French Rage
NICKERSON HAS [CENSORED]
Re: Financial Advice, 401k's, IRA's, Hiding it under a mattress...
Let's simplify this to: don't have revolving credit card debt.
Let's simplify this to: don't have revolving credit card debt.
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Financial Advice, 401k's, IRA's, Hiding it under a mattress...
- Thread starter aparch
- Start date
FlagDUDE08
Banned
Re: Financial Advice, 401k's, IRA's, Hiding it under a mattress...
9 bucks a trade is a bit steep. I may wait until I have 50 grand (or is 100 grand?) to invest and hit up Vanguard. Granted, if I ever get to half a mill that would be when I go there.
I've been using Sogotrade ($3 a trade) but they don't offer IRA options. EDIT: Yes they do. Hmmm...
9 bucks a trade is a bit steep. I may wait until I have 50 grand (or is 100 grand?) to invest and hit up Vanguard. Granted, if I ever get to half a mill that would be when I go there.
I've been using Sogotrade ($3 a trade) but they don't offer IRA options. EDIT: Yes they do. Hmmm...
Last edited:
Re: Financial Advice, 401k's, IRA's, Hiding it under a mattress...
gold is an interesting hedge option
Re: Financial Advice, 401k's, IRA's, Hiding it under a mattress...
You only need 10k in a single fund to avoid a maintenance fee. I'm not sure what their minimum is for non-retirement accounts, but it's considerably less than 50k or 100k. Furthermore, they're even easier to get in for retirement accounts unless they've changed something recently. I've had my Roth IRA with Vanguard from day 1.
You only need 10k in a single fund to avoid a maintenance fee. I'm not sure what their minimum is for non-retirement accounts, but it's considerably less than 50k or 100k. Furthermore, they're even easier to get in for retirement accounts unless they've changed something recently. I've had my Roth IRA with Vanguard from day 1.
FlagDUDE08
Banned
Re: Financial Advice, 401k's, IRA's, Hiding it under a mattress...
My concern is the commissions on stock trades for the IRA. $7 flat if you have 50k/100k, $2 flat for 500k, free/$2 for 1mil.
My concern is the commissions on stock trades for the IRA. $7 flat if you have 50k/100k, $2 flat for 500k, free/$2 for 1mil.
aparch
Acetaminamerican
Re: Financial Advice, 401k's, IRA's, Hiding it under a mattress...
The discussion has been good in helping me understand the differences so far. I was unaware of some of the tax breakdowns each had.
Since my 401k is four figures only, would it be in my best interest to just lump sum it out and wipe out some/most of my credit card debt? Seems if I have a slate of 0 to work from instead of negative, I could better use that money for retirement. Plus, I wouldn't have as much lost to the interest from debt then.
As long as I commit to use what I was paying in debts as savings for the future.
The discussion has been good in helping me understand the differences so far. I was unaware of some of the tax breakdowns each had.
Since my 401k is four figures only, would it be in my best interest to just lump sum it out and wipe out some/most of my credit card debt? Seems if I have a slate of 0 to work from instead of negative, I could better use that money for retirement. Plus, I wouldn't have as much lost to the interest from debt then.
As long as I commit to use what I was paying in debts as savings for the future.
FlagDUDE08
Banned
Re: Financial Advice, 401k's, IRA's, Hiding it under a mattress...
You have credit card debt? ABSOLUTELY! Pay that off first!
There are three prerequisites to stock market investing:
1. ZERO high APY debt (such as credit cards)
2. Health insurance
3. Disability insurance
You have credit card debt? ABSOLUTELY! Pay that off first!
There are three prerequisites to stock market investing:
1. ZERO high APY debt (such as credit cards)
2. Health insurance
3. Disability insurance
ScoobyDoo
NPC
Re: Financial Advice, 401k's, IRA's, Hiding it under a mattress...
I would add a number 4.
4. 4-6 months of cash on hand for expenses.
I would add a number 4.
4. 4-6 months of cash on hand for expenses.
FlagDUDE08
Banned
Re: Financial Advice, 401k's, IRA's, Hiding it under a mattress...
