next month. Using a portion of my 401(k) help me get through this rough time and save my home. Would you suggest that I take the penalties to save my home? Thank you -Debby, IL

Debby, I wish I knew a bit more about your finances but from what you’re telling me I would love for you to protect that 401(k), rather than dissolve it to save your home, especially if you have little equity and have a mortgage that’s too big for your budget. It would be better (though certainly not easier) for you to sell the home and move on to something more affordable.

We should all protect our retirement funds as much as possible especially when you consider that new bankruptcy laws protect 401k()s and IRAs from liquidation. It sounds like you’re going through a tough time that’s not going to change suddenly next month. Think about the reality that what works this month may not work months down the road and you’ll soon be left with nothing but bills. If you need help with a loan modification or a short sell or to find a housing counselor near you, head to HUD.gov and NFCC.org. Get help soon.

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Carmen Wong Ulrich is the host of On The Money