Technical Anyone ever cashout some of their 401k or IRA for a Hot Rod investment ?

Sketchy bad idea or may as well live a little while trying to reach retirement?
I know the safe way to insure that my money will be there is to just leave it alone and thats probably what I will do but the temptation does cross my mind as thats probably about the only way I will have a nicer car while Im alive in my living years
Im getting ready to turn 50 next month......I helped a older friend (62 at the time) make a decision on buying a 55 chevy a few years ago for 17,500 because thats what he wanted and he looked at it as an investment as well, I think it would bring 25,000 or more today, hes kept it insured and garaged while not out enjoying it, so ....???
If all worked as planned I think it would be better to enjoy it and still have the investment, but their is penalties for pulling that money out etc..??? and like anything else, It would be a gamble.
What are your thoughts?

 

Using the terms "investment" and "hot rod" in the same paragraph makes me cringe....

We have investments. We have hot rods. They are completely different instruments.

 

That is the short version and it is the best. If you were 65 and out of debt, to include paid for house, it would be a possibility. At 50 the penalty will hurt as well as likely moving you into a higher tax bracket. Are you sure you have enough money to live to 80 or 85?

If I wanted one that badly I think I would look for cutting back in other areas. That might, however, piss the missus off if she doesn't get her annual vacation to Cozumel or somewhere else.

 

Old cars are like any gamble, if you are looking at the money we all put into them. Don't do it unless you are OK with losing all the money. If you are OK with the prospect of losing your money, go ahead, if not don't do it. I am not saying you will lose your money on old cars or gambling, just it could happen, and you should be ready for that outcome if it does happen.

 

I nibble at it, but then I’m retired. I have never seen a Uhaul on a hearse

 

I took some money out of my Roth IRA to buy my '32 , but I was over 57 and no penalties.
Had it a few years,sold it and paid off half my home mortgage.
Each person's financial plan is different, only you and your planner would know what your picture is like.
I had enough that it wouldn't hurt me, but I wouldn't do it again.
Make sure there are no penalties and it won't put you in a higher tax bracket.
If taxes are a problem and you still want to do this, take some out up to the bracket this year, and the next after January so as not to bump it up

 

Spent 90% of my money on hot rods early on, the rest I wasted.

 

I pulled money out of our 401k to help buy our house. Our house is now worth twice what it was when we bought it. I think that was good decision.

its your life and you can’t take it with you. If this is your passion and a goal of yours, why the heck not. At least you’ll have a sweet ride on your way to working at walmart as a greeter.

(Also, 401k money is YOUR money, after all, and every financial planner is going to tell you not to because they WANT your money in the 401k so they can use it for their purposes...lol.

 

Personally I wouldn't do it, you just never know what tomorrow will bring, When I was younger and raising a family I would work a side job or two to help with expenses or if I needed some extra cash for a hot rod project, I never considered taking money away from my retirement investments.

Using you 401 for a home would be the exception in my book.

Obviously, you know your financial situation and only you can make that decision. HRP

 

I am still petty young 37 but I borrowed from my 401k to put up my garage, and upgrade the whole electrical service. In case of a power outage I can run everything of a generator.

I look at as borrowing to make a home improvement, and I am paying interest to myself not the to bank.

 

I have done it twice over the years. Once when my high school 66 chevelle became available 26 years after I sold it. I will make money on that car if I ever sell it although very unlikely. The other time was to buy my 65 dodge altered wheelbase car. I definetly made money on that. It's no different than taking out a loan at the bank only less interest. If you own your own home a second mortgage or home improvement loan might be a better option. I work in health care. Every day I have patients on the table that tell me if they could only do things over they would have had more fun. There's no guarantee that you will live to use your retirement investments. I'm not saying be reckless with your retirement savings. Just make sure you have lived a full life before you end up in a situation were you can't enjoy doing things you want to do.

 

Do you get the same penalty waiver as buying a house?

 

Don't get the idea that I think you shouldn't waste all your money on hot rods. I'm all for that!

But the idea of a hot rod being an "investment" is nuts. It's a toy.

