1908: Ask Farnoosh: HELOCs, FSAs, Early 401(k) Withdrawals & Helping Aging Parents

Summary

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So Money with Farnoosh Torabi

Episode 1908: Ask Farnoosh: HELOCs, FSAs, Early 401(k) Withdrawals & Helping Aging Parents
Date: November 22, 2025

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EPISODE OVERVIEW

This Friday “Ask Farnoosh” episode dives into timely financial topics on homeownership, savings strategies, and caring for loved ones across generations. Farnoosh shares a thoughtful “financial weather report,” responding to major headlines and then jumps into audience questions about home equity loans, maximizing health savings, early retirement withdrawals, and supporting parents without sabotaging your own future. She balances expert insight with empathy and practical advice—all with her signature warmth.

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KEY DISCUSSION POINTS & INSIGHTS

1. Financial Weather Report: Housing Regret, Delayed Milestones, and Lending Law Rollbacks

• Pandemic-Era Mortgage Regrets

  • Many who bought homes with ultra-low rates (<3%) now feel stuck because rates have risen to 7%+.
  • “It became the golden mortgage—and now it's become the golden mortgage with the golden handcuffs.” (Farnoosh, 03:40)
  • 1 in 4 regret buying, and 40% say homeownership is holding them back from other life goals due to underestimated costs or changing needs.
  • Homebuying during crisis shaped lives in unforeseen ways; stability can feel like confinement.

• Homeownership and Delayed Life Milestones

  • Over 70% of aspiring homeowners are postponing marriage, kids, and career moves until buying homes.
  • For Gen Z, 84% report putting off major milestones, believing homeownership is a prerequisite for “moving forward” in life.
  • Farnoosh’s take: “Can we just move on? You can actually grow wealth in the stock market... You can rent, you can have mobility. I get it. Homeownership—I own a home—but I always have said: I’ve rented in between homes.” (Farnoosh, 06:36)

• Consumer Protection Rollbacks

  • The Consumer Financial Protection Bureau (CFPB) is considering weakening anti-discrimination lending protections (disparate impact doctrine).
  • Farnoosh warns this could negatively affect fairness in mortgages, auto loans, credit cards, and small business financing.
  • “These guardrails are part of the structure of the financial game that we're all playing. The CFPB changing the rules, that's something we should all be watching.” (Farnoosh, 08:54)

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2. Mailbag: Listener Financial Dilemmas

a. Should I Take a Bigger Home Equity Loan to Replenish My Emergency Fund?

(Abby’s question, 18:21)

• Abby used savings for renovations; her emergency fund is down to $10k. She considers borrowing $30k instead of $20k on her home equity loan to restore savings, given a much better rate (6.75%) than on credit cards.
• Farnoosh’s advice:
  • Yes, it's smart to borrow extra now to protect your emergency fund—depleting it puts you at risk.
  • “Protecting your emergency fund should be a priority...Once your fund dips below two months of basic expenses, you're in risky territory—you're playing defense with no goalie.” (Farnoosh, 18:50)
  • Home equity loan gives you flexibility to repay faster if possible, and it’s vastly better than 25%+ credit card rates.

b. How Can I Maximize My Husband’s FSA If I’m Self-Employed?

(Holly’s question, 21:10)

• Holly’s husband just got a new job with FSA benefits; Holly is self-employed and wonders if she can benefit.
• Farnoosh confirms:
  • You can use FSA funds as his spouse, regardless of your insurance situation.
  • FSAs cover a wide range of healthcare costs (prescriptions, dental, eye care, therapy, feminine products, etc.)
  • Be careful not to over-contribute—FSAs are “use it or lose it.”
  • If there’s a Dependent Care FSA, that's even more valuable (covers daycare, camps, after-school, up to $5,000).

c. What’s the IRS Rule for Withdrawing Retirement Funds Early Without Penalty?

