Submitted by [deleted] t3_yhsq4w in personalfinance
[deleted]
Comments
hunybunnn t1_iufltvs wrote
Yes, that is an option, but I'm thinking it would bump up my taxes.
hunybunnn t1_iuflxwa wrote
The way it was explained to me, I won't have to sell. They would just lend me my own money, and I would pay it back (with interest that would also go back to me.) I'm wondering if that is wiser than selling when everything is so low right now.
Knipfty t1_iufmx1q wrote
By how much? I would find a way not to sell or borrow money. If you borrow against yourself and the market goes down, you could faced with a margin call.
hunybunnn t1_iufnuur wrote
So, I'm thinking I'll just pull out the $30K, which wouldn't trigger a tax event, since the value has dropped so low, and just continue my bi-monthly contributions...
Coronator t1_iufways wrote
401k loans are a bad idea. Your money is taken out of the market when you have a loan against it. If you lose your job (leave, get laid off, etc) your loan becomes immediately do. If you can't pay your loan, your funds are sold and you pay penalties and taxes.
Find another source of funds - or save money separately from your 401k for the improvements you are looking to do.
Werewolfdad t1_iufijtt wrote
Is this a margin loan?
If yes, do you understand how Margin calls work?
hunybunnn t1_iufiuot wrote
I'm not sure what a margin loan is. The way it was explained to me, I could borrow my own money, repay w/interest, which I get to keep.
Werewolfdad t1_iufkp2p wrote
What savings? Just cash? Then you’re just paying interest for no reason.
Or is this “savings” some sort of asset?
hunybunnn t1_iuflgw9 wrote
My money is invested in a pre-tax 401k, and also post-tax Roth IRA. There is enough money to draw from either bucket. I'm hesitant to sell because I've lost about 20-30% with the recent stock market fall.
Werewolfdad t1_iufloo3 wrote
You can't borrow against an IRA and borrowing against 401k can be quite expensive in the long run since your money is out of the market.
I'd look into helocs
hunybunnn t1_iufmesq wrote
A heloc is an option, but there would be points and interest at probably 8% or more. Also, I've worked so hard to pay off the house and psychologically I don't want to borrow against it. I could just pull the $30k out and gradually pay it back with my monthly contributions, but not sure if it is wiser to do that, or to go with what Transamerica is offering (borrowing my own money, can default, since it's my own money, and any interest comes back to me.)
Werewolfdad t1_iufmi74 wrote
- If you default you'll be subject to income taxes and a 10% penalty, which is way more than 8% interest.
If you have no mortgage, you should be able to find a heloc at prime minus, unless your credit is poor
hunybunnn t1_iufoaze wrote
My credit is excellent. What about the points and charges in borrowing 30K? Is it wiser to take out the HELOC or just pull the $$ out and re-invest/replenish that amount over the next 15 months? The Transamerica guy make the "loan from myself" sound pretty decent because he said all the interest goes back to my account.
Werewolfdad t1_iufqyan wrote
> What about the points and charges in borrowing 30K?
Most helocs don't have points or any sort of closing costs (at least any that ive seen).
>Is it wiser to take out the HELOC or just pull the $$ out and re-invest/replenish that amount over the next 15 months?
Heloc, especially if you have excellent credit. May just need a better lender.
> The Transamerica guy make the "loan from myself" sound pretty decent because he said all the interest goes back to my account.
Sure but he also left out the part where if the market turns around, you miss out on all those gains
hunybunnn t1_iufmurt wrote
At my current contribution, I would pay back the $30k in about 15 months.
DeluxeXL t1_iufjwp5 wrote
Are you talking about a 401k loan, a loan/line of credit via your taxable investment account, or something else like a loan against your life insurance?
hunybunnn t1_iufkmyl wrote
I withhold 40% of my salary. Of this 25% of my contributions are pre-taxed regular contributions into my 401K, and 15% are post-tax Roth contributions.
DeluxeXL t1_iuftsrn wrote
You did not answer my question. However, I'll assume you mean a 401k loan. When you borrow from your 401k, the investments are sold immediately. Is this what you want to happen?
Where else do you have investments that you can borrow or liquidate?
hunybunnn t1_iuj1rgy wrote
No, I wouldn't want that. The Transamerica person said it my money would be frozen, but I guess I'll have to call and clarify.
hunybunnn t1_iufkqc4 wrote
There is enough $ to take out my $30 from either bucket.
repub2 t1_iug6nf1 wrote
Do you need to do the improvements now? Sounds like you can’t afford them if you have to pull from retirement.
hunybunnn t1_iuistin wrote
I’m still working and make good money, snd have a lot in savings so that’s not the issue. I’m just hesitant to pull the money out of savings now because of the loss due to the market. I’m not sure if it would be wiser to do a HELOC and allow the market to come back up before paying it back.
Knipfty t1_iuflkwa wrote
Can you stop contributing to your investments and pile up cash? The you won't have to sell or sell as much.