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Posted: 7/22/2013 8:39:13 AM EDT
[#1]
I'd ask in the business and investment section but I'm going to say that its not a good idea. Is that 150 after the .gov takes 40% for pulling out early? I imagine other factors such as your age and when you want to retire with how much would come into play as well.
I would look into Dave Ramsey and build a budget to pay off your house early. |
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Posted: 7/22/2013 9:53:03 AM EDT
[#2]
The penalties and taxes would likely cost more than you would save on interest. Your interest would no longer be tax deductible, as you no longer have a mortgage, owing yourself doesn't count.
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Posted: 7/22/2013 9:53:05 AM EDT
[#3]
Yeah I don't want to just take it out I basically want to make a loan against it
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Posted: 7/22/2013 11:00:36 AM EDT
[#4]
How far are you from retirement, and how long will your plan allow you to make the loan for?
One thing you need to consider when taking out the loan, is what your Capitol will no longer be earning in that account. With what the market is doing, you should be achieving 10%+ this year alone. I don't know anyone paying that kind of interest on their house note. |
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Posted: 7/22/2013 12:16:36 PM EDT
[#5]
Quoted: I owe about 110k on my house. I was wondering if there was a way to pay it off with my 401k (around 150K) and become my own mortgage holder ... in essence paying myself interest instead of some evil bank. And if I did would the interest still be an income tax deduction ? |
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Posted: 7/22/2013 12:21:36 PM EDT
[#6]
While we have this thread up. What do you guys reccomend 401k or IRA. I've been using the TSP through the .mil but been looking at IRA's through USAA.
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Posted: 7/22/2013 12:52:42 PM EDT
[#7]
Quote HistoryQuoted: While we have this thread up. What do you guys reccomend 401k or IRA. I've been using the TSP through the .mil but been looking at IRA's through USAA. Hope this helps |
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Posted: 7/22/2013 1:34:32 PM EDT
[#8]
Quote HistoryQuoted:
While we have this thread up. What do you guys reccomend 401k or IRA. I've been using the TSP through the .mil but been looking at IRA's through USAA. There are others that are more qualified than I am on this, but I avoid investing with banks like usaa, wells, citi, ect. I prefer staying with fidelity, Wachovia, Charles schwab... They seem to have lower fees, and better research materials available. |
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Posted: 7/22/2013 2:05:15 PM EDT
[#9]
Quote HistoryQuoted:
...the .gov takes 40% for pulling out early.... The penalty for taking it out early is 10% |
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Posted: 7/22/2013 2:07:30 PM EDT
[#10]
Quoted:
.. I was wondering if there was a way to pay it off with my 401k (around 150K) and become my own mortgage holder ... No chance, although it would be nice if you could. |
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Posted: 7/22/2013 2:24:58 PM EDT
[#11]
Not worth it. Better to have a lower mortgage interest rate that is also tax deductible, and contribute the max annually to the 401k.
If mortgage rates were above 12% or so, and 401k yields around 5%, it might make sense. |
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Posted: 7/22/2013 3:25:35 PM EDT
[#12]
Quote HistoryQuoted:
The penalty for taking it out early is 10% Quote HistoryQuoted:
Quoted:
...the .gov takes 40% for pulling out early.... The penalty for taking it out early is 10% I know, I just added all the taxes. link |
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Posted: 7/22/2013 7:45:12 PM EDT
[#13]
Quote HistoryQuoted:
While we have this thread up. What do you guys reccomend 401k or IRA. I've been using the TSP through the .mil but been looking at IRA's through USAA. |
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Posted: 7/23/2013 2:58:42 AM EDT
[#14]
Quote HistoryQuoted:
Yeah I don't want to just take it out I basically want to make a loan against it I have heard Dave Ramsey say pay an additional month's payment by the end of each year of the mortgage term. In effect you are paying a total of 13 months per year till termination of the mortgage, the last month going entirely to the pay off of your principal. A learned man like DR probably has other courses for you to take. Only partial downside is your mortgage interest deduction will disappear faster. I am no financial expert, as you break 55+ or so your contributions to your IRA/Roth can go up DRAMATICALLY. Because of this it actually pays to kill yourself making money to be able to contribute more. Downside is dying in the process. Good luck. |
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Posted: 7/23/2013 7:59:23 AM EDT
[#15]
Quote HistoryQuoted:
There are others that are more qualified than I am on this, but I avoid investing with banks like usaa, wells, citi, ect. I prefer staying with fidelity, Wachovia, Charles schwab... They seem to have lower fees, and better research materials available. Quote HistoryQuoted:
Quoted:
While we have this thread up. What do you guys reccomend 401k or IRA. I've been using the TSP through the .mil but been looking at IRA's through USAA. There are others that are more qualified than I am on this, but I avoid investing with banks like usaa, wells, citi, ect. I prefer staying with fidelity, Wachovia, Charles schwab... They seem to have lower fees, and better research materials available. USAA is a very good investment bank, as well as Fidelity, Charles Schwab, and T Rowe. |
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Posted: 7/23/2013 8:00:35 AM EDT
[#16]
Hi OP, this somewhat applies to your question: http://finance.yahoo.com/news/8-retirement-planning-mistakes-avoid-111046172.html.
Look at number 7 on the list. |
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Posted: 7/23/2013 8:07:51 AM EDT
[#17]
Quote HistoryQuoted:
While we have this thread up. What do you guys reccomend 401k or IRA. I've been using the TSP through the .mil but been looking at IRA's through USAA. If your company offers a 401k or 401k like benefit with employer matching, you should take advantage of it. If they do not or if you want to roll money from a tax deferred account to something else, an IRA is a good idea. If you are thinking of saving money for retirement in a tax deferred method and do not have an employer 401k, then look at Roth IRA or IRA. USAA does offer both and has a decent fund selection. I think USAA offers at least one free investment analysis which would be good to take advantage of. By the way, I do not work for or represent USAA. I just think they are a good company. |
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Posted: 7/23/2013 11:33:08 PM EDT
[#18]
the duration of a 401k loan before its considered a distribution and subject to 10% penalty is way shorter than a 15 yr mortgage.
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Posted: 7/24/2013 5:03:00 PM EDT
[#19]
If your 401K allows, you can borrow against it and pay back with interest, how you use the money is generally up to you. There are also home mortgages through 401K, but generally that is limited to initial purchase or first time home purchase.
You can do what you propose, but the amount you mention may be to high for what you are attempting, depends on the max loan amount the plan allows. Usually, you must have twice the amount you intend to borrow. Also, as always, there are penalties if you default or stop payment, along with tax ramifications. |
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