(Carolyn’s question, 24:35)

• Carolyn heard about early retirement withdrawals and wants clarification.
• Farnoosh explains:
  • The “Rule of 55” lets you tap your current 401(k) penalty-free if you leave your job during or after the year you turn 55.
  • The other option is IRS Section 72(t) (SEPP): a strict plan, often called a “financial prenup with the IRS” (Farnoosh, 26:03), where you must withdraw a calculated amount every year for at least 5 years or until you’re 59.5 (whichever is longer). No flexibility once you start.|
  • Be extremely careful—once you start, you can’t change the plan, add money, or stop.

d. Is Buying My Parents a Home Jeopardizing My Own Retirement?

(Megan’s question, 27:45)

• Megan bought a home for her parents (and disabled sister), pays the entire mortgage, can only max her IRA, and worries about her retirement at age 33.
• Farnoosh’s perspective:
  • “What you’re doing is absolutely profound...But I do worry about you. I want you to have scaffolding, structure to support you and your financial goals.” (Farnoosh, 28:00)
  • You’re not ruining your retirement, but need a strategy. Consistently maxing your IRA is great; $40k by 33 is strong.
  • Explore if parents can contribute, seek assistance, and create backup plans (e.g., renting a room if needed).
  • Build a robust emergency fund—for yourself first; “put your own oxygen mask on before helping others.”
  • Consider opening a simple taxable brokerage account to supplement future retirement savings, even if starting small.

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NOTABLE QUOTES & MEMORABLE MOMENTS

• On “Mortgage Golden Handcuffs”:
  “Many homeowners now feel grateful for their low mortgage and trapped by it at the same time, as if the home is the one making their life decisions.” (Farnoosh, 05:20)
• On Homeownership Pressure:
  “We have this ginormous cohort of Americans saying homeownership—even with a 3% interest rate—is challenging, while another cohort says: homeownership or bust. We will give up on marriage, kids, career until we can buy a home. Wow, that's crazy. I think that's crazy.” (Farnoosh, 07:02)
• On Lending Regulations:
  “These guardrails are part of the structure of the financial game that we're all playing. The CFPB changing the rules, that's something we should all be watching.” (Farnoosh, 08:54)
• Emergency Fund Logic:
  “Once your emergency fund dips below two months of basic expenses, I think here you're in risky territory. You're playing defense with no goalie. Ideally, you want five, six months of expenses shored up. So replenishing it now is wise.” (Farnoosh, 18:50)
• On Caregiving and Financial Self-Preservation:
  “You have to put your oxygen mask on first. Caregiving is unpredictable, it's expensive, and you're a generous person—I can tell. So your inclination is probably always to give to others before you take care of yourself. So I want you to prioritize yourself.” (Farnoosh, 29:20)

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TIMESTAMPS FOR IMPORTANT SEGMENTS

• Financial Weather Report & Housing “Handcuffs” – 02:43–08:30
• Millennials & Gen Z Delaying Major Milestones – 06:14–08:30
• CFPB Rollbacks Explained – 08:30–10:48
• Listener Mailbag Begins – 18:21
  • Home Equity Loan Emergency Fund Advice – 18:21–20:45
  • FSA Maximization for Self-Employed Spouse – 21:10–23:28
  • Early 401(k) Withdrawal Rules Explained – 24:35–27:19
  • Supporting Parents Without Harming Your Future – 27:45–30:06

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SUMMARY

Farnoosh unpacks the emotional and financial consequences of pandemic-era housing decisions, rising rates, and shifting protections around equitable lending. She challenges the cultural fixation on homeownership, urging listeners to find flexibility in building wealth and life satisfaction. In the mailbag, she blends tactical guidance with deep compassion, reminding listeners that financial resilience means protecting themselves first—even when caring for loved ones. This episode is a guide for anyone balancing immediate generosity with long-term self-care, navigating America’s evolving financial landscape.

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For more advice or to submit your own question:
Email Farnoosh at [e-mail] or DM on Instagram @farnooshtorabi.

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Transcript

[Farnoosh Torabi]

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[Farnoosh Torabi]

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[Podcast Producer / Listener / Guest]

So money Episode 1908 Ask Farnoosh.

