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

I took 50K out of my 401 K to pay my ex during a nasty divorce. So that I could use my ROD again. does that count ?

 

ok I am reading all this and wondering when in the hell and how can I use my 401 I just turned 73 with out giving it away to government I am not to worried about leaving anybody money

 

You can use your money any time.

It's just that if you buy a hot rod with it, you might want to consider that the money has been "spent". It is no longer "invested".

 

If the market (if you are so invested..) is bad, it is a good time to borrow against the 401k. It will have less impact that if you did in a good market. I have borrowed 2x against mine to do home improvements.

Now I'm putting 10% of my pre-tax salary + the company kicks in 3% and my account has flatlined for the last 2 years. I had the pros look at it 2 months ago, rebalanced what I have and future investments. Still the same, now I have a local office so I can go hammer on some numbers geek. I told them already that I'm retiring in 2010, gave them the date plus what I expect to have in the account. If not, I'll move it elsewhere with 0 qualms.

I have 2 major pensions and my late wife's 2 smaller pensions, still need the final numbers on those. One of my pensions has a lump-sum option, which I may take. It would give me 2 years to not touch the 401k at all. That would let me expand the garage and get a 2nd car going.

I also owe a bunch on my house, I could either pay it down greatly or use the equity to find something else. No mortgage gives me $500 a week of post-tax $$ in my pocket.

 

At work, our old facility was ESOP owned, by the employees. We moved to new digs in 2005 and the old one was liquidated just in time for the market to shit the bed. My cut from the deal was $76,000, in one pocket and out the other within a month. I probably lost a total of $120,000.

 

Most plans you have to start taking out of it at age 70. By that age, you should be in a lower tax bracket. If you have a plan administrator, time to start talking to them.

 

At 70 1/2 I had to start taking it out whether I wanted to or not. Would rather have just let er ride. Now just pay the taxes and stash it somewhere-we don't need it to live as we like. I have kids, nephews and grandkids in the same trade and lean on em hard to max the 401 and stash at least another 5% on top of that. Their jobs have lots of OT but it is sporatic. Tell them to stash some of that every time but they buy stuff like jacked up new 4X4 pickups,travel trailers,boats,guns and houses that are $600k+ etc ! Some have learned already and have changed their ways. Hopefully they are loading up their savings as we have told them. With a pension,SS and a good size nest egg they should be fine.

Be 77 soon and am careful with the IRA $$. Seven yrs of RMD so far. Pay 30% tax and spent about 60% of that on home remodels, new car for my wife (hers was 19 yrs old). The balances are well above when I began RMD withdrawals.
At this point still looking for another 40 to do but have slowly started liquidating some collectibles (early Colts,Winchesters,Henry,Sharps, etc) and stashing the $$. Want to make sure she is set when I check out-we are not wanting for anything-we do/buy what we want and have had no payments, mortgage etc. for many years.

 

I sacrificed all my working career, now I’m going to nibble it away. If all goes according to plan I hope to hit zero when they screw the lid on the jar they pour my ashes in.

 

Interesting discussion..."never lost a minute of sleeping, worrying bout' the way things might have been"........life is short folks,......all relative but still short, live every day like it's your last, care for those that matter to you, have no regrets

 

Yup, I tried telling them......and I told them either we move in with them when the “time” comes, or I leave you every thing......they told me to keep it.....

 

Better to have and lost, than to never have had at all.
Common sense prevails. But no ones getting out of here alive. Life is short, enjoy whatever you can.

 

Borrowed money when I was young to build swimming pools and room additions, or so the bank thought, that got turned into race cars but never touched IRA or 401K money.
I also flipped cars on the side to pay for the racing addiction and didn't touch the family banking account.

 

I just cashed out part of my IRA to pay off my blood sucking two timing wife to pay off the divorce settlement.

 

That sounds like a better investment than a new hot rod project.

 

Actually have my 401k set up as a business. Been mostly borrowing for property and paying it back when I sell. Haven't found a car yet...avatar....that I would do it for.

 

Glad my Father taught me at a very young age "The Need, Want Rule. If you are looking to buy something ask yourself, do I need this or want this. If you truly need it, ( groceries, gas, etc... ) buy it. If the answer is want and you can't afford it, wait until you can. It taught me at a very early age to be responsible with money and learn how to save. Now if you have gobs of money, buy away.