Dang, that's a lot. I'd say 5 grand.
Dang, that's a lot. I'd say 5 grand.
ScoobyDoo
NPC
Re: Financial Advice, 401k's, IRA's, Hiding it under a mattress...
That's fine. Whatever number you feel comfortable with. 5 grand doesn't go very far though.
That's fine. Whatever number you feel comfortable with. 5 grand doesn't go very far though.
FlagDUDE08
Banned
Re: Financial Advice, 401k's, IRA's, Hiding it under a mattress...
It can give me 3-4 months. I have a lot of discretionary spending built into my budget.
It can give me 3-4 months. I have a lot of discretionary spending built into my budget.
French Rage
NICKERSON HAS [CENSORED]
Re: Financial Advice, 401k's, IRA's, Hiding it under a mattress...
Another way to do it would be a series of staggered CDs, for example 4 1yr with one maturing every 3 months or 8 2yr with one maturing every 3 months. That way you get a little more interest than plain savings and it's available enough to come in handy in case something bad happens. Granted, these days you don't get too much interest.
Another way to do it would be a series of staggered CDs, for example 4 1yr with one maturing every 3 months or 8 2yr with one maturing every 3 months. That way you get a little more interest than plain savings and it's available enough to come in handy in case something bad happens. Granted, these days you don't get too much interest.
Re: Financial Advice, 401k's, IRA's, Hiding it under a mattress...
Another way to approach the cash reserve issue is to have some money in a ROTH. After a given deposit has been in the ROTH for five years, you can withdraw the principal without penalty, thus providing a nice emergency fund if needed. Of course ideally you wouldn't tap into that, since it's post-tax, but it can be used as a backup rainy day fund.
Another way to approach the cash reserve issue is to have some money in a ROTH. After a given deposit has been in the ROTH for five years, you can withdraw the principal without penalty, thus providing a nice emergency fund if needed. Of course ideally you wouldn't tap into that, since it's post-tax, but it can be used as a backup rainy day fund.
FlagDUDE08
Banned
Re: Financial Advice, 401k's, IRA's, Hiding it under a mattress...
Actually, Roth principal can be withdrawn at any time; you don't even have to wait the 5 years. The DISTRIBUTIONS cannot be withdrawn without penalty unless you've had them in there 5 years and you have a valid reason (death, first time home buyer at a max of 10k, you've turned 59.5 years of age).
Actually, Roth principal can be withdrawn at any time; you don't even have to wait the 5 years. The DISTRIBUTIONS cannot be withdrawn without penalty unless you've had them in there 5 years and you have a valid reason (death, first time home buyer at a max of 10k, you've turned 59.5 years of age).
Re: Financial Advice, 401k's, IRA's, Hiding it under a mattress...
My understanding is that the principal can be withdrawn in the first five years, but there is a penalty in the first five years. After that you're ok. Just talked to a credit union representative about this recently.
unofan
Well-known member
Re: Financial Advice, 401k's, IRA's, Hiding it under a mattress...
Even if he takes the tax hit at the same time? I'd agree it's better to pay off cc's first, but if the money's already in the 401k, it's not a given that he'd be better off taking it out now.
Also, investing in 401k to the extent it's matched by an employer may still be a better bet than paying off cc's immediately. The former gives you a 33-100% return that first year (depending on the match), which is well above most CC interest rates.
Even if he takes the tax hit at the same time? I'd agree it's better to pay off cc's first, but if the money's already in the 401k, it's not a given that he'd be better off taking it out now.
Also, investing in 401k to the extent it's matched by an employer may still be a better bet than paying off cc's immediately. The former gives you a 33-100% return that first year (depending on the match), which is well above most CC interest rates.
FlagDUDE08
Banned
Re: Financial Advice, 401k's, IRA's, Hiding it under a mattress...
The person isn't employed right now. In addition, credit card APY's, especially if you let them fester, typically are well above 20%. Read the posts.
The person isn't employed right now. In addition, credit card APY's, especially if you let them fester, typically are well above 20%. Read the posts.
Re: Financial Advice, 401k's, IRA's, Hiding it under a mattress...