[Farnoosh Torabi]

You're listening to so Money with award winning money guru Farnoosh Kharabi. Each day get a 30 minute dose of financial inspiration from the world's top business minds, authors, influencers and from Farnoosh yourselves. Looking for ways to save on Gas or double your double coupons. Sorry, you're in the wrong place. Seeking profound ways to live a richer, happier life. Welcome to Sew Money.

[Podcast Producer / Listener / Guest]

Welcome back to Ask Farnesh, everybody. It is Friday, November 21st. Farnoosh Tarabi here. In case you were wondering who I was, it is the so Money podcast and we are going to be talking about some of the big headlines that have gotten my attention this week as well as of course, what has come in through the mailbag. Our audience members want to know, should we actually borrow more on a home equity loan to protect our savings? How do we maximize an fsa? Because if we don't use it, we lose it and it's getting towards the end of the year. What's that IRS break that lets you tap retirement funds early without paying penalty? And is buying a home for your parents putting your own retirement at risk? But first, let's start with the story that I think is one of the most revealing reads of the year. It takes us back in time to 2020 when the world shut down and we were, remember we were wiping down groceries and putting on masks and I was cutting up old sheets, bed sheets and turning them into masks and I was probably pulling up a lot of sourdough recipes and banana bread recipes while also having a lot of exist questions about life and work and just scared to death. And also at this time, mortgage rates fell below 3%. I think the lowest they dipped around early 2021 was 2.65%. That's where you could get a 30 year mortgage for under 3%. Basically, as some economists would call it, free money. So people rushed in. It was like the gold rush, but it was the housing gold rush. Couples, brothers and sisters, best friends, they pooled their savings, they made offers sight unseen. They began buying homes as a way to anchor themselves in a very uncertain and unsafe world. Multi generational families moving in together. And if you locked in anything below 3%, what a flex, what a brag. You basically won the mortgage lottery and that became the golden mortgage and now it's become the golden mortgage with the golden hand handcuffs. So this story is in the New York Times this week based on a survey from realtor.com that found that 82% of those homeowners now feel locked in, locked in those homes, unable to move because trading a 3% loan for now what is what a 7% loan just makes no mathematical sense. Plus, of course now prices have gone either higher or they've not gone lower. They've pretty much just stayed the same and depending on where you live. And a full 1 in 4 pandemic buyers now regrets the purchase. According to Credit Karma, a separate company, 38% underestimated the true cost of homeownership because they were like, oh yeah, now they realize there's taxes and maintenance costs and 40% say their house is holding them back from other life goals. Many bought with a partner they're no longer with, bought before kids but now have two and no storage. So they bought a starter home and now they're out, they've outgrown the home and they can't move out to another place unless maybe they rent or they bought before the empty nest and now they feel like they live in a museum that they have to maintain. So the stability is basically starting to feel like confinement. Economist Jake Krimmel in the article says many homeowners now feel grateful for their low mortgage and trapped by it at the same time, as if the home is the one making their life decisions. And now, of course, as we talked last week, the president is floating this idea of a 50 year mortgage. Real estate experts are calling it everything from a band aid to a distraction to a lifetime lease you just happen to own. But the bottom line, I think this is telling us, is that millions of people bought during a very unusual housing window. And those choices, although made in crisis, are shaping their lives today in ways that we didn't expect. And I will just say that we're holding onto these homes and yeah, maybe they're steering the ship in our lives. And why are we doing that? Because. Why? Because we feel as though renting is shameful, maybe. And I know in some neighborhoods there just aren't options besides owning if you want that single family home. So we also have to give up on that potentially. Or we have to give up on that neighborh. We have to make adjustments. It's not easy, I get it. But that's not to say that we don't have any options, but we are trying to squeeze a round hole in a square peg. Or is it square peg in a round hole? You get the analogy. And we have to get uncomfortable to get out of this mess. And it's interesting because where these people live, it's like they've got the comfort of the 3% mortgage, but then the discomfort of maybe the space that they're in is no longer suitable. So. So we'll just leave that story where it's at. And if you are experiencing this, write to me because I think that would make for a very interesting. So