 

So many things to add, such limited band width. I'll have a go

No. And watch that "penalty waiver for buying a house business". It must be your first home (not owning a home for the last three years) in order for the waiver, still have to pay the taxes. Generally you can grab a maximum of $10,000 without incurring the wrath of the IRS.

Penalty is waived on most accounts after you are aged 62.5 years. Again, still have to pay the taxes but at your current income which may be a nice break from what you were paying when you put it in the account.

Buying toys with profits is the best case scenario.
Buying a declining value asset on borrowed money aint great.
Taking an asset out of a profit making portfolio to buy a depreciating asset? Only if its my car your buying at the time.

 

I am not a CPA but I believe money can only be borrowed from a 401K for very specific reasons. Purchasing a classic car is probably not one of them. The repayment schedule isn’t very user friendly either.

Withdrawal of funds will severely devalue your money. The early withdrawal penalty is 10%, on top of that you will have to pay taxes because they are pre-tax dollars. It also counts as income which could create other tax liabilities. I withdrew money to pay off my brothers house when he was struggling to live on disability, with the agreement that I would be reimbursed by his estate after his death. I would do it differently if I had to do it again.

 

Edit to my earlier post ...Actually I no longer have a 401, since I retired I no longer have it, it’s now savings....nibbling away still, I never nibbled it when it was a 401...actually it was a 403b but I never touched it. I started late in life but made max contributions for 22 yrs.

 

Hot rods aren't an investment. That said I borrowed against my Thrift savings plan (Govt) a few years ago t buy my Model A and then paid myself back with 50 bucks out of each paycheck until it was paid off.
A coworker did pretty much the same when she bought her house. She borrowed a big chunk out of her TSP and paid it back with a big percentage of her check each payday and when it was paid off she retired.

 

Mine has an option for both house and non-house loans against the balance.

 

did I just stumble into the money channel? last 401 I had was in a AMX.

 

I've done it, enjoyed the hell out of the car and sold it later for a very good profit. I would do the same again if I could go back, when I look back at my life I look back at the good times, that car made more good memories than any investment statement I got in the mail on money I'm not using anyways.
No one is guaranteed tomorrow and coffins don't have room for suitcases of money or cars for that matter, live a little while you can.

 

" Im getting ready to turn 50 next month......"

I've done it a few times to get the car I want, why not. At 50 you have time to still invest for retirement but in the meantime drive the thing that twists your crank.. The clock is ticking, it's time to have what you want out of the candy store. Don't look back.

 

No! Just spent it on cars to begin with!

 

I have been saving since 1983 at work when the plan was offered. Every time I got a raise, I put 1% more away. Now I have quite a bit saved up and close to time to spend it once my salary stops. I'll do something else to make a few bucks, can't sit around and do nothing. Probably going to get my big lathe fixed up with a DRO and get a newer Bridgeport with the works too.

I was talking to the guy who handles part of my investments, he said that something like 60% of the people he has for clients have less than $50k in retirement accounts and these people are over 55... scary.

 

Mines set up through my work...I put in 10% and the company puts 5%..was told 15% is the sweet spot..I also have a pension..I guess I’m a lucky one..I hope to stay healthy enough to enjoy a few years of fun in the sun..I want a ragtop in the sunshine at some point..had to borrow the max 2 years ago to when a house we’d been looking at for over year came on the market. I took a chance and listened to the wife say “ we can sell the other one easily” it was a scary time. The wife was right...we sold our house via neighborhood FB page in 2 days to the first people to see it for full ask with a 30 day close...I never made a payment on my 401K loan. If I recall we didn’t have a “why are you taking it” question. I simple filled out a loan type application and the money was in my account in 24 hours. As soon as I got that check from closing I was at the bank depositing it and paying off that 401K loan.
The good thing is you’re paying yourself back at a much lower interest rate. I’m contemplating doing another one to pay off some credit cars / card debt..

 

Borrowing from your 401K is great if you don't mind paying double taxes. Doesn't make much sense to spend it on a depreciating asset.

 

I have the 1 401k from work, 35 years worth, 2 401ks my late wife had plus her Roth. I have 2 pensions from work, I will get something from my late wife's 2 pensions as well, probably not much and I know one is a straight lump sum. The lump sum from my one pension pays out at over $120k, I have to see what the tax hit is if I liquidate any of it. But the idea is to expand the garage, get some better machine shop equipment and do a little side work again.

 

I thought about pulling my 401K and taking the money to finish a couple of cars then selling them, possibly making a career out of it. I can't seem to finance the move otherwise and I'm getting too old to be up on ladders painting houses all day.