 

Money can definitely be made on hot rods, but it is made when you buy them below market value and sell them relatively quickly to realize that gain. Time is rarely kind to a cars value. The restoration or build cost depreciates just as a new car does. As you use it and get wear and tear, the valueOf the paint and interior go down. Only the actual car in “driver” condition will typically appreciate over time and that rate is often less than inflation.

 

Any financial planner will tell you its a bad idea to take money out of your 401k, but that could be true or not. If you borrow it , and pay it back, there is no penalty but you still pay yourself interest. If you just take it out and spend it you will pay a substantial penalty because you are less than 59 1/2.
I did it once to spend on a new race car. My reasoning was , no bank was going to loan me money on a race car. Guess what I have to show for it today? I learned a lot though, I try not to borrow money for anything now.
My sister and her husband cashed in their 401k and bought a business, and I just knew they were screwing up. This was 2007, and we all know the market crashed in 2008, so they would have likely lost as much as they paid in penalties, they came out to the good, still own the business today.
There's a whole lot of luck involved in the whole deal. Good Luck!

 

No.
There are only a few exceptions to having to pay the penalty, and you dont ever want to have to use any of them. Google it.

 

I too have borrowed from my 401K, never a huge amount or long term. Like a lot of people, I put a large chunk away every payday for later on, so i see no problem borrowing from my self in order to live in the here and now. Live NOW but prepare for later.

 

Borrowing is less dumb than straight withdrawal. How much are you thinking you'll need? Maybe sell your DD get your dream car and a cheap car for your DD. I just sold an OT Camry to carmax for $2500. Would have made a fine work car for someone, had 116k on it. would have lasted 100k more . While all my co-workers tool around in $40,000 SUVs. ......as they say it's your money ....you can get a c!assic car loan from places like JJ Best ...probably no dumber than the boat or cycle guys.

 

borrowing from yourself, or others, puts you behind the 8 ball - even if you have the best of plans to pay it back and an emergency of some type or losing your job can change all of that - plus, never know how long that you will be on this side of the dirt - on top of that never had a ride that I put more money into than I planned on initially - bottom line, your life do what you know is best for you - have known gamblers that will tell you about all of the money that they have "won" - but, rarely how much they lost along the way

 

Borrowing from your 401K is usually a losing proposition. Not something I would do.

 

I'm 68 and I withdrew some a couple years age to buy my pickup. Checked with the wife and she said you've worked your ass off all these years if you want it, get it. Enjoy your retirement. I've never looked back. I'm enjoying my retirement.

 

Never, never, they are just cars, your maiden drive could end in a half mile with your investment smashed to bits, I build out of my pocket, no money, no build. I've retired well, able now to buy the car I want, but the two I have are paid for. Patience my boy, they are just cars, they are not investments, it's supposed to be a hobby.

 

I have never borrowed from my 401,found other ways to get what I want,work extra,trade or sell stuff.I have made money on hot rods because I bought them right and they needed work .The only way you make money on your home is if you own it with no payments.Vacant land is the way to make money with little or no work.As for borrowing from your 401 k and paying yourself back at 5-6or7% ,you may be losing the opportunity to make 10-15% on certain investments.

 

Yeah, I did once..... I needed a down payment for a new car.....

 

Remember, if you borrow from 401K and leave job for some reason,(quit,got fired,company folded, etc) you have a short amount of time to pay back the total loan, 30 days I think, but might be wrong on that time. If you withdraw, you have to pay the taxes, plus penalties if not old enough for early withdrawal, plus bumping up to a higher tax bracket. It could amount to 30-40% cost of money. That % may be wrong, but DO your homework first!!

 

"It's never too late to have a wonderful childhood"
John Stimac

 

That's what it's all about. The investment pays for the toys.

 

This - best laid plans of mice and men! Lose your job or have a health emergency - inability to pay yourself back is often the reason experts say not to borrow against a 401k.

Also "cars" and "investment" are two terms that shouldn't be used in the same sentence unless you add "poor" too. Especially if you can't afford to buy one outright. There are exceptions of course but for the most part they are just big boy toys.

For me, if I ever need to raise cash in an emergency my cars will be the first assets I liquidate, even at a loss, and the retirement funds will be last.

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I borrowed from mine to buy a foreclosed property during the 2008 recession. Paid it back within the 60 day window, the recession turned around, doubled my investment and then some.