money conversation. Maybe we can work through it. Another story that caught my attention. People are putting their milestones on pause. A new Coldwell Banker survey shows more than 70% of aspiring homeowners are delaying major life milestones, like getting married and having kids and shifting careers until they can afford to buy a home. Hey, maybe these people need to have a phone call with the people who bought during the pandemic and they can have real talk about what it's like to actually own a home. For Gen Z, 84% of those members of Gen Z are delaying major life milestones until they can afford to buy a home. This is such a pervasive goal and it's, wow, if we can't buy a home, it's, forget it. I won't do anything else. I'm just like, going to just sit here and just wait and just cross my arms and I won't do anything. I'm going to hold my breath. It's, can we just move on? Because you can actually grow wealth in the stock market. You can make other investments. You can rent. You can have mobility. I get it. Home ownership. I own a home. I may be being hypocritical here as I speak, but I always have said that I've rented. I've rented in between homes. When we moved here to Montclair, Plan B was to rent. I was like, my goal is to be in the neighborhood that I like. Whether I rent, I own. We'll figure it out. So I find it interesting. I don't know what my advice here is. I just find it interesting that while we have this ginormous cohort of Americans that are saying homeownership, even with a 3% interest rate, is challenging right now, you still have another cohort that are like, homeownership or bust. We will give up on marriage and kids and career until we can live in a home that we own. Wow, that's crazy. I think that's crazy. And here's a third story that didn't get as much play this week. So I'm going to shout it from the hilltops because it is not good news and we need to know about it. The Consumer Financial Protection Bureau, cfpb, is proposing a rollback, is proposing to roll back a key part of our anti discrimination lending laws, the disparate impact doctrine under the Equal Credit Opportunity Act. Translation. For decades, lenders have been held accountable not just for their intentions, but for the outcomes of their policies. If a lending practice disproportionately harmed certain groups, regulators could step in this rollback would weaken those protections. And this is going to affect mortgages, auto loans, credit cards, and small business financing. These guardrails are part of the structure of the financial game that we're all playing. And the CFPB changing the rules, that's something we should all be watching. So this is just an FYI, it's a developing story. We know that since this new administration took office, one of their priorities was to wind down the cfpb, which was something that came out of that Great Recession that we had in 2009. This was one of the departments that were put in place. The CFPB was put in place because of the lack of regulation that we had that led to the stock market crisis, the housing crash, all of that financial trauma and tribulation, that trauma and tumult that we had in 2008, 2000 and so to see. And then so this, the CFPB has already been stripped of a lot of its role and impact in D.C. as a bureau. And so this doesn't surprise me, but we should be aware of this. And that's our financial weather report for the week. Let me know if you like these because I'm thinking like in the new year that I'm going to start doing these more regularly every week and I like doing them. I think that this is not something that we get in the financial podcast world very much. So if you like it, let me know. I'll keep it up. Next up, we're going to head to the mailbag really soon. But first I want to highlight and shout out our reviewer of the week. This person's going to get a free 15 minute phone call with me if they follow up. And I tell you they don't always follow up. So you got to do this if you want the free 15 minute call with me. I don't know how else to reach you. If I could, I would left a review last week on my dad's birthday, actually November 11th, saying, I'm so grateful. As a 41 year old mom going through a divorce, I'm deeply grateful for this show. Finances have always intimidated me, but Farnoosh makes the topics friendly, accessible and fun. Thank you Farnoosh for educating and empowering me. Hallie, thank you so much. I know in the recent weeks I've done some episodes gearing towards women in midlife, one specifically about divorce and post divorce finances and maybe that's the one you listen to that was right on target for you. I'd love to extend a free call to you where we can talk about your finances, maybe your career, whatever you like. And to do that you can email me farnoochomoney podcast.com Let me know you left this review. I'll send you a link where you can schedule a time to chat with me. All right, let's head over to the mailbag. All of these questions, by the way, came in through my website. I almost missed them too. I went through the archives and found them and so apologies because they can. I think they've been sitting there for a while and I miss them. But just in time. Before the end of the year, we've got questions about borrowing on a home equity loan, maximizing an fsa, some IRS rules about retirement funds, and buying a home for your parents and how that might impact your own retirement. Going online without Express VPN is like driving a car without a seatbelt. Even if you trust yourself, do you really trust everyone else out there on the road? Here's the reality. 