Easy choice. rollover to IRA. That way you get to decide what to do with it. Invest, cash out (defer tax bill till end of year with penalty).
Most internet brokers (Etrade, TD, etc...) have no fees (maybe $500 acct balance) for retirement accounts. And they have rollover option when you create an account and it's fairly straight forward.
You can always buy the DIA (dow 30), SPY (sp500) or QQQ (nasdaq 100) if you want diversification, instead of buying a mutual fund.
I received a notice from my former employer that I have some options for my 401k Plan. It's been sitting idle plugging along along with the crappy economy since I was let go from this firm last June.
They'd like to know what I want to do with my money: either keep it with them, or take it out.
If I take it out, it's a lump sum where 20% is withheld for Federal Income Tax, with the possibility of another 10% due when I file my taxes. They also provide the paperwork so I can also roll it into an IRA.
There's another two pages of small print explaining the options in much greater detail enclosed with the forms, but I was looking for a more lay-mans terms as to what might be my best option. I have no problem with just "letting it ride," as I've only had it three years (and two hard stock market drops).
I'm 30. And looking for insight into the best options available to me.
"Cash it out and spend it on hookers and blow," is also an acceptable answer.
Easy choice. rollover to IRA. That way you get to decide what to do with it. Invest, cash out (defer tax bill till end of year with penalty).
Most internet brokers (Etrade, TD, etc...) have no fees (maybe $500 acct balance) for retirement accounts. And they have rollover option when you create an account and it's fairly straight forward.
You can always buy the DIA (dow 30), SPY (sp500) or QQQ (nasdaq 100) if you want diversification, instead of buying a mutual fund.
manurespreader
Still upright
Re: Financial Advice, 401k's, IRA's, Hiding it under a mattress...
Having read the whole thread I disagree with most people. I think you have to keep it simple first and foremost. I'd leave it where it is for several reasons. Most people, like almost everyone, who take money out of their retirement plan to pay off CC debt, end up some months later with more CC debt. So I don't think this is a good option. Moving it to an IRa on the surface looks good but the reality is you as an individual have to be a better money manager than the professionals you fired when you moved the money. That's not likely. Small investors are at a disadvantage.
so overall leave it and watch it get bigger. Also though a roth might seem a good idea, and would be smart, the idea behind a 401k is that your tax rate is lower after you stop working. If you don't expect that to be true and can move it to a roth then that would be the smart thing to do.
Having read the whole thread I disagree with most people. I think you have to keep it simple first and foremost. I'd leave it where it is for several reasons. Most people, like almost everyone, who take money out of their retirement plan to pay off CC debt, end up some months later with more CC debt. So I don't think this is a good option. Moving it to an IRa on the surface looks good but the reality is you as an individual have to be a better money manager than the professionals you fired when you moved the money. That's not likely. Small investors are at a disadvantage.
so overall leave it and watch it get bigger. Also though a roth might seem a good idea, and would be smart, the idea behind a 401k is that your tax rate is lower after you stop working. If you don't expect that to be true and can move it to a roth then that would be the smart thing to do.
Re: Financial Advice, 401k's, IRA's, Hiding it under a mattress...
Taking the money out and paying off credit card debt is a terrible idea; he'd have to pay income tax on that since it's a disbursement, and he'd take a 10% early withdrawal penalty. Given the fact it's a relatively small amount in the 401(k), rolling it to a Roth probably makes the most sense.
The problem with paying off credit card debt with this money (other than the tax and penalty hit) is that he may very well build up that debt again going forward and be right back where he started (only without the retirement funds). Bear in mind that in bankruptcy, 401(k) money is untouchable.
Taking the money out and paying off credit card debt is a terrible idea; he'd have to pay income tax on that since it's a disbursement, and he'd take a 10% early withdrawal penalty. Given the fact it's a relatively small amount in the 401(k), rolling it to a Roth probably makes the most sense.
The problem with paying off credit card debt with this money (other than the tax and penalty hit) is that he may very well build up that debt again going forward and be right back where he started (only without the retirement funds). Bear in mind that in bankruptcy, 401(k) money is untouchable.