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      01-21-2020, 12:38 AM   #23
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Quote:
Originally Posted by MisterF80M3 View Post
Wait, you pulled money out of your investment accounts for a car?
Sure. Why not?

It was only about $60k, I haven't bought a new car in 15 years and I really don't like monthly debt payments.

Last edited by flybigjet; 01-21-2020 at 12:44 AM..
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      01-21-2020, 12:45 AM   #24
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Quote:
Originally Posted by flybigjet View Post
Sure. Why not?

It was only about $60k, I haven't bought a new car in 15 years and I *really* don't like monthly debt payments.
You paid 10% early withdrawal penalty and 20% in taxes by the IRS to fund your car?
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      01-21-2020, 12:54 AM   #25
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Originally Posted by MisterF80M3 View Post
You paid 10% early withdrawal penalty and 20% in taxes by the IRS to fund your car?
No early withdrawal penalties-- just sold some underperforming stock.

And taxes are taxes. Not much point in saving your entire life and then getting old or dying and not being able to enjoy something in life that you want-- I've been income reinvesting for over 30 years, saving a good portion of my income every year and living well within (or even below) my means-- it doesn't hurt to take some cash out once ever 15 years or so to get yourself a toy.

I'm sure there were financially more prudent ways to do it, but as it is (since I don't have kids), I'm going to have to find a charity I really like before I shuffle off this mortal coil.

Yes, I'll get hit with cap gains-- but there are ways to minimize that hit going forward throughout the year.

R.
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      01-21-2020, 04:42 AM   #26
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      01-21-2020, 05:43 AM   #27
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Originally Posted by flybigjet View Post
No early withdrawal penalties-- just sold some underperforming stock.

And taxes are taxes. Not much point in saving your entire life and then getting old or dying and not being able to enjoy something in life that you want-- I've been income reinvesting for over 30 years, saving a good portion of my income every year and living well within (or even below) my means-- it doesn't hurt to take some cash out once ever 15 years or so to get yourself a toy.

I'm sure there were financially more prudent ways to do it, but as it is (since I don't have kids), I'm going to have to find a charity I really like before I shuffle off this mortal coil.

Yes, I'll get hit with cap gains-- but there are ways to minimize that hit going forward throughout the year.

R.
Not only will you lose money to taxes, there is the opportunity cost of 60K Invested. A low risk portfolio would almost certainly return more than the cost of a 3% loan.
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      01-21-2020, 08:15 AM   #28
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Quote:
Originally Posted by DriverDaily View Post
Not only will you lose money to taxes, there is the opportunity cost of 60K Invested. A low risk portfolio would almost certainly return more than the cost of a 3% loan.
I'm not disagreeing. I simply look at it like taking some of the chips off the table instead of "letting it ride".

The market's kind of irrational lately, and it makes me a little nervous.

And, I only took out about $40k for the car to decrease the size of the monthly payment down to something that was reasonable (i.e. doesn't impact my life at all).

What's the purpose of saving, if not to use the funds occasionally?

Last edited by flybigjet; 01-21-2020 at 08:22 AM..
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      01-21-2020, 09:24 AM   #29
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Originally Posted by DriverDaily View Post
Not only will you lose money to taxes, there is the opportunity cost of 60K Invested. A low risk portfolio would almost certainly return more than the cost of a 3% loan.
Maybe. But he would still have to find a way to pay down the principal payments wouldn't he? Which would leave him withdrawing some of the investments anyways, assuming he does not have the cash sitting around.

Nobody takes the money with them, he might as well enjoy it now.
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      01-21-2020, 09:29 AM   #30
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Originally Posted by Joekerr View Post
Maybe. But he would still have to find a way to pay down the principal payments wouldn't he? Which would leave him withdrawing some of the investments anyways, assuming he does not have the cash sitting around.

Nobody takes the money with them, he might as well enjoy it now.
Right then heís paying taxes and interest. Even if he doesnít need to make the withdrawals to to make payments, there will be taxes due at some point. I donít see an issue with his approach and think it is different than OPís timing strategy.
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      01-21-2020, 11:26 AM   #31
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Quote:
Originally Posted by flybigjet View Post
What's the purpose of saving, if not to use the funds occasionally?
What's the purpose of using the funds when the cost of a loan is so low?

The interest is $3,124.86 on a $40,000 5 year loan. You setup an auto withdrawal on $719 per month to make the payment and in 5 years of a 6.5% return your car is paid off and you have an extra $4,223 in your account.

That's before you even calculate the taxes, which will always be higher when you take a lump sum like that instead of $719 a month.
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      01-21-2020, 11:30 AM   #32
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Quote:
Originally Posted by DriverDaily View Post
What's the purpose of using the funds when the cost of a loan is so low? The interest is $3,124.86 on a $40,000 5 year loan. You setup an auto withdrawal on $719 per month to make the payment and in 5 years of a 6.5% return your car is paid off and you have an extra $4,223 in your account. That's before you even calculate the taxes, which will always be higher when you take a lump sum like that instead of $719 a month.
Don't mistake average returns with actual returns. You WILL pay 3% APR on the loan. You MIGHT get 6.5% return on investments.
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      01-21-2020, 11:39 AM   #33
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Quote:
Originally Posted by DriverDaily View Post
What's the purpose of using the funds when the cost of a loan is so low?