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1 comes from Abby who says farnooch we are in the middle of a $20,000 home renovation. We started with $25,000 in savings, but unexpected expenses brought our emergency fund down to about $10,000. We were planning a $20,000 home equity loan, but now I'm considering taking a larger $30,000 loan to replenish savings. The rate on this home equity loan is prevents us from putting expenses on credit cards at 25%. Is it smart to borrow extra to rebuild our emergency fund? All right Abby, great question. You're doing a lot right now. You've paid off loans, you've freed up over $1,000 a month in cash flow. You are aware of your emergency savings and you're aware that your emergency savings are dipping into an uncomfortable level. So great, you're keeping an eye on your finances and that's good. So here's what I think. I think taking the larger home equity loan is reasonable. Why protecting your emergency fund should be a priority once your emergency fund dips below two months of basic expenses. I think here you're, you're in risky territory. You're playing defense with no goalie. Ideally you want five months, six months of expenses shored up. So replenishing it now is wise. A rate of 6.75%. Way better, infinitely better than a 25% credit card rate. Every dollar you avoid putting on a 25% card is smart. I just did today, in fact, a webinar for our so many members on debt management and credit health. And we talked about this just so. Interestingly enough, coincidentally, you can always pay the home equity loan off faster as well. So choosing a ten year payoff instead of seven doesn't trap you. It gives you flexibility once your bonus and consulting money comes in. Maybe if you get a raise, you get some tax refunds, you get a bonus. You can put that extra money towards the principal and get out of that heloan I call them even faster. So yeah, take the slightly larger loan if you must stabilize your savings and avoid the credit card debt. I think that all your instincts here are good. Next up, we have Holly in the audience whose husband has a new job with a flex spending account. He's covered through his employer. She meanwhile is self employed. She wants to know what's the smartest way to use the FSA and can she benefit. So the quick answer is yes, an FSA can absolutely benefit you as the self employed spouse. So first, here's how it works. Healthcare FSAs cover spouses and their dependents. You don't have to be on the employer plan, you simply need to be the spouse. And what this covers includes prescriptions, co pays, dental work, eye exams, glasses, therapy, feminine care products, sunscreen, acupuncture and a long list of medical essentials. All of this becomes pre tax. So that's a huge win for your household. Be careful though to not over contribute because FSAs are use it or lose it. So you want to estimate your spending and then you want to add a modest cushion for those predictable expenses. Now if your husband has a dependent care fsa, that's even better because that can cover additional things like daycare, after school programs. I'm not sure if you have dependents, summer day camps, nannies in certain situations. And that is up to $5,000 per household. And then you as a self employed person, you also have benefits including deductible health insurance premiums, HSA eligibility if you ever switch to a high deductible health care, and then medical expenses deductible above 7.5% of your adjustable gross income. But the FSA short answer is absolutely available to you, so you should definitely use it. All right, next question from Carolyn. She said. Hey Farnoosh, another podcast I was listening to mentioned I could withdraw from my retirement accounts at 55 with a quote contract with the IRS. What is this called? All right, so I have not done an episode on this on my podcast, but look this up. I think I know what you're talking about. This is one of two things. First, the rule of 55. This allows you to tap your 401k penalty free if you leave your job in or after the year that you turn 55. The taxes still apply, but there's no penalty. This only applies to the 401k at the job that you just left. Not like an old 401k that you may have rolled into an IRA. Or you can take penalty free withdrawals from IRAs or 401ks at any age, but you must withdraw a calculated amount every year for at least five years or until age 59 and a half with zero flexibility. And then when people talk about that contract with the IRS that lets you tap retirement money early. And then when people Talk about that contract with the IRS that lets you tap retirement money early. They're usually referring to Sepp, also called 72T distributions. And here's the simplest way to explain it. Sepp 72T is a strict payment plan that lets you withdraw from retirement accounts early without penalties. It's penalty free, but it's not flexible. So think of it like entering into a financial prenup with the irs. And once you agree, you have to follow the terms exactly. And so here's how it works. You can start these withdrawals at Any age, like 35, 45, 50, doesn't matter. You don't have to be 55. You must take out a specific dollar amount every year. And that amount is based on your age, your account balance, and a life expectancy formula that the IRS gives. And you cannot change this number once the plan starts. And then you have to continue that for a required period. And this is where get tripped. And this is where people get tripped up. You must keep taking these withdrawals for at least five years or until you reach 59 and a half, whichever is longer. So for an example, if you start at age 50, you have to continue for 10 years until 59 and a half. If you start at 57, you have to continue for five years until age 62. If you start at 40, you're locked in for 19 years. And so it's a real commitment. You can't stop, you can't add money. You cannot change the amount. You cannot roll the IRA over during this period. There's no adjustments. There's no, oh, wait, I changed my mind. So it's very strict. Hope that explains things. And actually, maybe I'll do more of an episode on this because I'm finding that more and more of my audience is in the midlife phase where this could be relevant. People are interested in like mini retirements or early retirement, or they're approach real retirement. And this could be very applicable to them. So thanks for bringing it up. All right, last but not least, Megan has a question that involves her family. She recently bought a home for her parents and her disabled sister. Megan's going to be paying the full mortgage. She says I can still max my IRA, but I can't save much beyond that. I'm 33 with 40,000 in retirement savings. Will this hurt my own retirement? All right, Megan, firstly, what you're doing for your family is absolutely profound. It's so generous. But I do worry about you. I want you to have some scaffolding. I want you to have Structure in place to support you and your financial goals. No, you're not ruining or hurting your own retirement, but you're going to need a plan. And you're young enough where you can put a plan in place. You do have some retirement savings. You're not super behind. So here are some things that I think you would want to look into. One, maximizing your ira. Big deal. Stay consistent with that many people at your age, they've saved very little. If anything, you've saved 40,000. That's real traction. So the key now is to make this living arrangement sustainable long term. So some things to explore. Can your parents contribute even a little bit? Do they qualify for assistance? Could you eventually house hack part of the property, rent out a room somewhere, maybe it's above the garage or there's an addition to the house. And what is your backup if your income dips or you're in between jobs and not making money because you're shouldering the load now and it's working out. But what if, right? What if? There's a what if? So start building retirement infrastructure outside the ira. That's another step. A simple taxable brokerage account that you can open up at any brokerage. I often talk about these robo advisors online where you can make automatic investments. They create a diversified portfolio for you. This can be a way to supplement your retirement. And you can start small, $100 a month, $200 a month to start. A lot of them have no minimums to start. And then I really want you to have a robust emergency fund, non negotiable for caregivers like you. You have to put your oxygen mask on first. Caregiving is unpredictable, it's expensive and you're a generous person, I can tell. So your inclination is probably always to give to others before you take care of yourself. So I want you to prioritize yourself because the truth is if you don't have enough for yourself, you're not going to have enough for anybody else. And so prioritize yourself, build that savings. And again, you're not behind. You're early, you're young. Your 30s are for building foundation. It's not for being perfect. And so I admire you, I am proud of you and you are very inspiring. So keep at it. Build this structure. Let me know how it goes. And we're here for you, we're cheering you on. And that's our show for today. As always, thanks to all of our guests, thanks to all of our audience members for their questions. Your emails are really giving me insights into what is going on in our financial lives, the decisions that are keeping us up, the trade offs we're making, the futures that we're trying to build. Thank you so much for inviting me into your lives. If you'd like to send me a question very simple, just email me farnooshomoneypodcast.com you can also DM me on Instagram arnooshtarabi. I'll see you back here on Monday where I have the Governor Elect of New Jersey, Mikey Sherrill on the show. Have a great weekend. I hope your weekend is so money.

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