The interest is $3,124.86 on a $40,000 5 year loan. You setup an auto withdrawal on $719 per month to make the payment and in 5 years of a 6.5% return your car is paid off and you have an extra $4,223 in your account.

That's before you even calculate the taxes, which will always be higher when you take a lump sum like that instead of $719 a month.
Did you account for the taxes he will pay on the additional $719 per month he'll have to make in order to make the payment when calculating this $4K leftover?

What about the taxes he'll pay on the *estimated* 6.5% interest he makes - that baked in to the extra $4K leftover?

Yes the taxes are higher in lump sum, but you can trigger them in a year where your income is lower if he has a corp to have a net wash.
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      01-21-2020, 11:41 AM   #34
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Quote:
Originally Posted by DriverDaily View Post
What's the purpose of using the funds when the cost of a loan is so low?

The interest is $3,124.86 on a $40,000 5 year loan. You setup an auto withdrawal on $719 per month to make the payment and in 5 years of a 6.5% return your car is paid off and you have an extra $4,223 in your account.

That's before you even calculate the taxes, which will always be higher when you take a lump sum like that instead of $719 a month.
Not worth getting into a fight about it (especially since it's my money ), but there are a few more variables.

Car will be paid off in a year as I put down a reasonable down payment-- $5k on a credit card (paid off with cash available, but worth it to use the card for points), and $40k from investments-- so total loan value (including taxes) is about $17k?

That's less than $400 interest over the course of the loan and gives me the discretionary income to have available to reinvest when the market turns south (which I think it will-- this growth is madness).

I'm not a fan of debt-- it's just a personal thing about the way I was raised. If it helps, in my mind, I've been making a car payment to myself for 15 years-- so now was the time to take the money out and use it for the purpose I saved it for. And, cap gains are 15% at the moment, so if I had left the money in the market (and they were underperforming stocks anyway) eventually, I would have had to pay tax pulling the money out-- at some point, you're going to get hit with a tax bill.

So, now or later. I don't see much of a difference.

I'm still on track for my "have this much in savings when you walk out the door", so to me this way of doing things made sense. Maybe it's a little "instant gratification", but since I could afford it and it wouldn't hurt me, so what?

Just how I see it.

R.

Last edited by flybigjet; 01-21-2020 at 11:48 AM..
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      01-21-2020, 11:46 AM   #35
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Quote:
Originally Posted by corn18 View Post
Don't mistake average returns with actual returns. You WILL pay 3% APR on the loan. You MIGHT get 6.5% return on investments.
Sure, but you can 4% on a fixed income portfolio and still come out on top.
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      01-21-2020, 11:56 AM   #36
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Originally Posted by flybigjet View Post
Not worth getting into a fight about it (especially since it's my money ), but there are a few more variables.

Noooooo.....fight, fight, fight.

How else do you expect me to be entertained today anyways?
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      01-21-2020, 12:24 PM   #37
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Quote:
Originally Posted by DriverDaily View Post
Quote:
Originally Posted by corn18 View Post
Don't mistake average returns with actual returns. You WILL pay 3% APR on the loan. You MIGHT get 6.5% return on investments.
Sure, but you can 4% on a fixed income portfolio and still come out on top.
4% and you will have some principal risk.. short term rates are 1.5%-1.8%. Anything more you take credit risk, duration risk...
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      01-21-2020, 12:39 PM   #38
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Originally Posted by DriverDaily View Post
Sure, but you can 4% on a fixed income portfolio and still come out on top.
Where are you getting 4% on fixed income?
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      01-21-2020, 12:55 PM   #39
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Quote:
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Sure, but you can 4% on a fixed income portfolio and still come out on top.
Where are you getting 4% on fixed income?
He probably has some High Yield bond fund...
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      01-21-2020, 01:04 PM   #40
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He probably has some High Yield bond fund...
Ok I wouldnít consider that low-risk as he indicated in an earlier post.
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      01-21-2020, 02:20 PM   #41
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Originally Posted by bimmerfrk View Post
Ok so after today i put all my wife's and my 401k proceeds into a money market fund. This trajectory cant continue and a lot of economists feel that the economy is reaching if not already at full employment. I don't care if i miss another 2 - 5 percent in gains. I'm up 39 percent over the last 2 years and im sure there is a pull back coming. I'm protecting my profits. I will continue to contribute to my 401k but there is just no value at the moment. Its crazy how many times companies are trading their earnings


Thoughts?
How old are you and how long have you been in the market?

Retirement wise, is your net worth on track for someone your age (30s = $300-400K, 40s = $500-700K, 50s = $700K-1.3M)?

When you talk about this 39% gain in the past 2 years, is this 4 figures, 5 figures, 6 figures?

What were these investments in? Stocks? Funds?

Do you have any other investment/retirement accounts? If so, how well are they funded?
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      01-21-2020, 02:20 PM   #42
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Quote:
Originally Posted by Joekerr View Post
Noooooo.....fight, fight, fight.

How else do you expect me to be entertained today anyways?
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      01-21-2020, 02:43 PM   #43
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Noooooo.....fight, fight, fight.

How else do you expect me to be entertained today anyways?
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Originally Posted by zx10guy View Post
Slightly, now. Thanks.
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      01-21-2020, 03:05 PM   #44
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Slightly, now. Thanks.
Boy - they would really flip if they saw I was getting 8.00% on my 18mo CD's invested at a foreign national bank, wouldn't they?
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